100% FDI in Indian Space Sector: Opportunities and Regulations Under FEMA

Context

The Finance Ministry notified amended rules under the Foreign Exchange Management Act to allow up to 100 percent Foreign Direct Investment (FDI) for the Indian space sector through three categories of liberalised entry routes.

100% FDI in Indian Space Sector: Key Highlights of the Notfication

100% FDI for Manufacturing, Operation of Satellites: 100 per cent FDI has been allowed for the Indian space sector category of manufacturing and operation of satellites, satellite data products, and ground segment and user segment.

• In this,  up to 74 per cent would be through the automatic route and a government nod would be required for investment beyond 74 per cent. 
• Under the earlier policy, any foreign investment in manufacturing and operating satellites is allowed only with government approval.

49% FDI for Launch Vehicles: Automatic FDI has also been permitted up to 49 per cent for launch vehicles and associated systems or subsystems and the creation of spaceports for launching and receiving Spacecraft. 

• Government approval would be required for investments beyond 49 per cent.

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Definition of Key Terms in the Notification

• Satellites – manufacturing and operation: It has been defined as end-to-end manufacturing and supply of satellite or payload, establishing the satellite systems including control of in-orbit operations of the satellite and payloads. 
• Satellite Data Products: These have been defined as reception, generation or dissemination of earth observation or remote sensing satellite data and data products including Application Interfaces (API).
• Ground segment: It refers to supply of satellite transmit or receive earth stations including earth observation data receive station, gateway, teleports, satellite telemetry, Tracking and Command (TTC) station, and Satellite Control Centre (SCC) etc.
• User Segment: It refers to supply of user ground terminals for communicating with the satellite, which are not covered under the ground segment.
• Launch vehicles and associated systems or sub-systems: It is defined as a vehicle and its stages or components that is designed to operate in or place spacecraft with payloads or persons, in a sub-orbital trajectory, or earth orbit or outer space.
• Spaceport: It refers to the base from which spacecraft are launched, and consists of facilities involving devices for transportation to, from and via outer space.
• Space Activities: They largely encompass the launch vehicle and launch service, the satellite, ground stations that can detect the signals, and user products where the data from satellites is utilised.

Strengthening Indian Space Sector: FDI Policy and Future Investment Plans

Enabling Power Indian Space Sector: Currently, ISRO operates spaceports in the country. By allowing 49 per cent FDI in the segment, the government aims to make the ecosystem more enabling for private companies.

Increasing share in Global Space Economy: Indian space sector’s share of the global space economy is between 2 and 3 percent. 

• The government plans to increase it to more than 10 percent by 2030. 
• According to the Indian National Space Promotion and Authorisation Centre (IN-SPACe), this scale-up will require an investment of $22 billion in the next 10 years.

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