Against the backdrop of an uproar, government on Thursday scrapped the deal Isro's commercial arm Antrix had struck with a private company for lease of premium space segment, saying it was not in the country's strategic interest.
The Cabinet Committee on Security (CCS), at a meeting chaired by Prime Minister Manmohan Singh, decided to annul the contract Antrix had entered into with Devas Multimedia under which it was to lease out 90 per cent transponders on two of Isro's satellites GSAT-6 and GSAT-6A.
Under the agreement signed in January 2005, Devas was to lease transponder capacity from the two satellites at a cost of $300 million (approximately Rs 1350 crore) spread over 12 years.
Some estimates said the deal was heavily undervalued, which triggered an uproar with the BJP-led opposition attacking Prime Minister Manmohan Singh who is directly incharge of the Department of Space.
"The Agreement for the lease of space segment capacity on Isro/Antrix S-Band spacecraft by Devas Multimedia Pvt. Ltd. entered into between Antrix Corporation and Devas Multimedia Pvt. Ltd. on 28th January, 2005 shall be annulled forthwith," announced law minister Veerappa Moily after the meeting.
He said when the question of strategic requirement arises, the government cannot give S-band spectrum even to Antrix for commercial use.
"We have thoroughly examined this matter and ultimately we have come to the conclusion that under provisions of the agreement and the law governing that, it can be annulled," he said when asked whether the impact of the decision was discussed by the CCS.
Devas Multimedia had yesterday threatened to move court if the government took any unilateral decision to terminate the deal.
"Even if they go to court, they are not likely to succeed," Moily said when asked whether the government was ready to face the legal challenges put up by Devas.
After news reports about the possible revenue loss appeared, the Government and Isro said the project was already under review and action has been initiated for termination of the contract.
The Prime Minister said on Wednesday that the deal had never been operationalised and rejected suggestions that his office had held "backroom" talks with Devas after the Space Commission's recommendation to scrap the deal.
He had said that if there has been delay in scrapping the deal, this has been 'only procedural'.