PRIME Minister Narendra Modi unveiled India’s ambitious plans to launch its own space station by 2035. Highlighting the rapid progress made by his Government, he envisioned a future where Indian astronauts will explore the moon’s surface using indigenous rocket technology. The Government recently amended its foreign direct investment (FDI) policy for the space sector, tweaking how much equity a foreign entity may acquire in three different subsectors through the automatic route.
The new caps announced are 49 per cent in launch vehicle manufacturing and spaceports, 74 pc in satellite manufacturing and 100 pc in components and sub-systems for satellites and ground station hardware.
These numbers are not FDI limits, but the percentages allowed through the ‘automatic route’ – higher holding is possible with the approval of the Government. While the Government has not explicitly disclosed the rationale behind these categories, the logic is not hard to make out.
Manufacturing of rockets (49 per cent through automatic route) is governed by the Missile Technology Control Regime (MCTR), an informal political understanding among member countries, which discourages laxity in control. India, which was admitted into the MCTR in 2016, would like its policies to be devoid of any whiff of proliferation.
Allowing 74 per cent stake through the ‘automatic’ route in satellite making must be viewed in the context of two factors: the rising global conflicts and a global economic slowdown. Regarding the first, the Russian invasion has hit Ukraine – which boasted of one of the largest rocket-manufacturing facilities in the world – hard. Venture capitalists previously keen on putting their money in Ukraine’s growing space industry have developed cold feet. As for the second, India, as a low-cost producer of satellites, stands to gain against China.
This is an opportune moment for India to amble into satellite making, as tens of thousands of satellites are slated to be launched in the coming years. The amendment makes it alluring for foreign entities to manufacture satellites in India, while reserving a slice for Indian businesses. However, the satellite manufacturing is fraught with suspicions of spyware. That is why the Government has allowed 100 per cent automatic FDI in components and sub-systems – a foreign investor may have full control over the manufacture and exports.
Two other broad trends have contributed to a liberalised space policy. One is the ‘China-plus-one’ approach, where investment is expected to fork away from China. India would like to position itself as a credible alternative to China in making satellites. The other is India’s ‘production-linked incentive’ (PLI) scheme for electronics manufacturing.
For those who avail themselves of the PLI, satellite manufacturing can be a ready market. Enlarging this market by inviting FDI would spur the electronics industry. The idea of private participation in space has somehow got hooked with startups. But there are many MSMEs in this space which can now access foreign investment.
It is believed that this policy took about two years to make. IN-SPACe, the nodal agency for facilitating private sector participation in the space sector, has developed the policy after numerous industry consultations. There is, perhaps, no need for the Government to pore into every FDI deal – broad oversight is enough. FDI in space can work as a good launching pad.
