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Source: ReedSmith

“Indian regulators continue to relax foreign direct investment (FDI) regulation in various business sectors in India. The latest industry to potentially receive greater opportunity for non-Indian investor participation is the space sector.

The Indian space sector has become the latest industry to possibly join the ongoing trend of relaxed FDI regulation in India. This past week, the Indian Space Research Organisation (the ISRO) released a draft of the new Spacecom Policy 2020 (the Policy). The Policy governs the use of orbital slots, satellites and ground telecommunication stations with the goal of providing greater industry access to private companies. Representatives of the Department of Space (the DoS) in India confirmed that the Policy also aims to encourage FDI in Indian space businesses.

Currently, all FDI proposals for Indian space companies are subject to DoS approval. While a foreign investor can technically invest up to 100 percent under the existing Indian space regulation, any such transaction requires approval by the government first. Space industry leaders have been formally requesting the Indian government to permit FDI through the “automatic route,” as opposed to requiring regulatory approval, since June. With less stringent FDI approval rules, India could be poised to attract billions of dollars into the Indian space and satellite sectors. This could establish India as a significant player in the global space communication sector.

The Policy as drafted permits more private activity in the space sector, including the ability to construct ground stations, space ports and manufacturing facilities to make satellites and launch vehicles. While specific mechanics for FDI have not been published, Indian authorities have confirmed to the press that the Policy aims to entice international companies to not only set up private space facilities of their own in India, but to also invest in existing Indian space companies.

Indian lawmakers believe allowing a greater number of private players, both domestic and foreign, in the Indian space sector will enable India to keep pace with the growing worldwide demand for satellite-based broadcasting, network connectivity and mobile personal communication.

The ISRO is accepting comments on the current draft of the Policy until November 4.

Indian companies, their investors and their business counterparts should be aware of the government’s ongoing liberalization trend. FDI specifically has become an area that India has been intently reviewing and reforming across industries. The Policy demonstrates India’s efforts to bring sophisticated first-world capital and technology to its domestic space industry. Space industry groups should monitor the Indian government’s continuing developments and the corresponding reactions of the affected businesses. For overseas companies and investors in particular, the Policy could represent a significant opportunity to participate in the newest phase of India’s economy.

We continue to monitor developments in Indian FDI regulation, both generally and within the space and telecommunications sectors. We summarize the initial announcement of the relaxation of regulations applicable to FDI in India and summarize subsequent FDI movement with respect to the defense sector.

Our India Business team includes multidisciplinary lawyers from the United States, Asia and EME who stand ready to advise you on the issues above or others you may face related to cross-border transactions. ”