Potential FDI in the Spacetech Sector – What to expect?

The Government of India, Ministry of Commerce and Industry, Department for Promotion of Industry and Internal Trade (“DPIIT”) has many sectors, sub-sectors under inter alia the Foreign Direct Investment Policy of India (“FDI”).

One of the upcoming sectors i.e., the Space sector and/or Space Tech Sector, has been making waves in the Startup industry with about more than 75 start-ups registered in India under the Space Technology Category with the DPIIT.

Since its inception in 1972, the space activities in India have been completely governed by the Department of Space.

In 2017, the Government of India, Department of Space released a draft of the Space Activities Bill, 2017 (“Space Bill”) seeking comments from the stakeholders/public.

The Space Bill is expected to clearly define the scope of FDIs in the Indian space sector, as well as the role that the Indian Space Research Organisation (“ISRO”) would play alongside Indian start-ups.

Whilst, India is already a signatory to many international space treaties, until the Space Bill, there was no domestic space law or a policy in India.

With increasing interest of the private sector in the Indian space program, the growth of the tech sector and magnification of the start-up industry in India, in 2019, the Government of India had already established a public-sector company, the New Space India Limited (“NSIL”), to offer a huge repertoire of ISRO-built technologies and spin-offs to the private sector for commercial applications.

In May 2020, the Indian National Space Promotion and Authorization Centre (“IN-SPACe”), a new facilitating agency was established to, compliment the functions of NSIL and to provide the private sector enabling innovation and industrial policies, and giving them the necessary access to use ISRO-built space infrastructure.

The Government of India had also come up with a draft of the Space-based Communication Policy of India-2020 (Spacecom Policy- 2020) and draft norms, guidelines and procedures for implementation of Spacecom Policy-2020 (Spacecom NGP-2020).

The SpaceCom Policy 2020 aims to do two things, one, the said policy will regulate the commercial use of satellites, orbital slots, and ground stations for communication needs and, secondly how private players can get authorisation to set up new communication satellites and ground stations.

The Government of India, in its FDI Policy over the last few years have opened up various sectors including the defence sector, that were not open to private foreign investment and have also increased foreign investment sectoral caps, this combined with the recent space related laws passed by the Government of India indicates that FDI may also be allowed by the Indian government in the space sector.

The Government of India, Ministry of Science and Technology, Department of Science and Technology, Lok Sabha, in its written response, answered on 9 February 2022 in relation to ‘Startups in Space Tech’ (“Space Tech Response”) that on 24 June 2020, it has approved reforms in space sector to boost private sector participation in entire range of space activities.

Please note that as per the said Space Tech Response, whist the government has confirmed that it will welcome private participation, please note that no confirmation till date has been provided by the Government of India, stating if foreign direct investment/FDI will be permitted in the space sector.

Whilst the new space reforms and the establishment of IN-SPACe and NSIL are aimed at enabling the Indian industry and innovation ecosystems to be vital players of the global space economy. As a sign of progress toward this goal, as many Indian space start-ups and technology companies, have formed strategic partnerships with their US, Australian, French, Canadian, and British counterparts; and made outward strategic investments in global space-technology companies, which makes it seems very likely that in the next coming years, FDI will be permitted by the DPIIT in the space sector.