As India stands at the threshold of becoming a global space power. with private sector participation enabled under the Space Policy 2023, the next critical step is fiscal, regulatory and structural support to accelerate growth and position India among the top three spacefaring nations.
ISpA has outlined key private space sector recommendations for government consideration which aim to boost domestic manufacturing, enhance national security, create high-value jobs and foster global competitiveness while ensuring controlled and secure access to strategic satellite and geospatial data.
- Recognizing the Space Sector as ‘Critical Infrastructure’
India’s space sector is entering a decisive growth phase yet remains structurally disadvantaged in access to finance due to its capital-intensive nature and long gestation cycles of 5-7 years. While global peers classify space assets as strategic or critical infrastructure, India’s space ecosystem currently lacks formal infrastructure status, limiting access to long-term, low-cost capital. Recognizing space infrastructure as a distinct infrastructure sub-sector is essential to unlock scale, private investment, and global competitiveness.
Space infrastructure underpins telecommunications, defence, navigation, finance, weather forecasting, disaster management, and governance. Formal recognition will enable infrastructure-grade financing, reduce cost of capital by 2-3%, and strengthen national resilience.
Key Recommendations:
- Include “Space & Satellite Infrastructure” under the Harmonised Master List of Infrastructure Sub-Sectors notified by the Ministry of Finance and RBI.
- Notify a separate infrastructure sub-sector covering:
- Launch vehicles and spaceports
- Satellite manufacturing and integration facilities (LEO/MEO/GEO)
- Ground stations, TTC networks, and mission control centres
- Earth Observation and communication constellations
- Navigation systems and Space Situational Awareness (SSA) networks
- Enable access to:
- Long-term bank lending and DFI financing (including NaBFID)
- Infrastructure bonds with tax benefits
- Viability Gap Funding (VGF), insurance and credit-enhanced instruments
- Demand Creation through a 50% Government Procurement Mandate
Predictable demand is the single most powerful driver of private investment. While Indian private players now possess proven capabilities across satellites, launch systems, EO data, and ground infrastructure, lack of assured government demand constrains scaling. A formal procurement mandate will anchor industry growth while allowing ISRO to focus on strategic and exploratory missions.
Global best practices demonstrate this clearly: NASA sources over 80% of its systems from industry, while ESA follows a 90% industry-led execution model.
Key Recommendations:
- Mandate that at least 50% of all Government procurement for space-based services, hardware, and missions be sourced from Indian private entities (NGEs).
- Scope to include Satellite manufacturing and payloads, EO data and analytics, SATCOM services and ground infrastructure, Launch subsystems and deep-tech components and SSA networks
- Introduce a standard procurement clause: “Where a viable Indian NGE capability exists, a minimum of 50% of contract value shall be reserved for Indian private entities.”
- Position Ministries such as MoD, DoT, Agriculture, Environment, and Urban Affairs as anchor customers.
- Oversight through IN-SPACe, with empanelment and periodic compliance review.
- Empanelment and Secure Use of Satellite Data
With growing use of satellite-derived data in governance and commercial applications, standardisation and security are critical. A structured procurement and access framework will support domestic industry while safeguarding national interests.
Key Recommendations
- Require all Ministries, State Governments, and ULBs to procure satellite imagery and geospatial data only from empanelled Indian companies.
- Establish a geo-tagging framework for all space entities and authorised users.
- Restrict access to sensitive satellite data to geo-tagged, authorised entities, ensuring data security and regulatory compliance.
- Link eligibility for incentives (SEZ, GST benefits, procurement access) to geo-tagging compliance.
- Financial and Tax Incentives for the Space Sector
Given high upfront costs, rapid technological obsolescence, and delayed revenues, the space sector requires a tailored fiscal framework distinct from conventional manufacturing. A predictable incentive regime will crowd-in private and global capital while accelerating domestic capability creation.
Key Recommendations:
- Introduce PLI schemes for satellites, launch vehicles, space-grade components, and critical subsystems.
- Provide five-year tax holiday for space manufacturing, launch services, and space-based service providers.
- Enable R&D tax credits of 20-30% for qualifying space-sector R&D.
- Introduce capital investment tax credits for launch pads, ground stations, and satellite production plants.
- Allow accelerated depreciation on satellites, rockets, and launch-related hardware.
- Special Economic Zones and Export Enablement
Space activities are inherently export-oriented. Extending SEZ-like benefits will strengthen India’s role as a global space manufacturing and services hub.
Key Recommendations:
- Grant deemed SEZ status to space tech parks and manufacturing clusters.
- Extend duty-free import of components and equipment, zero-rated inter-SEZ supplies and simplified foreign currency handling for exports.
- Allow SEZ-to-DTA movement based on end-use relaxation for space products.
- Interest Subvention for Space Infrastructure and R&D
High financing costs materially impact project viability in space manufacturing and launch services.
Key Recommendations:
- Introduce a 2-5% interest subvention on term loans for Satellite manufacturing, Launch services, Ground infrastructure and space-related R&D.
- Implement through IN-SPACe, in coordination with banks and DFIs.
- Incentives to Promote R&D and Employment
India’s space ambitions depend on sustained R&D investment and a highly skilled workforce.
Key Recommendations:
- Restore 150% weighted deduction under Section 35 for in-house R&D on space technologies.
- Introduce employment-linked tax deductions for hiring scientific, engineering, and technical personnel.
- Provide concessional GST and customs duties for R&D equipment, linked to end-use certification.
- GST Rationalisation and Input Tax Credit Reform
Current GST exemptions inadvertently block ITC, raising costs for domestic missions and distorting competitiveness.
Key Recommendations:
- Classify satellites, launch vehicles, and launch services as Zero-Rated Supplies, not exempt supplies.
- Enable full ITC availability and refunds, including on capital goods.
- Create a special ITC refund framework for long-cycle satellite manufacturing.
- Allow ITC carve-outs under Section 17(2) for satellite manufacturing.
- International Collaboration, Exports, and FDI Rationalisation
India’s space sector must integrate with global value chains while retaining strategic oversight.
Key Recommendations:
- Exempt TDS under Section 195 for foreign services procured for space operations.
- Notify IN-SPACe as the single-window authority for space-related export approvals.
- Introduce export incentives for satellites, launch services, and space-based services.
- Increase FDI cap for launch vehicle companies to 74% under Automatic Route.
- Allow 100% FDI under Automatic Route for launch vehicle sub-systems and components.
- Legal and Regulatory Certainty
Long-term private investment requires a stable and transparent regulatory environment.
Key Recommendations:
- Enact a Comprehensive Space Act formally recognising spacetech as an industry.
- Grant statutory authority to IN-SPACe as the independent civilian regulator.
- Establish clear licensing, authorisation, and dispute-resolution mechanisms.
India stands at a defining moment in its space journey. By recognising space as critical infrastructure, mandating private sector participation, rationalising taxes, incentivising R&D, and strengthening regulatory certainty, the Union Budget 2026-27 can decisively shift the Government’s role from provider to partner and anchor buyer.
ISpA remains committed to working closely with the Government of India, Department of Space, IN-SPACe, Ministry of Finance, and allied Ministries to build a globally competitive, commercially vibrant, and strategically secure Indian space ecosystem.
