NDI Amendment Rules: Significant Milestone in Fostering Foreign Investment in the Space Sector

On April 16, 2024, the Ministry of Finance, through the Department of Economic Affairs, notified the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2024 (the “Amendment“), prescribing new entry routes for foreign investment in activities under the space sector. The Amendment primarily focuses on the space sector and has amended the provisions of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (“2019 Rules“), relating to foreign investment in the space sector.

The Amendment has introduced revisions in investment regulations concerning satellite manufacturing, satellite data products, launch vehicles, spaceports, and component manufacturing. Changes have been made to Schedule I of the 2019 Rules, liberalizing the entry routes for foreign investment in specified space sector-related activities. The liberalized entry routes specified under the amended policy on foreign direct investment, are stated below:

The Amendment defines “Satellites – Manufacturing and Operation” as end-to-end manufacturing and supply of satellite or payload, establishing the satellite systems including control of in-orbit operations of the satellite and payloads. “Satellite Data Products” have been defined as reception, generation or dissemination of earth observation or remote sensing satellite data and data products including Application Interfaces (API).

The Amendment further defines “Ground Segment” as supply of satellite transmit or receive earth stations including earth observation data receive station, gateway, teleports, satellite Telemetry, Tracking and Command (TTC) station, and Satellite Control Centre (SCC) etc. “User Segment” has been defined under the Amendment, as supply of user ground terminals for communicating with the satellite, which are not covered under the ground segment.

“Launch Vehicles and Associated Systems or Sub-systems” have been defined under the Amendment as a vehicle and its stages or components that is designed to operate in or place spacecraft with payloads or persons, in a sub-orbital trajectory, or earth orbit or outer space.

As per the Amendment, a spaceport (also referred as 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.’.

The Amendment also specifies that the investee entity will be subject to sectoral guidelines as issued by the Department of Space from time to time.

Prior to the Amendment, foreign direct investment was permitted in the establishment and operation of satellites through the government route only, i.e., prior approval was mandatorily required to be taken from the Government. The Amendment has been introduced pursuant to the Indian Space Policy, 2023, which demonstrated the Government’s intention to promote private sector participation in the space economy. The Amendment is likely to increase the influx of substantial capital into the Indian space sector, which in turn, would accelerate the pace of research, development, and deployment of solutions in satellite manufacturing, launch services, and space exploration. More investment will enable non-government entities to utilize their skills and expertise in the areas of satellites and launch vehicles to achieve sophistication of products, global scale of operations and enhanced share of global space economy.