Space sector optimistic as budgetary allocation increases

The Union Budget announced by Finance Minister Nirmala Sitharaman on February 1 has brought some relief to the space sector, including private players, as budgetary allocation sees an increase, while certain reforms have been proposed. The budget has allocated Rs 13,416.2 crore to the Department of Space for the fiscal year 2025-26, as opposed to Rs 13,042.7 crore in the interim Budget. Although the stakeholders are seeing this as a positive development, the allocation is lesser than the Rs 13,700 crore granted in FY23, and Rs 13,949.09 crore (highest among the budgets in the ongoing decade) granted in FY22.

The allocation, to be divided as Rs 6,103.63 crore for capital expenditure, and Rs 7,312.57 crore for revenue expenditure, keeps in view the big-scale space programmes the Indian Space Research Organization (ISRO) has up their shelves, and the work of the other agencies including the Indian National Space Promotion and Authorization Centre (IN-SPACe). With consistent disruptions in deep-tech, the potential also multiplies for the space sector.

A broad view of the sector already shows how India’s space industry has been growing over the last few years. Mostly, ISRO’s high-stake missions such as the Chandrayaan-3, and the Aditya-L1 solar observation project, among others, have strengthened India’s stance among the top space-faring nations. With more rapid disruptions ensued since the opening of the space sector to private players in 2020, the budgetary allocation has always been a point of concern for all the stakeholders. The proposed allocation is being viewed as conducive to the growth of space-infrastructure and operational caliber of the sector.

Although the reactions from industry experts are mixed, they are more on the optimistic side, especially in the context of the announcement of the National Geospatial Mission. Aligned with the PM Gati Shakti initiative, the National Geospatial Mission is envisioned to modernize land records and enhance urban planning. The aim is to push for development in geospatial infrastructure for better infrastructure design and execution.

“The announcement of the National Geospatial Mission shows the growing commitment of the government to use the downstream capabilities of the space tech sector,” said a statement from the Indian Space Association (ISpA).

“We also welcome the government's decision to remove customs duty on ground installations for satellites, including spares, consumables, and essential goods used in building launch vehicles and facilitating satellite launches. This long-awaited reform aligns with the industry's needs. Additionally, the increase in the space budget is a significant step towards strengthening India's space ecosystem, fostering innovation, and enhancing global competitiveness,” they added, highlighting the other key reforms proposed in the space sector.

Dr. Pawan K Goenka, Chairman, IN-SPACe, also lauded the announcement of the National Geospatial Mission as “a bold step towards modernizing our infra by leveraging geospatial and space data.” “I urge private players to harness PM Gati Shakti’s data to drive innovation and smart growth,” he shared on X.

Dr. Goenka, who was awarded Padma Shri this year in recognition of his contribution to the space and mobility sector, has been spearheading the endeavors at IN-SPACe, which acts as a single-window, independent, nodal agency under the Department of Space. As an agency dedicated to promote, enable, authorize and supervise various space activities of the NGEs, IN-SPACe has been instrumental in driving India’s private space boom since its inception in 2020.

A greater part of IN-SPACe’s work revolves around getting the new-age space startups necessary authorizations and assistance in making their endeavors successful. The budget’s proposal to remove the 5 per cent customs duty on goods “used in the building of launch vehicles and launching of satellites” brings cheer for these startups as they prepare for diverse space missions that cater to imaging, surveillance, space exploration, data mining, and many other sectors.

Before the budget, the announcement of a 1000 crore VC Fund brought hope for the rapidly growing Indian space startup market. The VC Fund is to be deployed over five years and would likely benefit around 40 startups – the entire process of which would expectedly bridge the risk capital gap in India's high-tech space sector, enabling startups to thrive and compete globally. With deliberations for the operational aspects of the VC Fund still ongoing, IN-SPACe’s focus would be on streamlining authorization processes, and enhancing international collaborations to strengthen the private sector’s role in India’s space economy. Additionally, the Earth Observation Satellite System initiative aims to create commercial opportunities in the midstream and downstream sectors while enhancing India’s self-reliance in satellite data and imagery.

Although, there are more prospects required for attracting funding and investments in the sector and the budgetary allocation should also increase, collaborations between the industry and government would be key in taking the space economy to a projected USD 44 billion by 2033. India’s revised Foreign Direct Investment (FDI) policy 2024 allowing up to 100% foreign investment in the space sector is also a big boost. With up to 74% FDI for the automatic route for satellite-related activities, up to 49% for launch vehicles and spaceports, and 100% for manufacturing space components, the new reforms are expected to boost innovation, industry growth, and global investments.