ISLAMABAD, July 29: The Paksat-1 launched last year will continue facing losses for its entire five-year life and the satellite will not be marketable in its two target regions, the Middle East and African countries, despite an investment of around Rs1.85 billion, finance ministry sources told Dawn.
The government is defending the project on “purely strategic grounds”. It has decided to consider the capital cost as subsidy over the entire life of the project because the
satellite could meet only 66 per cent of its recurring cost. Both the costs are to be financed under the Public Sector Development Programme (PSDP), official record provided to Dawn stated.
The ministry of information technology and telecom (IT&T) is now seeking an ex-post facto approval of the Rs1.85 billion for the project from the executive committee of the national economic council (ECNEC) with a foreign exchange component of Rs1.695 billion, the sources said.
The government concluded a contract with an American company, M/S Hughes, for the satellite through negotiations and without open bidding in July last year and the satellite was moved from 50 East to the contracted orbit position of 38 East in December last year.
A one-time service establishment fee of $4.1 million in addition to frequency coordination fee of $0.25 million and a satellite training service support charge of $0.05 million, all of which totalled to $4.4 million was paid to the company following the signing of the contract.
The government also paid an annual operating fee of $2.65 million and an annual lease payment of $2 million and lease fee of $2 million in February this year. The operating fee and the lease fee will be paid annually to the leasing company over the five-year lease period.
An official summary suggests that the satellite has a problem with one of the control processors in one of the series and its power supply system will need to be switched off for three hours from 11pm to 2am for 90 days (of two equal segments) of the eclipse period every year.
A high-level meeting was told recently that “because of the eclipse, it cannot not be useful for strategic communication or other strategic purposes, the primary purpose of its acquisition. It will also not be useful for telecommunications to any significant extent,” official record states.
It is also observed that 34 transponders were leased from M/S Hughes for multiple applications, but actual availability of transponders even after the successful frequency coordination was expected at 10 to 11-C band and 2 to 3-Ku band transponders and that too was not guaranteed.
The Hughes Satellite has a history of power supply problem and problem of frequency coordination with other satellites in the orbital slots vicinity. The satellite was initially manufactured and launched for Indonesia in 1996. It developed power pack problem after three years and subsequently after resolving the insurance claims it was leased out to Turkish telecom, but the contract was cancelled over financial disputes.
Official sources said the Central Development Working Party (CDWP) was recently informed that the Paksat had a payload of 30-C band and 4-Ku transponders. Out of these, 10-C band transponders were most likely to be frequency cleared over a one year period.
This meant that only 29 per cent of the transponders capacity would be available for leasing. It was further recorded in the official documents that satellite with doubtful performance had been purchased without any performance guarantee.
Financial analysis undertaken on the basis of 11 transponders to be sold during five years lease period at $40,000 income per transponder revealed that the income recovery would meet only 66 per cent of the recurring cost while entire capital cost would be treated as subsidy.
According to revenue forecasts based on tariff recommendations of a high-level committee, the satellite would face a revenue deficit of Rs3.6 million in 2003 and Rs0.96 million in 2004. It would, however, earn a net income of Rs0.08 million in 2005 and Rs0.68 million in 2006.
The IT&T ministry is of the view that leasing of Hughes Satellite was taken on strategic grounds, otherwise they would have lost the opportunity to occupy the slot incurring a heavy financial loss.
The ministry stated that economic analysis were seldom adopted as a criterion to decide the fate of projects having strategic reasons. Pakistan was allotted five orbital slots between 1983 and 1992, but
it could secure only one and that too of a chequered history and an expected loss-making future.
A committee comprising secretary IT&T and chairman National Telecommunication Corporation (NTC) and additional secretaries of finance and planning to prepare a tariff to lease out the transponders.
The secretary IT&T and chairman NTC did not respond, despite repeated calls while Paksat General Manager Col Latif refused to discuss the project at this stage.
