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Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2024: – Comments.
In a significant move, the Ministry of Finance, through its official gazette, has announced an enhancement of the Foreign Direct Investment (FDI) limits for satellite-related activities under the FEMA (non-debt instrument) Rules. As outlined in the notification, the investee entity is required to adhere to sectoral guidelines issued by the Department of Space. These new regulations, referred to as the Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2024, has come into effect on April 16, 2024.
Union Cabinet Approves Revised FDI Policy for Space Sector.
On February 21, the Union Cabinet approved revisions to the FDI policy for the space sector, allowing up to 100% foreign investment under the automatic route for specific activities, including the manufacturing of components, systems, and subsystems for satellites. This notification follows the approval of the Union Cabinet in February. It establishes a more accessible entry route and provides clarity on FDI in satellites, launch vehicles, associated systems or subsystems, the establishment of spaceports for launching and receiving spacecraft, and the manufacturing of space-related components and systems.
According to the notification, the automatic route permits up to 74% FDI for satellite manufacturing and operation, satellite data products, and the ground segment and user segment. Beyond 74%, government approval is required for these activities. FDI up to 49% is permitted for launch vehicles and associated systems or subsystems, as well as for the creation of spaceports for launching and receiving spacecraft under the automatic route. Beyond 49%, government permission is required. Additionally, 100% FDI is allowed for the manufacturing of components and systems/sub-systems for satellites, the ground segment, and the user segment without government permission.
Conclusion:
The decision by the Ministry of Finance to expand the Foreign Direct Investment (FDI) limits for satellite-related activities marks a significant milestone for the space sector in India. With the new regulations set to come into effect on April 16, 2024, up to 100% foreign investment under the automatic route will be permitted for specific activities, including the manufacturing of components, systems, and subsystems for satellites.
This move not only establishes a more accessible entry route but also provides clarity on FDI in satellites, launch vehicles, associated systems or subsystems, the establishment of spaceports for launching and receiving spacecraft, and the manufacturing of space-related components and systems.
This decision is expected to stimulate investment and innovation in the space sector, encouraging the development of indigenous capabilities and infrastructure. By providing a clearer regulatory framework and more accessible entry routes, the government aims to attract foreign investment and facilitate the growth of the space industry in India. This bold move will not only create new opportunities for the space sector but also enhance India's position as a significant player in the global space arena.