The Indian space industry: Key regulatory and policy developments from 2024

Partner: Aabhishek Dubey, Associate: Sagnik Sarkar

1. Introduction

The year 2024 was a landmark year for space policy and reform in India. The Indian government notified a liberalised policy on Foreign Direct Investment (FDI) in the space sector, and the Indian National Space Promotion and Authorisation Centre (IN-SPACe) released the Norms, Guidelines and Procedures (NGP) for the regulation of space activities in the country. Spacecomm spectrum is also set to be administratively allocated instead of being auctioned, and industrial states such as Karnataka and Tamil Nadu announced dedicated policies targeted towards the growth of the space sector.

The liberalised FDI policy presents an opportunity for space businesses to raise more foreign investment, and explore the establishment of more Indian subsidiaries, consortiums and joint ventures. The NGP enables space businesses to secure authorisation for, and attempt, a range of space activities that push the boundaries of private space capabilities, including the launch and operation of satellites and the development of launch vehicles. The expected finalisation of rules for the administrative assignment of spacecomm spectrum will enable space industry players to use spacecomm spectrum on a shared basis in a manner that is aligned with the general global practice in this regard. Businesses will also have the opportunity to compare the benefits and concessions being offered under various state space policies, once finalised, and evaluate which state presents the best ecosystem for setting up various facilities and installations.

The key regulatory and policy developments in the Indian space sector during the year 2024 are discussed in detail below.

2. Policy developments

2.1 Liberalisation of foreign direct investment in space

One of the prominent regulatory and policy developments of the year was the liberalisation and clarification of restrictions on FDI in the space sector. The law now prescribes a graded regulatory framework for such FDI, balancing economic liberalisation with national interest. FDI up to 100% under the automatic route is permitted in relatively less sensitive sub-sectors, and up to 74% or 49% in more sensitive sub-sectors.

The key features of the new norms, and their impact on the industry, are as under.

• FDI up to 74% under the automatic route is now permitted in the end-to-end manufacturing and operation of satellites and satellite systems. FDI in the establishment and operation of satellites was previously permitted only under the approval route. Companies that own and operate satellites and satellite constellations (which previously required government approval for any foreign investment) can now raise FDI up to 74% without prior government approval. This change represents by far the most significant liberalisation of FDI norms under the new regulatory framework.
• FDI up to 74% under the automatic route is also permitted in the distribution of satellite data products and in the ground segment and user segment. There was previously no specific entry for this sub-sector in the Indian FDI policy, leading to ambiguity in whether companies in the business of distributing satellite imagery, or the ground segment or user segment of space applications, were covered within the ambit of any FDI in the establishment and operation of satellites requiring government approval. The addition of a specific entry for this sub-sector clarifies the position of law in this regard.
• FDI under the automatic route has been limited to 49% in launch vehicles and spaceports, in view of their sensitive nature and direct ‘dual use’ applications for both civilian and military purposes. Hence, companies in the business of operating launch vehicles and spaceports will have to ensure that the aggregate FDI raised remains a minority stake.
• Finally, FDI up to 100% under the automatic route is permitted in the manufacturing of components and systems for satellites and in the ground segment and user segment of space applications. There was no specific entry for this sub-sector prior to these amendments. This clarification, and the resulting regulatory clarity, has the potential to further attract FDI in the extensive supplier and vendor ecosystem comprising various manufacturers that supply diverse components and systems to government space agencies and private space businesses.

The table below compares the permissibility of FDI in various space sub-sectors before and after the notification of the amendments to the space FDI norms:

The relaxed sectoral norms on FDI in the space sector and the related clarificatory amendments are expected to make it easier for space businesses and startups to raise funds from foreign investors, create Indian subsidiaries of foreign holding entities, and make downstream investments in step-down subsidiaries, consortiums, and joint ventures in India (which are subject to the same sectoral restrictions as direct FDI received from non-residents, as described above).

(To read our detailed update on the liberalised regulatory and policy framework for foreign investments in the space sector, click here.)

2.2 Norms, Guidelines and Procedures for implementation of the Indian Space Policy

Another major regulatory and policy milestone of the year was the release of the NGP in May 2024 by IN-SPACe, the single-window agency tasked with the promotion and authorisation of all space activities in India. The NGP constitutes a consolidated policy document setting out the general regulatory framework subject to which the space industry can operate in India, thereby creating a significant degree of regulatory clarity for space businesses.

Specifically, the NGP contains provisions on the:

• process for obtaining IN-SPACe authorisations and their terms;
• procedure for registration of Indian space objects under the United Nations Convention on Registration of Objects Launched into Outer Space, 1974; and
• liability of businesses for private space activities and mandatory third-party liability insurance requirements.

An entity carrying out space activities to or from the Indian territory generally requires authorisation from IN-SPACe, and the scope of such activities is defined broadly to include “any activity pertaining to the space sector“. The NGP currently envisages the grant of authorisation for six kinds of space activities (including establishment and operation of satellites, launch vehicles, ground systems, and dissemination of satellite imagery), and empowers IN-SPACe to also grant other kinds of authorisations. Importantly, in a statement on its website, IN-SPACe has clarified that the following do not require authorisation:

• manufacturing and supply of satellites or launch vehicle hardware;
• testing and qualification of space systems on ground; and
• end users of satellite capacity and users procuring satellite data.

Hence, generally, on-ground activities do not require authorisation from IN-SPACe, even if they relate to the space sector. This clarification is significant because in its absence, suppliers and vendors of space hardware components (including small or medium-scale industries), customers and end-users of satellite-based communication services, and even customers who merely purchase satellite imagery, could potentially be required to obtain authorisation from a space regulator. Subjecting such players to the stringency of securing authorisation would have been overbroad and unnecessary, as none of them are directly involved in carrying out any activities in space.

According to IN-SPACe’s website, it has already issued a good number of authorisations for the conduct of space activities. Between November 2022 to December 2024, as many as 38 authorisations to 23 different non-governmental or private entities were issued. The maximum number of authorisations are to enable foreign satellite operators to provision the capacity of their various satellites for providing satellite-based services in India and for the launch of hosted payloads. The other authorisations are for the operation of owned satellites or satellite systems and the undertaking of launches from Indian territory. A breakdown of the various categories of authorisations granted by IN-SPACe is set out below:

With the growing maturity of the Indian space industry and the regulatory experience of IN-SPACe and other industry stakeholders, the number of authorisations is expected to grow in the coming years.

2.3 Administrative assignment of spacecomm spectrum

Spectrum for space-based communications is set to be administratively assigned, with the closing of a public consultation by the Telecom Regulatory Authority of India (TRAI) on the various modalities and terms of assignment following the enactment of the new Telecommunications Act in 2023 explicitly permitting such assignment. This process represents the culmination of a long-standing debate on whether spacecomm spectrum should be administratively assigned or auctioned, which had pitted major space industry players against established telecom majors in India on the preferred mode of allocation. (To read our earlier article on this debate, arguing for administrative assignment, click here.)

An auction would grant the exclusive right to the highest bidder to use particular frequency bands of the spacecomm spectrum for a market-determined price. In contrast, administrative assignment would allow all eligible entities to use frequency bands simultaneously on a non-exclusive basis, upon payment of the administration fee specified by the government. The government’s decision in this regard aligns India with the general global practice and the ask of major space industry players.

To facilitate the implementation of the new Telecommunications Act, 2023, TRAI released a consultation paper in September 2024 seeking public comments on the various modalities and terms on which spacecomm spectrum may be administratively assigned. This consultation period ended in November 2024. TRAI is expected to formulate its recommendations soon and the government is likely to prepare spacecomm spectrum allocation rules shortly.

2.4 Fresh authorisation for satcomm services by foreign satellite operators

The NGP requires IN-SPACe authorisation for operators of non-Indian satellites that provision their satellite capacity to users in India to provide space-based communication services. Operators have been given a grace period till 31 March 2025 to continue with their existing arrangements (including the right to extend or renew any existing arrangements till such date). From 1 April 2025, only those non-Indian satellites which have obtained IN-SPACe authorisation will be permitted to provide satcomm services in India. The Ministry of Information and Broadcasting also issued an advisory on 10 August 2024 emphasising compliance with this authorisation requirement within the prescribed timeline.

However, service providers using the satellite capacity of foreign satellites as well as the end-users of these services do not need to obtain authorisation.

Therefore, foreign satellite operators providing satellite-based communication services need to secure IN-SPACe authorisation on priority by the end of March 2025 to be able to continue providing services to Indian users. Gauging by the breakdown of the kinds of authoriations granted by IN-SPACe quoted in Section 2.2 above, several major foreign satellite operators have already secured this authorisation.

2.5 Space policies announced by several states

Over the last year, the states of Karnataka and Tamil Nadu have announced draft state space policies, containing bespoke benefits and incentives for attracting the space industry to set up shop in these states. While Indian industrial states (such as Karnataka, Andhra Pradesh, Tamil Nadu and Uttar Pradesh) have had industrial policies for the aerospace and defence industries for some time (under which certain space business could have availed of some benefits), the release of draft state space policies indicates that states are developing dedicated policies to support and attract the space industry in particular. The kind of benefits typically offered under these policies include subsidies as a percentage of the amount of investment in eligible fixed assets or incremental increases in turnover, concessions from certain statutory charges/fees and utility charges (such as stamp duty and registration fees on land, electricity charges, etc.), and in some cases various concessions for sustainability initiatives (such as the setup of effluent treatment plants).

This trend is encouraging and reflective of the growing awareness of the states of the need to provide specific support and incentives to the space industry. The eventual adoption of state space policies will not only benefit the space industry directly but will also foster competition amongst states, which will ultimately lead to even greater benefits for the industry in the long run.

3. Government measures to support the private sector

3.1 Dedicated venture capital fund for space startups

In her Union Budget speech in July 2024, the Finance Minister announced the creation of a dedicated venture capital fund of INR 1,000 crore (~USD 115 million) to support the space industry. In August 2024, IN-SPACe announced the operationalisation of the IN-SPACe Seed Fund Scheme for Indian Space Startups and Micro and Small Enterprises and released guidelines for the same.

As per the guidelines, the fund is intended to finance selected applicants on a rolling basis as and when a round of applications is invited by IN-SPACe. A grant of up to INR 1 crore (~USD 115,000) may be given to selected applicants in three or more tranches, with each tranche being payable on fulfilment of the agreed milestones. Only DPIIT recognised startups in which employees, Indian promoters, and angel investors hold at least 80% shareholding are eligible to apply. Entities that receive grants must utilise them fully within three years from receipt of the first instalment.

Startups that require seed capital for spacetech research and development or for building space hardware may consider applying under this scheme as and when the next round of applications is announced by IN-SPACe. While the IN-SPACe Seed Fund Scheme is expected to kickstart the evolution of fledgling space startups, given the magnitude of expenses involved in conducting spacetech R&D and in building the resulting hardware, such startups will also need to look for additional sources of capital in the long run.

3.2 Technology transfers and public-private partnerships

IN-SPACe continues to facilitate several technology transfers to the private sector. Its website reports that as of 31 December 2024, IN-SPACe has signed 75 technology transfer agreements covering technologies like propellants, electrical and electronic components, materials, and chemical formulations. Additionally, nearly 165 more technologies are listed as available for transfer to interested private sector parties. This presents an opportunity for various companies to secure rights to critical technologies that have been developed, qualified and improved by the Indian Space Research Organisation (ISRO) across a range of space missions. Having the rights to these technologies is a significant business opportunity, as it would enable the recipients of the transferred technologies to commercially exploit proven ISRO technology and, at the very least, scale the entry barrier to the supplier and vendor ecosystem that manufactures and supplies space components to different customers (which may include ISRO itself).

Further, two significant public-private partnerships (PPP) were announced in 2024:

a. LVM-3 PPPs

In May 2024, New Space India Limited (NSIL), a commercial arm of ISRO, invited bids from the private sector to produce the LVM3 on a PPP basis. The LVM3 is currently ISRO’s heaviest launch vehicle and is designed to carry payloads up to 4,300 kg into geostationary transfer orbit. Currently, an established network of private vendors fabricates and supplies various components and systems for the Polar Satellite Launch Vehicle (PSLV), which are then integrated by ISRO to produce the final launch vehicle. In contrast, the LVM3 PPP envisages the fabrication of the entire launch vehicle by the private sector in partnership with ISRO. This marks a significant advancement in private sector participation in the development of launch vehicles for ISRO.

b. Earth observation satellite PPP

In the second proposed PPP, which is for establishing and operating an earth observation satellite system, IN-SPACe will offer a degree of financial support to the private sector to launch up to 12 earth observation satellites for creating one or more constellations on a build-operate-own model. This PPP is intended to develop indigenous private sector capability in earth observation and satellite imagery, a critical business with significant growth potential and several varied downstream applications.

These PPPs are significant because they signal the growing confidence of ISRO/NSIL in procuring products and services from the private space industry and is a positive step towards eventually positioning the government as an ‘anchor customer‘ in the Indian space economy. Even globally, jurisdictions with strong space economies are characterised by the government being an ‘anchor customer‘ for the products and services of space-tech businesses, which stimulates the growth of the space economy.

Further, the selection process for transferring the technology of the Small Satellite Launch Vehicle (SSLV) to the private sector is ongoing. SSLV is a small-lift launch vehicle designed by ISRO to carry payloads up to 500 kg to low earth orbit and 300 kg to sun-synchronous orbit. In August 2023, IN-SPACe invited bidders to apply for end-to-end transfer of the SSLV technology to enable mass production and commercial launches. By August 2024, ISRO completed the SSLV development with its third flight, and the then ISRO Chairman Shri S. Somnath announced readiness to transfer the technology upon completion of the bidding process. Once the bidding and technology transfer process is completed, SSLV will become the first ISRO-developed launch vehicle to be produced entirely by the private sector. This is expected to increase the availability of private launch services in India, as the selected bidder will have the right to manufacture and operate a proven launch vehicle that has been developed and qualified by ISRO.

4. Introduction of space liability insurance product by Tata AIG

In May 2024, Tata AIG debuted its in-orbit third-party liability insurance product for satellites, covering bodily injury and property damage caused by satellite operations after the insured satellite is in orbit, having separated from its launch vehicle. Damage caused in the pre-launch or launch stages is not covered under this policy. With this, Tata AIG joins New India Assurance Company (New India) as a key player in the Indian space insurance market. New India has historically insured ISRO satellites launched through foreign operators, beginning with the launch of INSAT-1A (India’s first operational satellite), since foreign launch operators are typically required by law to insist on insurance for launches, and often contractually pass on this burden to the customer contracting for the launch services.

The introduction of this insurance product is significant as it increases choices for owners and operators of satellites in the Indian space insurance market, which so far had been a market with limited choices for customers. Nevertheless, the depth of the market remains limited. The government may have to consider offering incentives (such as the creation of a specialised risk sharing or reinsurance mechanism) to incentivise the growth of the Indian space insurance market.

Since the newly introduced TATA AIG insurance product does not offer coverage for the launch stage, private launches from Indian territory will need to be insured by other insurers that offer coverage for this stage. The NGP empowers IN-SPACe to require private launch operators carrying out launches from Indian territory to procure third party liability insurance and name the Republic of India as co-insured to cover for its launching state liability under the Convention on International Liability for Damage Caused by Space Objects, 1971 (to which India is a contracting state along with other major spacefaring nations). The convention makes the launching state strictly liable on a no-fault basis to another contracting state for any bodily injury or property damage caused on the surface of the earth or to aircraft in flight by the launch of a space object. Hence, globally, spacefaring nations generally require private launches to be insured by third-party liability insurance.

5. Outlook for the new year

The global space economy, valued at USD 570 billion in 2023, is projected to triple to USD 1.8 trillion by 2035. While India currently holds a modest 2% share in the global space economy, the government aims to increase it to 8% by 2035. This presents a significant opportunity for growth and investment in the Indian space sector. The developments of the past year have laid the groundwork for the industry to capitalise on this opportunity, as summarised below.

• The liberalised and amended policy on FDI in the space sector generally unlocks greater flexibility for businesses in structuring investments, fundraises, and business relationships. Businesses engaged in the end-to-end manufacturing and operation of owned satellites and constellations will benefit the most, as FDI in this sub-sector was previously permitted only with government approval and is now under the automatic route up to 74%. In view of FDI under the automatic route being capped at 49% in launch vehicles and spaceports, Indian companies engaged in the development of launch vehicles may have to explore alternatives other than direct foreign investments to leverage the collaboration, technology, and expertise, of foreign partners.
• Indian businesses are expected to leverage the benefit of the consolidated regulatory framework put in place by the notification of the NGP to secure IN-SPACe authorisations. IN-SPACe’s momentum in granting authorisations for space activities is expected to continue increasing. Businesses will have to closely evaluate and navigate this regulatory framework and comply with ongoing operational conditions under the NGP and the authorisations granted to them, to make the most out of this opportunity.
• The rules for the administrative assignment of spacecomm spectrum, once finalised, are expected to put in place a defined and predictable regulatory framework under which space industry players can use spacecomm spectrum on a shared basis. This regulatory clarity is expected to attract more industry players to apply for the allocation and use of spectrum for space-based communication services. Businesses intending to avail of this opportunity will have to understand and navigate the spectrum allocation mechanism to be put in place for this purpose, which is expected to involve technical nuances and convergence with the global regulatory framework of the International Telecommunications Union (ITU) for the operation of satellites and usage of spacecomm spectrum.
• While a good number of foreign satellite operators have already obtained IN-SPACe authorisation to offer services to Indian users, the streamlining of space policy and regulation with the notification of the NGP is expected to attract more foreign satellite operators to secure authorisations for providing services to Indian users and for existing foreign operators to secure authorisations for more satellites to expand their offerings. This presents both a challenge and an opportunity for foreign satellite operators to familiarise themselves with the new regulatory framework of securing dual approval from the Department of Telecommunications and IN-SPACe.
• The finalisation of state space policies is expected to both support space businesses and enable them to take more informed decisions on which states to set up relevant facilities or installations in, depending on their eligibility for and the scale of state support and benefits being offered by the respective states. Interested businesses may have to closely coordinate with the respective state investment promotion agencies to understand the practical nuances of the scale of benefits being offered and the terms on which they are being offered, as these policies tend to focus on the substance of the benefits and leave open the finer procedural aspects of their implementation.
• Businesses are also expected to benefit from the transfer of a significant portion of the 165 odd proven ISRO technologies available for transfer to the private sector under the technology transfer mechanism administered by IN-SPACe. To leverage this opportunity, interested business will have to timely apply for the transfer of the relevant technologies in which they are interested and pass the selection process, for which a close analysis of the selection criteria and transfer terms will be necessary.

It will be interesting to watch the developments and accomplishments of the Indian space industry as they unfold.

If you require any further information about the material contained in this newsletter, please get in touch with your Trilegal relationship partner or send an email to alerts@trilegal.com. The contents of this newsletter are intended for informational purposes only and are not in the nature of a legal opinion. Readers are encouraged to seek legal counsel prior to acting upon any of the information provided herein.