The Ministry of Finance, through the Department of Economic Affairs, has issued a significant amendment to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. This third amendment, effective from April 16, 2024, introduces crucial changes impacting various sectors, particularly the space industry.
The amendment primarily focuses on the space sector, introducing alterations in investment regulations concerning satellite manufacturing, satellite data products, launch vehicles, spaceports, and component manufacturing. Notably, these amendments aim to liberalize foreign investment in the space industry, aligning with the evolving global landscape and India’s aspirations in space exploration and utilization.
Under the revised rules, sectors such as satellite manufacturing and operation, satellite data products, and ground segment and user segment now allow up to 100% foreign direct investment (FDI). However, certain conditions apply, with automatic approval limited to specific thresholds, beyond which government approval is necessary.
For instance, in the manufacturing of components and systems for satellites and associated segments, 100% FDI is permitted under the automatic route. Additionally, the investee entities are subject to sectoral guidelines issued by the Department of Space, ensuring regulatory compliance and strategic alignment with national interests.
The amendment defines key terms such as “Satellites – Manufacturing and Operation,” “Satellite Data Products,” “Ground Segment,” “User Segment,” “Launch Vehicles,” and “Creation of Spaceports,” providing clarity on the scope and applicability of the revised regulations.
*****
MINISTRY OF FINANCE
(Department of Economic Affairs)
NOTIFICATION
New Delhi, the 16th April, 2024
S.O. 1722(E).— In exercise of the powers conferred by clauses (aa) and (ab) of sub-section (2) of section 46 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Central Government hereby makes the following rules further to amend the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, namely:-
1. (1) These rules may be called the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2024.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, in Schedule I, in the Table, for serial number 12 and the entries relating thereto, the following shall be substituted, namely:-
| (1) | (2) | (3) | (4) |
| ‘12. | Space Sector | ||
| 12.1 | (a) Satellites-Manufacturing and Operation
(b) Satellite Data Products (c) Ground Segment and User Segment |
100% | Automatic up to 74%.
Government route beyond 74% |
| 12.2 | (a) Launch Vehicles and associated systems or sub-systems
(b) Creation of Spaceports for launching and receiving |
100% | Automatic up to 49%.
Government route beyond 49% |
| 12.3 | Manufacturing of components and systems or sub-systems for satellites, Ground Segment and User Segment | 100% | Automatic |
| 12.4 | The investee entity shall be subject to sectoral guidelines as issued by the Department of Space from time to time. | ||
| 12.5 | Definitions:
(a) “Satellites – Manufacturing and Operation”: 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; (b) “Satellite Data Products”: Reception, generation or dissemination of earth observation or remote sensing satellite data and data products including Application Interfaces (API); (c) “Ground Segment” and “User Segment”: (i) “Ground Segment”: 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.; (ii) “User Segment”: Supply of user ground terminals for communicating with the satellite, which are not covered under the ground segment; (d) “Launch Vehicles and Associated Systems or Sub-systems”: 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; (e) “Creation of Spaceports for launching and receiving Spacecraft”: – 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; (f) “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.’. |
||
[F. No. 1/5/EM/2019]
SURBHI JAIN, Jt. Secy.
Note: The Foreign Exchange Management (Non-debt Instruments) Rules, 2019 were published in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii) vide number S.O.3732 (E), dated the 17th October, 2019 and subsequently amended vide notification numbers:
(i) S.O. 4355 (E), dated the 5th December 2019;
(ii) S.O. 1278 (E), dated the 22nd April, 2020;
(iii) S.O. 1374 (E), dated the 27th April, 2020;
(iv) S.O. 2442 (E), dated the 27th July, 2020;
(v) S.O. 4441 (E), dated the 8th December, 2020;
(vi) S.O. 3206 (E), dated the 9th August, 2021;
(vii) S.O. 3411 (E), dated the 19th August, 2021;
(viii) S.O. 4091 (E), dated the 5th October 2021;
(ix) S.O. 4242 (E), dated the 12th October 2021;
(x) S.O. 1202 (E), dated 12th April 2022;
(xi) S.O. 332(E), dated 24th January 2024; and
