Budget 2024: Spacetech Startups Seek PLI Scheme, Clarity On FDI Policy

The spacetech sector has been on the Centre’s priority list over the last two to three years. This has resulted in not only a boom in the number of startups emerging in the sector but also major achievements like the first private satellite launch in the country.

From providing funding support to establishing the Indian National Space Promotion and Authorization Centre (IN-SPACe) as a nodal agency to support emerging startups in the sector, the government has left no stone unturned to give a boost to the spacetech ecosystem. 

Now, with the interim Budget for 2024 just around the corner, the startups and investors in the spacetech industry are looking forward to some important policy tweaks, increase in budgetary allocation, and a clear policy on foreign direct investments (FDI). Besides, they are also seeking a production-linked incentive (PLI) scheme on the lines of multiple such schemes launched by the Centre for other sectors.

Speaking to Inc42, Pixxel founder and CEO Awais Ahmed said that the industry has grown enough to survive without any new announcements. However, clarity on FDI and a PLI scheme for the sector would incentivise manufacturing and help the existing companies scale up quickly.

It is pertinent to note that the government has been working on finalising the FDI policy for the spacetech industry for quite some time now. Besides, the PLI scheme for the spacetech sector has also been a long-standing demand.

Muted Expectations From Interim Budget

However, as Finance Minister Nirmala Sitharaman would present an interim Budget on February 1, ahead of the general elections, the industry doesn’t expect too many new announcements. 

“Typically, interim budgets focus more on continuity and less on introducing major financial allocations. However, given the strategic importance of the spacetech sector in terms of boosting innovation and national security, advancing scientific research and enhancing indigenous capabilities, we remain hopeful for favourable announcements,” said Ahmed.

“Even though significant financial outlays might be restrained, minor policy tweaks or modest funding allocations that support research, innovation, and public-private partnerships in the space sector would be welcomed,” he added. “These measures could serve as a precursor to more substantial commitments in the future, laying the groundwork for sustained growth.”

On the other hand, Murali Krishna Gunturu, principal at Inflexor Ventures, said, “We don’t expect any major announcements in the current interim Budget as this is going to be an election Budget. We are probably going to see more announcements in the actual Budget after the elections are done.”

Inflexor is one of the investors in spacetech startup Bellatrix, which manufactures propulsion technologies for satellites.

Will FDI Policy Find A Mention? 

IN-SPACe chairman Pawan Goenka earlier acknowledged that the FDI constraint was a persisting issue in the spacetech sector, given many startups were not able to get investments for their growth. 

After all, manufacturing satellites and launching space vehicles requires significant capital investment. 

Speaking on the matter, Inflexor’s Gunturu said that the industry has been expecting the FDI announcement for some time now and it’s time the government lays down a clear policy for the same. 

“The space industry has been seeing many interesting entrants in India for the last few years… The FDI announcement will clear the way for foreign money to enter India. Since India is getting recognised world over as a serious player in space, we think it will be a good boost for all the early-stage startups,” he added.

Echoing similar sentiment, SatSure cofounder and CTO Rashmit Singh Sukhmani said that FDI proposals were cleared on a case-to-case basis so far as the sector was in a nascent stage, but the situation has changed now.

“FDI norms under which people would not have to route the proposals on a case-to-case basis will help the sector from here on,” Sukhmani said, expressing hope that the interim Budget will provide clarity on this. 

Meanwhile, Pixxel’s Awais opined that the absence of any new development in terms of FDI policy could potentially dampen the enthusiasm of investors and industry players and slow down the growth of the space sector.

Need For PLI & GST Rate Cut

Over the last few years, the Centre has launched a number of PLI schemes for various sectors to boost domestic manufacturing. The PLI schemes for the auto and EV industry and drone sectors, both of which have the presence of a number of startups, has provided a boost to these segments. 

Hence, the spacetech startups are hoping that the finance minister would announce a PLI scheme for manufacturing space-grade components in the upcoming Budget.

Ahmed said that a PLI scheme for the sector would not only promote local production but also reduce import dependencies and create a robust supply chain within the country. 

Besides, some industry stakeholders told Inc42 that there is a need to extend goods and services tax (GST) exemption to all rocket vehicles, satellites, and ground equipment manufacturing to give a fillip to the spacetech sector. 

It is pertinent to note that the GST Council last year granted GST exemption on satellite launch services supplied by the Indian Space Research Organisation (ISRO), Antrix Corporation Limited, and New Space India Limited (NSIL).

Meanwhile, industry players also sought an increase in budgetary allocation for the spacetech sector.

During last year’s Union Budget, FM Sitharaman allocated INR 12,543.91 Cr to the Department of Space, which was an 8% cut from the previous year’s Budget estimates.

Gunturu said he expects the space budget allocation this year to be at similar levels as last year or even lower. However, SatSure’s Sukhmani expects around a 10% hike in this allocation. 

Overall, while many established players in the spacetech ecosystem today are well-placed to capture the growing opportunities in the sector without any further policy boost, it goes without saying that a few tweaks would be highly beneficial for the early stage startups.

As per Inc42’s analysis, the Indian spacetech industry is expected to surpass the $77 Bn mark by 2030, growing at a 26% CAGR between 2023 and 2030.