India has taken steps in quick succession to liberalise its private space industry. In June 2020, the government approved the setting up of the Indian National Space Promotion and Authorisation Centre (IN-SPACe) to facilitate private activity. These steps signal definite changes in policy but there are reasons to be cautious.  

India has taken steps in quick succession to liberalise its private space industry. In May, the Finance Minister Nirmala Sitharaman announced the opening up of the Indian Space Research Organisation's facilities to the country's private sector as part of its Covid-19 special economic stimulus. More recently, the Indian Cabinet approved the setting up of the Indian National Space Promotion and Authorisation Centre ('IN-SPACe') to facilitate private sector participation "through encouraging policies and a friendly regulatory environment". These are early but laudable steps.

The private industry, however, is cautiously optimistic because of its disappointing experience so far. In 2017, US-based company Hughes had announced a USD 500 million satellite communications system in India. Till date, Hughes has received neither an approval nor an expected timeline. Multiplicity of approvals and procedural ambiguity have been repeatedly cited as barriers to growth. A satellite company, for example, will typically need to navigate the Department of Space ('DoS,' which sits under the Prime Minister's office), ISRO (sits under the DoS), Antrix (ISRO's commercial arm) and the Committee for Establishment and Operation of Indian Satellite Systems, and in the case of communication satellites, the Department of Telecommunications ('DoT') and the Wireless Planning and Coordination Wing ('WPC'; both DoT and WPC sit under the Ministry of Communications). The roles of each of these agencies are not clearly defined, further complicating the process. An example of this was the Antrix and Devas dispute. In 2005, Antrix (ISRO's commercial arm) inked a 12-year spectrum deal with Devas Multimedia to provide satellite-based mobile services. In 2010, the deal was cancelled without as much as prior information to Dewas. ISRO reneged on its contract with Dewas over allegations of impropriety in granting the contract – one impropriety being that ISRO earmarked spectrum for Dewas without securing approval of the WPC or consulting the DoT. Procedural ambiguity in the regulations allowed for this to happen.

Multiplicity of approvals and procedural ambiguity have been repeatedly cited as barriers to growth.

A discussion on the disappointments of the private sector experience in India is incomplete without mention of Team Indus. The venture was racing against international participants to launch a rover to the moon, in its bid to win the US$ 30 million Google Lunar X Prize and had secured a contract with ISRO to launch the rover on a dedicated PSLV mission. In 2018, seven years after it started on the mission, Team Indus had to abort the mission when its launch contract was cancelled. The company was unable to raise adequate funds to pay its instalment to ISRO. Raising capital was a struggle for Team Indus, as it is for the rest of the industry. Private capital follows markets that have clear, specific and predictable regulations, making it difficult for an Indian space company to raise from foreign markets. Also, given the long gestation periods and capital-intensive nature of the technology, the sector needs access to 'patient' capital, which can come from the government or yet again, from global private equity markets which can better afford to take long-term, innovative bets. This also requires FDI reforms. Currently, the establishment and operation of satellites has a 100% FDI limit subject to government approval. Industry bodies have repeatedly raised concerns of projects being held up for years while waiting for such approvals. One way to balance industry needs and the security considerations which the Government rightfully looks to protect is to adopt the telecommunication services model. The telecommunication sector in India was the subject of legitimate security considerations that are in some ways similar to the space sector. At the same time, the Government recognized the benefits that can accrue from a high-growth telecommunication sector. The balance was therefore achieved through a model of liberalization that now permits investments up to 49% under the automatic route and through the government approval route beyond that limit. This prevents foreign entities from getting a majority stake without Government approval while also providing Indian companies with seamless access to capital for a non-controlling stake in the company.

Lastly, ISRO is both a regulator and an operator. The apparent conflict of interest is another reason cited for the Team Indus debacle. The conflict manifests in various ways. For example, ISRO and the private sector have not transitioned beyond a 'vendor-supplier' relationship. ISRO establishes intellectual property and then shares technical expertise with the private sector in order to buy back components. ISRO maintains complete control over the final product. Private companies are precluded from exercising intellectual property, thereby limiting export and innovation. Private sector players need to be treated as equal market participants. Startups need to be actively incubated by ISRO and be allowed to exercise intellectual property. The inevitable competition between startups will be a net positive for ISRO, which will get access to an overall better quality product. Moreover, private companies will be able to leverage their intellectual property to export products to the burgeoning international satellite and launch vehicle market.

The Government's recent decisions are welcome steps in the right direction. The intention appears to be to re-focus ISRO's role to research and development and empower IN-SPACe to promote private space operations. This should be accompanied with a replacement of the present, overlapping regulatory framework to offer a single-window licensing system with a clear application process, precisely drafted exceptions, and strict timelines to be adhered to.

Relevant regulations will also need to be updated to reflect the aspirations of the private sector. It remains crucial for the Government to consult key stakeholders in the private sector while overhauling regulations. This may prevent increased red tape from being the price to be paid for private sector participation. India's space startups are hoping change will come in the form of a conducive policy environment that creates the right incentives, provides access to capital and assures clarity in regulation.

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