In recent weeks, India’s space endeavors have garnered international attention, including on account of the successful soft-landing of Chandrayaan-3 near the lunar south pole, followed by the launch of Aditya-L1 to study the solar atmosphere. The Indian Space Research Organisation (“ISRO”) has also announced significant progress in connection with India’s first manned space mission, Gaganyaan, including the successful test of the Gaganyaan Crew Escape System, which is a significant milestone in achieving manned spaceflight capabilities. These achievements constitute a series of important developments in recent times in India’s space sector, including the country’s signing of the Artemis Accords (which establishes a framework for cooperation in the civil exploration and peaceful use of the Moon, Mars, and other astronomical objects) and release of the Indian Space Policy, 2023. On aggregate, such initiatives seem intended to repair India’s somewhat unremarkable presence (thus far) in the global space market, representing a mere two per cent of the USD 447 billion market for space-related activities. Indeed, private participation in India’s space sector has been hampered by multiple factors, including poor access to finance, lack of a stable and predictable regulatory framework, as well as continued ambiguity on issues related to liability in case of untoward incidents.
Several motivations have led to India’s recent interest in space, including a desire to capture nine per cent of the global market share by 2030, as well as to replicate (and improve upon) the success of space firms elsewhere in terms of lowering costs, increasing innovation and developing advanced technologies.
This note outlines India’s efforts to enhance space regulation, including in terms of ongoing reforms and liberalization in this sector, and presents a snapshot of future perspectives.
PREVIOUS EFFORTS TO BETTER REGULATE SPACE
Prior attempts to enhance space regulation in India have been fragmented and reactive. Presently, India has only two non-legislated policies to regulate private sector participation, and moreover, no statute or dedicated legislative instrument exists as of date for the purpose of regulating commercial activities in outer space.
In 2000, the Department of Space introduced the SatCom Policy which “provides a framework to provide licenses to private sector players to operate communication satellites over India.” However, the sole license issued to a private sector entity under the SatCom policy (to Essel Group’s Agrani Satellite Services Limited) related to a project which failed to take off. Likewise, the Remote Sensing Data Policy (RSDP), 2011, which contained modalities for managing and/or permitting the acquisition/dissemination of remote sensing earth observation data, could not establish a robust internet-enabled free market (as envisaged), and instead ended up creating a platform that was “cumbersome and business-unfriendly.”
India’s space policy has also suffered setbacks on account of the prolonged dispute between the Antrix Corporation and Devas Multimedia, which has attracted considerable criticism for India in connection with the enforceability of investor rights.
Subsequently, in 2020, ISRO announced the establishment of a new space industry regulator – the Indian National Space Promotion and Authorization Center (“IN-SPACe”), an autonomous agency within the Department of Space – to ensure greater private participation. Accordingly, IN-SPACe functions as a single-window nodal agency for all space sector activities of private entities. As of September 30, 2023, it has completed, and is in the process of, reviewing, respectively, almost 200 applications apiece in connection with space activities. IN-SPACe has also initiated a seed-funding program to promote Indian startups in the private space ecosystem whereby certain Indian companies, such as MISTEO Private Limited and ARMS 4 AI Private Limited, have already been selected.
REFORMS IN THE WORKS
India’s space sector has witnessed several attempts in respect of legislative reform with the aim to promote private participation and the growth of commercial space ventures. However, the Draft Space Activities Bill, 2017 (the “2017 Bill”), despite taking centerstage in such reform efforts, was criticized widely. For instance, while most space-faring nations such as the United States, the United Kingdom and Australia specifically require private sector entities in the space sector to obtain insurance for a certain amount, the 2017 Bill introduced an ambiguous provision – pursuant to which a private entity could be held liable for damages/losses beyond the insured sum. Additionally, the criminalization of most offenses, such as the suppression of factual information or causing damage/pollution to the environment, did not sit well either from the perspective of state capacity or that of ease of doing business. After the 2017 Bill lapsed in 2019 with the outgoing Lok Sabha, a new space bill, which addresses some past concerns, was expected to be released by the end of 2022 after completing public and legal consultations. However, no formal announcement has been made yet in this regard.
A new FDI policy for the space sector is also in the pipeline. Presently, although FDI in the space sector is allowed up to 100% in the area of satellite establishment and operations, such permission is only applicable for investments made through the Government route. The upcoming policy is expected to allow FDI in three different kinds of space activities – satellite establishment and operations, launch vehicle operation and manufacturing, and sub-system manufacturing.
The degree of private sector involvement in the Indian space market hinges on achieving sufficient clarity in matters related to liability, insurance and access to financing. Accordingly, three key recommendations are outlined below:
First, active measures must be taken to facilitate and promote asset-based financing. Asset-based financing will allow the private sector to gain easier access to finance and reduce their cost of capital. Upon default, a creditor could gain control/ownership of the assets in which it has been assigned rights. However, asset financing in a sector such as space is more complex due to the mobile nature of the underlying assets. A viable solution in this regard is provided by the Space Protocol (under the Convention on International Interests in Mobile Equipment or the Cape Town Convention), which provides for the establishment of an electronic international registry with respect to international security interests in space assets. Notably, while the lapsed 2017 Bill required India’s Central Government to maintain a registry of space objects, it did not address the aspect of registering the security interests in such space assets. To establish a sustainable asset-financing ecosystem for the space sector, India must devise mechanisms that enable the registration of such interests. Additional guarantees under law which require an Insolvency Resolution Professional to preserve the value of assets and transfer possession or control of the underlying asset to a creditor at the end of a reasonable period may offer the kind of protection that financiers require to take critical decisions with respect to lending.
Second, the extent to which private entities are liable for damage caused to third parties (or to space assets) due to their operations must be determined reasonably, and the corresponding approach needs to be rationalized. Most space-faring nations (e.g., the United States, France, South Korea, Australia and the United Kingdom) have imposed a liability cap through their respective space laws – as opposed to having an uncapped liability regime. As a result, any compensation payable that exceeds the cap on liability under the domestic space legislation will be incurred by the state. However, India’s approach to liability attribution with respect to commercial space operators has followed a different trajectory. For instance, the 2017 Bill had allowed for all liability to be passed on to private actors while providing wide discretionary powers to the Central Government in respect of determining the quantum of liability to be imposed upon a licensee.
Third, the laws and regulations applicable to space insurance need to be made clear for the purpose of bolstering private sector participation. Space firms not only seek to insure themselves against accidents, but also against damages payable to third parties who are affected by such accidents. Globally, space insurers have found it increasingly difficult to insure space assets profitably, having to spend more on paying out claims than what annual premiums cover. While guidelines for third-party liability space insurance were anticipated in India by the end of 2022, such guidelines are yet to be released.
Finally, the quality and ease of protection with respect to the rights of investors and consumers in the space sector remain a key factor. Several investment arbitration tribunals such as those in Eutelsat v. Mexico, Antrix v. Devas and Deutsche Telekom v. India have had to adjudicate upon disputes pertaining to space assets. Accordingly, there appears to be a growing need for specialized tribunals in this regard, staffed with sectoral and subject-matter experts. Some countries have already rolled out initiatives for the purpose of setting up necessary infrastructure in respect of resolving space disputes. For instance, the UAE has launched a new court “under the auspices of the Dubai International Financial Centre to settle commercial space disputes and violations of bi- and multilateral space-related treaties.” Since such courts may operate through an opt-in jurisdiction, companies and institutions worldwide “will now have the option of agreeing to take grievances to the tribunal, with new contracts potentially specifying the new space court as the forum for resolving disputes.”
Promisingly, it appears that the DOS, in conjunction with ISRO, proposes to continue with its deliberate shift from a supply-based approach to a demand-based model. In this regard, NewSpace India Limited (“NSIL”), a Central Government-owned enterprise founded in 2019, has taken over the tasks of aggregating user requirements and obtaining commitments from the Antrix Corporation. Such aggregation aims to optimize the utilization of space assets (such as satellites and launch capacity) by determining accountability among stakeholders. For instance, new assets can be created based on demand confirmations from user entities.
As non-government private entities (“NGPEs”) increasingly engage in space activities pursuant to their respective business models, several start-ups and industries are making launch vehicles and satellites with the aim of providing space-based services. By assuming ownership of operational launch vehicles from DOS, NSIL aims to commercialize launches, satellites and allied services. Accordingly, NSIL acts as the nodal agency for the manufacture of both ‘polar’ (“PSLV”) and ‘small’ (“SSLV”) satellite launch vehicles in partnership with private entities. Further, in collaboration with ISRO, NSIL remains focused on improving the national ecosystem with respect to the building of satellite systems and subsystems, as well as ground infrastructure.
Thus, the Central Government appears keen to provide a favorable regulatory environment for private entities, including by creating a level-playing field, with the aim of encouraging such entities to become independent actors (instead of just being vendors or suppliers to the government). Further, the ease of doing business in the Indian space sector can continue to improve through single-window mechanisms and predictable timelines with respect to IN-SPACe processes in terms of promoting NGPE activities.
Thus, with the goal of making national space infrastructure increasingly available for use by private entities, a mechanism has been created pursuant to which private entities can approach IN-SPACe for utilizing ISRO facilities and services – including those related to testing, tracking, telemetry, launchpads, laboratories, engine and antennae testing, ranging and range safety, utilization of thermo-vacuum chambers and systems, etc. – which can help such actors ascend the value chain. In addition, the Central Government has demonstrated its commitment to support space sector startups by supplying critical items (e.g., flight termination systems).
Among other developments, the recently launched SpaceTech Innovation Network (“SpIN”), a public-private collaboration for startups and SMEs in the space industry, offers a dedicated platform for stimulating India’s recent space reforms, along with curating innovation and developing new ventures within an expanding entrepreneurial ecosystem. Accordingly, SpIN aims to identify, and promote the market potential of, promising entrepreneurs with respect to space technology across discrete categories related to innovation – including geospatial technologies and downstream applications; enabling technologies for space and mobility; as well as aerospace materials, sensors, and avionics.
At the start of this year, before the presentation of the Union Budget, it was reported that various NGPE representatives within the Indian space sector had sought viability gap funding (“VGF”) to set up new infrastructure, along with tax incentives and a space-based production-linked incentive (“PLI”) scheme to boost local manufacturing, encourage capability building, as well as to promote much-needed research and development undertaken by private entities without ISRO assistance.
In the context of such demands, a PLI scheme may help Indian ‘space-tech’ startups, as well as existing manufacturers, including for the purpose of developing spacecrafts, satellites, components, control systems, sensors, modules, launch vehicles, propulsion systems and similar items – eventually enabling the country to become an export hub, as envisaged by the Central Government.
This insight has been authored by Abhishek Tewari (Partner) and Dr. Deborshi Barat (Counsel) and Hitoishi Sarkar (Associate). They can be reached at email@example.com and firstname.lastname@example.org and email@example.com , respectively, for any questions. This insight is intended only as a general discussion of issues and is not intended for any solicitation of work. It should not be regarded as legal advice and no legal or business decision should be based on its content.
© 2023 S&R Associates