Union Budget: A perfect platform to unlock India's space potential

The Indian government’s budget allocations for the space sector have traditionally been conservative typically ranging between Rs12,500 crore to Rs13,500 crore. However, recent developments, including missions like Chandrayaan 3 and Aditya L1, coupled with structural reforms, have infused optimism into India’s burgeoning space economy. With the establishment of IN-SPACe, liberalisation of foreign investment, and the release of updated space policies and guidelines, industry stakeholders are eagerly anticipating substantial policy reforms in the upcoming Budget to propel this sunrise sector forward.

Policy recommendations for government consideration

1. Need for codified legislation

The current Indian Space Policy 2023 and guidelines from IN-SPACe, though progressive, lack statutory backing. To provide a stable regulatory environment conducive to private participation, there is an urgent need for comprehensive legislation. Revisiting and advancing the dormant Space Activities Bill, 2017 could establish clear roles and responsibilities for IN-SPACe, incorporating industry feedback and enhancing appellate mechanisms for space-related authorisations.

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2. Access to growth capital

Space-tech startups face significant funding challenges due to high capital requirements and extended development timelines. The creation of a dedicated debt fund aligned with Alternative Investment Fund (AIF) Regulations, offering favourable borrowing terms and supported by a Credit Guarantee Scheme for Startups, could alleviate the notorious “Valley of Death” phenomenon. Additionally, fiscal incentives and tax rebates should attract private equity and other growth capital to invest in space startups.

3. Tax exemptions

Extending GST exemptions to certain space activities beyond satellite launch services, such as ground systems, satellite components and launch vehicles, and reducing customs duties and withholding taxes, would bolster profit margins across the space industry. These fiscal reforms would benefit the supply chain and enhance global competitiveness by enabling cost-effective pricing for end consumers.

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4. Skill development

Enhanced funding for skill development programmes, aligned with IN-SPACe’s strategic vision, is crucial to bridging the talent gap in India’s space sector. Increased collaboration between the Department of Space (DOS), educational institutions and the private sector in developing specialised courses and knowledge platforms will foster growth and generate employment opportunities.

5. Government adoption of space technology

Government procurement policies should prioritise indigenous space products and services, promoting their integration into sectors such as agriculture, disaster management, and infrastructure. Leveraging technology like earth observation data as Digital Public Infrastructure can enhance public service delivery while validating the utility of space-tech innovations.

6. Focus on ‘Make in India’

Expanding the Production-Linked Incentive (PLI) scheme to encompass the space sector would stimulate domestic manufacturing, aligning with the government’s ‘Make in India’ initiative. The PLI initiative in space sector will not only encourage local production but also create a conducive environment for new business ventures, thereby boosting employment and economic growth.

7. Robust Intellectual Property (IP) protection

Creating a unified platform for streamlined IP registration and cybersecurity measures will safeguard the intellectual property generated by Indian space-tech startups. This initiative is crucial for fostering innovation, facilitating collaborative partnerships and ensuring competitiveness in the global market.

Conclusion

As the Indian space sector embarks on a trajectory of growth and innovation, the upcoming Budget presents a pivotal opportunity for the Government of India to catalyse its development through strategic fiscal and regulatory interventions. By addressing funding gaps, enhancing policy frameworks, and fostering a supportive ecosystem for private players, the government can unlock the full potential of India’s space-tech startups, driving sustainable economic growth and reinforcing India’s position as a global space leader.

Revathy Muralidharan is Partner and Aryan Mohindroo is Associate at IndusLaw. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.