March 12, 2024

Foreign Direct Investment in space Sector| Recent Amendments for FDI in Space sector

India is showing substantial development in the space sector. Considering the major development of India in the space sector, the government has approved amendments in FDI policies with respect to FDI in space sector.

As per Department of Space, with increased investment from private sector and global sources, Indian Space sector would be able to achieve sophistication of products, global scale of operations and enhanced share of global space economy.

As per existing policies, FDI is permitted in establishment and operations of satellites upto 100% subject to government approval. In line with the vision of Indian Space Policy, 2023, the Union cabinat has liberalized FDI norms for the space sector by allowing automatic approval route upto specified limit and prescribed the various categories and classifications of space sector.

This article discusses the detailed provisions of FDI in the Space Sector.

1. Earlier FDI Policy

As per Clause No. 5.2.12, following FDI is approved:

Sector/Activity	% of Equity/ FDI Cap	Entry Route
Satellites- establishment and operation, subject to the sectoral guidelines of Department of Space/ISRO	100%	Government

No other condition and clarification was provided for FDI in space sector under earlier FDI policy.

2. Updated FDI Policy

2.1 Threshold Limit for FDI in Space Sector

As per amended FDI policies, following are the entry routes for various satellite activities:

Sector/Activity	% of Equity/ FDI Cap	Entry Route
5.2.12.1(1) Satellites-Manufacturing & Operation(2) Satellite Data Products(3) Ground Segment & User Segment	100%	Upto 74%-Automatic Approval Route Beyond 74%- Government approval route
5.2.12.2(1) Launch Vehicles and associated systems or subsystems(2) Creation of Spaceports forlaunching and receiving Spacecraft	100%	Up to 49%: Automatic Beyond 49%: Government route
5.2.12.3Manufacturing of components and systems/ sub-systems for satellites, ground segment and user segment	100%	Up to 100%: Automatic

Accordingly, the government has classified Investment in space sector into different activities.
Further, The investee entity shall be subject to sectoral guidelines as issued by Department of Space from time to time.

2.2 Definitions

The amendment clause has provided the following detailed definitions of different operations of Space sector:

Satellites-Manufacturing & Operation: End-to-end manufacturing and supply of satellite and/or payload, establishing the satellite systems including control of in-orbit operations of the satellite & payloads.
Satellite Data Products: Reception, generation or dissemination of earth observation/remote sensing satellite data and data products including Application Interfaces (API).
Ground Segment: Supply of satellite transmit/receive earth stations including earth observation data receive station, gateway, teleports, satellite Telemetry, Tracking and Command (TTC) station, Satellite Control Centre (SCC), etc.
User Segment: Supply of user ground terminals for communicating with the satellite, which are not covered under the ground segment.
Launch Vehicles and Associated Systems or Subsystems: A vehicle and its stages or components that is designed to operate in or place spacecraft with payloads or persons, in a suborbital trajectory, earth orbit or outer space.
Creation of Spaceports for launching and receiving Spacecraft: A spaceport (also referred as launch site) can be regarded as the base from which spacecraft are launched, and consisting of facilities involving devices for transportation to, from and via outer space.
Manufacturing of Components and Systems/Subsystems for Satellites ground segment and user segment: Comprises the manufacturing and supply of the electrical, electronic and mechanical components systems/ subsystems for satellites, ground segment and user segment.

3. Conclusion

Such an amendment is a welcome move by the government as it will boost the space sector in India and will create new opportunities in India. This increased private sector participation will lead to employment generation, enable modern technology absorption and make the sector self-reliant. Through this amendment, the companies will be encouraged to set up their manufacturing facilities within the country.

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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