New Delhi, Feb 17 (IANS): The government Thursday scrapped the controversial deal between Antrix, the commercial arm of Indian space agency ISRO, and private firm Devas on the allocation of space spectrum using S-band, high value and scarce radio waves.

"The agreement for the lease of space segment capacity on Antrix S-Band spacecraft (satellite) by Devas Multimedia Pvt. Ltd. shall be annulled forthwith," Law Minister M. Veerappa Moily told reporters, announcing the decision of the Cabinet Committee on Security (CCS) here presided over by Prime Minister Manmohan Singh.

Moily said the decision was taken after noting "the fact that government policies with regard to allocation of spectrum have undergone a change in the last few years".

He said there had been "an increased demand for allocation of spectrum for national needs, including for the needs of defence, paramilitary forces, railways and other public utility services as well as for societal needs".

"Having regard to the needs of the country's strategic requirements, the government will not be able to provide orbit slot in S-band to Antrix for commercial activities, including for those which are the subject matter of existing contractual obligations for S-band," he said.

The cancellation of the deal follows a raging controversy after the media, citing the government auditor's findings, reported that the agreement for handing over 70 Mhz of S-Band spectrum to the private firm for Rs.1,000 crore had resulted in a loss of Rs.2 lakh crore to the nation.

The deal, finalised in 2005 without any competitive bidding, was under review for the past many days by the government and the space department, directly looked after by the prime minister.

Manmohan Singh told reporters Wednesday that the deal was not operational; if there was any delay in scrapping it, it was "only procedural", he said.

Devas Multimedia has threatened to take legal action as it Wednesday termed as "disturbing and inappropriate" the government's "unilateral" decision to terminate the agreement.

However, the government is ready for a legal battle if Devas approaches a court.

"The legal impact was also discussed in the CCS and it will move to the court since the deal is annulled. The government has taken all possible litigations under consideration before taking the decision (to scrap the deal). We are very confident that this is the matter which, even if they go to the court, they will not succeed and we will be in a position to face any legal challenges," Moily said.