News Excerpt:

The Finance Ministry has notified a new Foreign Direct Investment (FDI) limit for various satellite-related activities under Foreign Exchange Management (Non-Debt Instruments) Rules.

Key points of the new liberalized FDI norms:

• The investee entity shall be subject to sectoral guidelines issued by the Department of Space from time to time. 
  • The new rules will come into effect from April 16.
• Under the amended FDI policy, 100 per cent of FDI is allowed in the space sector. 
• Now, satellite manufacturing and operation, satellite data products, and the ground and user segments can receive FDI up to 74 per cent under the automatic route, beyond which the government route will be applicable. 
  • Sub-sector comprises launch vehicles and associated systems or sub-systems. 
• The creation of spaceports for launching and receiving spacecraft can get FDI through automatic route up to 49 per cent. 
  • Here, too, beyond 49 per cent, these activities are under government route. 
• One hundred per cent FDI under the automatic route has now been permitted to manufacture components and systems/subsystems for satellites, the ground segment, and the user segment.

Definitions overview: The notification defines various satellite-related activities.

• “Satellites – Manufacturing and Operation” means end-to-end manufacturing and supply of satellite or payload, establishing the satellite systems, including control of in-orbit operations of the satellite and payload. 
• “Satellite Data Products” refers to the reception, generation, or dissemination of earth observation or remote sensing satellite data and data products, including Application Interfaces (API).
• “Ground Segment” means the supply of satellite transmit or receive earth stations, including earth observation data receive stations, gateways, teleports, satellite Telemetry, Tracking and Command (TTC) stations, Satellite Control Centres (SCC), etc. 
• “User Segment” means the supply of user ground terminals for communicating with the satellite, which is not covered under the ground segment.
• “Launch Vehicles and Associated Systems or Sub-systems” refers to a vehicle and its stages or components designed to operate in or place spacecraft with payloads or persons in a sub-orbital trajectory, earth orbit or outer space. 
• “Creation of Spaceports for launching and receiving Spacecraft” means that a spaceport (also referred to as a launch site) may be regarded as the base from which spacecraft are launched and consists of facilities involving devices for transportation to, from and via outer space.
• “Manufacturing of components and systems or sub-systems for satellites Ground Segment and User Segment” comprises the manufacturing and supply of the electrical, electronic and mechanical components systems or sub-systems for satellites, Ground Segment and User Segment.

Significance of the increased investment:

• Non-Government Entities (NGEs) have developed capabilities and expertise in the areas of satellites and launch vehicles
• With increased investment, they would be able to achieve sophistication of products, global scale of operations and enhanced share of the global space economy.
• It would unlock India's potential in the space sector through enhanced private participation.
• This move is set to revolutionize the Indian space industry by opening new avenues for foreign investment and participation, thereby accelerating India’s journey towards becoming a global space powerhouse.
• This amendment aims to create an ecosystem conducive to the effective implementation of space applications across various stakeholders.
• This increased private sector participation would help generate employment, enable modern technology absorption, and make the sector self-reliant. 
• It is expected to integrate Indian companies into global value chains.
• This will allow companies to set up their own manufacturing facilities within the country by duly encouraging the 'Make In India (MII)' and 'Atmanirbhar Bharat' government initiatives.
• The FDI policy reform will enhance the ease of doing business in the country, leading to greater FDI inflows and thereby contributing to the growth of investments, income and employment. 
• Nonetheless, it is one more step for India to fully become a developed & advanced country.