Space industry seeks liberal FDI policy, PLI scheme in Union Budget

India's nascent space sector has sought a liberal FDI policy on a par with the defence industry and production-linked incentive in the interim Budget that the government will present next week.

The industry body Indian Space Association (ISpA) has also sought GST exemption for satellites, launch vehicles and ground equipment manufacturing, lower tax rates for external commercial borrowings and reduction of satellite sector withholding tax from 10 per cent to two per cent, given the low profit margins.

"Our expectation is for enabling a more liberal FDI (foreign direct investment) policy in the space sector. As of now, even one per cent of FDI has to go through the government approval route and that takes months and months," Awais Ahmed, founder and CEO of Pixxel, a Bengaluru-based start-up, told PTI.

"The defence sector has 74 per cent FDI through the automatic route. Beyond that, you have to go for the government route. At least matching what is there for the defence side would be really helpful in opening up the inflow of external capital for Indian space companies trying to scale up and build more things," Ahmed said.

He also sought a production-linked incentive (PLI) scheme for space manufacturing.

"We need to catalyse and innovate more by having suppliers and folks building a variety of different things for space technology -- whether that is components, satellites, cameras, trackers. That would only be possible to innovate or accelerate through a PLI scheme that sort of enables that to happen," Ahmed said.

ISpA also demanded a PLI scheme for space-grade components along the lines of a similar scheme for drones.

The industry body also wants the government to commit to procuring and adopting space tech solutions across domains such as agriculture, disaster management.

"Now, to propel this promising industry and drive innovation, it is crucial for the government for the development of a comprehensive regulatory framework and to address existing fiscal and taxation challenges," ISpA Director General Lt Gen (Retd) AK Bhatt said.

The association has also sought reasonable spectrum usage charges (SUC) as percentage of adjusted gross revenue (AGR) for satellite services allocated non-auctioned spectrum under the new Telecommunications Act, 2023.

ISpA said satellite operators should be permitted 25 per cent depreciation on one-time fee and licence charges to optimise tax impact and capital subsidy on infrastructure investments with additional subsidy for facilities in remote areas to spur manufacturing capabilities, launch infrastructure advancement and downstream space offerings growth in India's private space industry.

IN-SPACe, the space sector regulator, has projected the country's space economy to increase to $44 billion by 2033.