India Unleashing Reforms In Space Domain

In India, the space sector is largely driven and controlled by GoI. Private participation in this sector in India in comparison to the other developed countries has been slow and is relatively small in size. In order to develop home-grown space technology, promote private participation and facilitate additional funding, the Indian space sector has been evidencing varied policy interventions in recent times by GoI to bring our country’s space sector at par with other developed nations.

Recent space reforms in India

The chairman of the Indian National Space Promotion and Authorization Centre (“IN-SPACe”), Dr. Pawan Goenka, announced, in the second half of May, 2023, that a draft of the foreign direct investment in the space sector (“Draft Space FDI Policy”) may be rolled out in the next three months. The Draft Space FDI Policy would allow 100 percent FDI in the following three areas:

1. sub-system manufacturing;
2. launch vehicle operations; and
3. satellite operations and establishments.

This move is intended to promote collaboration, innovation, and technological improvements in the Space sector. It is announced that if the Draft Space FDI Policy is implemented, foreign investment would be attracted in the aforesaid three activities and the FDI limit could range from 49% to 100%. Until now, 100% FDI was permitted only for satellite operations and establishments via the government route^[1]. With the new Draft Space FDI policy, India is likely to continue its efforts to attract global investments and promote global enterprises. Therefore, injecting a large amount of FDI into this sector would not only assist the space industry in India to grow but also be a key enabler of growth for the other fields in the country such as meteorology, energy, telecommunications, insurance, transport, maritime, aviation, urban development etc.

In addition to the Draft Space FDI Policy, ISRO revealed the Indian Space Policy 2023 on April 20, 2023^[2]. The policy’s objectives include enhancing space capabilities, enabling, encouraging, and establishing a thriving commercial presence in space, using space as a catalyst for technological advancement and the advantages it brings to related fields, fostering international relations, and creating a framework for the effective adoption of space applications by all parties, including non-governmental entities^[3] (“NGE”).

IN-SPACe, which was founded on June 24, 2020, will work as an autonomous government organization with the responsibility to promote, hand-hold, guide, and authorize space operations in India^[4].

Some of the key functions of IN-SPACe are as follows:

1. to act as a nodal agency for authorization of space activities;
2. Establish a framework for developing space industry standards;
3. Identify ISRO-developed technologies that can be transferred to NGEs and facilitate such transfers;
4. Set safety and security standards for space objects in guidelines;
5. Educate private organizations on best practices for enabling the technology ecosystem;
6. Establish policies to deal with liability issues emerging from potential damage caused by space activities;
7. Specify the circumstances under which IN-SPACe may examine, revoke, or modify the authorizations granted.

Furthermore, IN-SPACe will periodically establish policies and standards that, among other things, will enhance the ease of doing business in India in the space industry. Now, ISRO could henceforth concentrate primarily on the research and development of new space technology and applications as well as enhance human understanding of space.

With the advent of Indian Space Policy 2023 and the proposed Draft Space FDI Policy, the Indian space program would be able to maintain cost competitiveness in the international space market and hence generate a number of employments in the space and other related sectors, which in turn will unleash the full potential of India’s young people and entrepreneurs.

Last year, on December 6, 2022, ISRO and Social Alpha, a foundation for innovation and social entrepreneurship, signed a memorandum of understanding to establish the SpaceTech Innovation Network (“SpIN”)^[5], India’s first platform for innovation curation and business development for the developing space entrepreneurial ecosystem. This innovative partnership, a first-of-its-kind public-private partnership for start-ups and small and medium-sized enterprises in the space industry, will work to identify and unleash the market potential of India’s most promising space tech innovators and entrepreneurs. It is a significant step forward in providing further stimulus to India’s recent space reform policies.

There is no skepticism that India has been a spacefaring country and has made significant advancements in this field, but the government has traditionally controlled this industry and private businesses have had little to no involvement in it. With the recent reforms in the space sector which has opened the doors for Indian private companies and foreign investors, India can take some lessons from the nations already thriving in the space domain like the USA, European Union, France, the United Kingdom, Japan etc.

Following the implementation of the aforementioned reforms, Indian private enterprises and foreign players are likely to enter the Indian space market, in large numbers, which was previously completely controlled and governed by GoI.

For the space industry, which is by its very nature capital-intensive, a forward-looking FDI policy and other reforms, along with the Indian Space Policy, 2023 for start-up space enterprises, would be a welcome move. It is a win-win situation for both India and other nations (i) as India will have enough investments to boost its space industry which would have a positive impact at a global level, and (ii) for foreign nations it will be more economical to invest in India in comparison to investing in developed nations.

However, it’s too soon to comment on the recent reforms and only time will tell (i) if the proposed Space FDI Policy (along with the other reforms that GoI, has recently undertaken or yet to undertake, in the said sector) could open the doors for new avenues in the Indian space industry, (ii) if the Indian Space Policy 2023 would be able to attract sufficient private participation from the industry, and (iii) whether SpIN could be a game changing platform.

Authors: Apoorva Chandra (Partner) and Damini Chouhan (Associate) Sarthak Advocates & Solicitors. Views Are Personal.

1. FDI Policy 2020 (Department for Promotion of Industry and Internal Trade Ministry of Commerce and Industry Government of India, Effective from 15 October 2020), https://dpiit.gov.in/sites/default/files/FDI-PolicyCircular-2020-29October2020_0.pdf ↑

2. https://www.isro.gov.in/media_isro/pdf/IndianSpacePolicy2023.pdf ↑

3. Indian Space Policy 2023 defines NGE to “mean (i) a company incorporated under the Companies Act, 2013 or (ii) a partnership firm established under the Limited Liability Partnership Act, 2008, (iii) Trusts under the Indian Trusts Act 1882 (iv) Association of persons or body of individuals incorporated under relevant statutes in India.” ↑

4. Id. ↑

5. https://www.isro.gov.in/ISROAndSocialAlpha.html ↑