07 March 2024
by Ashima Obhan and Manisha Khalkho
Obhan & Associates
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On February 21, 2024, the Union Cabinet made a historic strideby sanctioning a groundbreaking revision to India's ForeignDirect Investment Policy ("FDI Policy")in the space sector. This pivotal decision marks a significantdeparture from India's traditional stance, signaling a boldshift towards leveraging private investment and expertise to drivethe nation's space aspirations forward.
India's space domain, historically governed by stringentgovernment control, saw some reform initiatives in 2020, aimed atfostering private sector involvement. However, these endeavors wereconfined to the government approval pathway, constraining theinflow of foreign investments into the sector. Even the proposed2017 draft of the Space Activities Bill, designed to encourage FDIand private sector engagement in commercial space ventures,maintained rigorous regulations, stifling investmentopportunities.
Against this backdrop, the recent revision to the FDI Policy isa welcome reform, opening avenues for FDI through the automaticroute. This significant policy amendment is poised to revolutionizeIndia's space sector, paving the way for increased privatesector participation and fostering innovation, competitiveness, andself-reliance in this vital sphere.
Under the revised policy framework, the satellites sector hasbeen delineated into three distinct activities, each with specifiedlimits for foreign investment. This strategic move aims to provideclarity and investment opportunities, while catalyzing growth andinnovation in the space sector. Additionally, the Indian SpacePolicy 2023, a dynamic and comprehensive framework, serves as aguiding compass for unlocking India's space potential throughenhanced private participation. The Indian Space Policy 2023outlines a suggestive compilation of space undertakings permissiblefor private sector entities. These activities encompass a range offunctions such as acquiring, leasing, or setting up communicationsatellites; managing and operating remote sensing satellitesystems; overseeing ground facilities dedicated to spaceoperations; utilizing Indian or non-Indian orbital resources forestablishing space objects catering to communication services; andmaking International Telecommunication Union submissions throughbodies like Wireless Planning Commission, Department ofTelecommunications, or non-Indian administrations for procuringorbital resources, among others. Set forth below is a brief summaryof functions assigned to different authorities under the IndianSpace Policy, 2023:
Previously, FDI in satellite establishment and operation wasconfined to the government approval route. However, in line withthe objectives outlined in the Indian Space Policy 2023, therevised FDI policy now presents a more liberalized entry route andclearer investment guidelines for satellites, launch vehicles, andassociated systems.
1. Indian National Space Promotion and Authorization Centre:
- Functions as a centralized clearance and authorization agencyfor space endeavors.
- Shares technological insights, practices, and processes withnon-government entities ("NGEs").
- Establishes a uniform regulatory framework for NGEs.
- Plays a dual role as a promoter and regulator, fosteringindustry clusters and issuing liability guidelines.
2. New Space India Limited:
- Specializes in commercializing space technologies and platformsdeveloped through public investment.
- Oversees the manufacturing, leasing, or procurement of spacecomponents, technologies, and platforms.
3. Department of Space:
- Offers comprehensive policy guidelines and implements spacetechnologies.
- Facilitates international cooperation in space governance.
4. Indian Space Research Organisation:
Concentrates on Research and Development ("R&D"),transferring mature systems to industries for commercialutilization.
5. Non-Governmental Entities' ("NGEs") Role:
Authorized to engage in end-to-end activities in the spacesector.
Previously, FDI in satellite establishment and operation wasconfined to the government approval route. However, in line withthe objectives outlined in the Indian Space Policy 2023, therevised FDI policy now presents a more liberalized entry route andclearer investment guidelines for satellites, launch vehicles, andassociated systems.
Key Highlights of the Revised FDI Policy
- Policy Clarity: The revisions to theFDI Policy offer liberalized entry routes and clarity for FDIacross various sectors within the space industry.
- Categorization and Liberalisation ofFDI: The amendment provides for three categories ofliberalised entry route.
| Sr. No. | Sector / Activity | % of Equity / FDI Cap and Entry Route |
| (i) | Launch vehicles and associated systems or subsystems, creationof spaceports for launching and receiving spacecraft. | Up to 49% under the automatic route (Investments beyond 49% will require prior approval of therelevant sectoral regulator under the government route.) |
| (ii) | Satellite manufacturing and operation, Satellite data products,and ground segment and user segment. | Up to 74% under the automatic route (Investments beyond 74% will require prior approval of therelevant sectoral regulator under the government route.) |
| (iii) | Manufacturing of components and systems/sub-systems forsatellites and ground segment and user segment. | Up to 100% under the automatic route |
This strategic move is poised to unlock a plethora of benefits forIndia's space sector. Enhanced private sector participation isanticipated to not only generate employment opportunities but alsofacilitate the absorption of modern technology, fostering sectoralself-reliance. Furthermore, it presents an opportunity for Indianentities to seamlessly integrate into global value chains,bolstering initiatives such as Make in India and AtmanirbharBharat.
In conclusion, India's decision to liberalize the FDI Policywithin the space sector underscores its commitment to fosteringinnovation, competitiveness, and self-reliance in this criticaldomain. By embracing private participation and fostering anenabling investment environment, India is primed to unlock newopportunities, propel technological advancements, and emerge as apivotal player in the global space economy.
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