Space sector pushes for dedicated PLI, tax sops as budget wishes

India’s private space and satellite sector, which crossed milestones of 100 active startups and $100 million in venture capital funding last year, is pushing for the rollout of a dedicated production-linked incentive (PLI) scheme to boost the local manufacturing of satellites, rockets and related components, which they hope will reduce reliance on imports and strengthen India’s private space and component industry.

They are also asking for tax benefits, similar to the Centre’s extended tax holidays given to startups under Section 80 IAC of the Income-Tax Act, as part of their demands they hope the government will approve in this budget.

According to a 35-page document by the Satcom Industry Association of India (SIA), which Mint reviewed, the key demand of the industry will hinge on a PLI scheme for satellite manufacturing. “In 2020, India accounted for merely 0.61% of global exports in aircraft, spacecraft and parts, with an export value of $1.03B. On the other hand, India’s share in global imports in the same segments stands at 3.67%, with an import value of $5.7B,” said Anil Prakash, director general of SIA. “A space-based PLI scheme would help boost local manufacturing, and encourage capability building within the country,” said Awais Ahmed, chief executive of Bengaluru-based homegrown space-tech startup, Pixxel.

Industry experts, however, believe it would be advisable to optimise the existing PLI framework rather than introducing a dedicated PLI scheme for the space sector. “The space sector is not a bulk manufacturing industry — it is mostly an assembly industry. On top of this, it is unlikely that there will be sustained demand for thousands of satellites to be launched, and the numbers, at least initially, could be in the hundreds. This does not warrant a dedicated space-sector PLI scheme,” said Chaitanya Giri, consultant at policy think tank, Research and Information Systems for Developing Countries (RIS).

Giri added that the space sector presently needs incentivization for production of components that are key to it, such as dedicated space-grade semiconductors, solar panels, electronic equipment and sensors. Most of these are already covered in the Centre’s existing PLI framework, which includes a ₹76,000 crore semiconductor PLI introduced in December 2021, a ₹3,285 crore Scheme for Promotion of manufacturing of Electronic Components and Semiconductors (SPECS) in April 2020, a ₹19,500 crore scheme for domestic manufacturing of solar modules, and as of December 27 last year, a yet-to-be-announced ₹12,000 crore PLI scheme to incentivize “hi-tech components”.

While most of these schemes are directly targeted at other sectors, Giri said that most of these schemes already cover the key components needed for creation of a local manufacturing economy in the country. “For instance, solar cells are crucial components of satellites, but we already have a PLI scheme that promotes it. This shows that we do not really need a dedicated space PLI, at least not right now,” Giri added.

Another key demand for the space sector right now lies in increasing the allocated budget for the government’s nodal space authorization body, Indian National Space Promotion and Authorization Centre (IN-SPACe) — which industry experts state will continue to play a vital role in offering infrastructure for early-stage space companies to use, without needing to make capital-heavy investments in factories and research and development (R&D) facilities at the onset.

“The FY23 Union Budget allocated ₹33 crore to IN-SPACEe. For FY24, we request a further ₹100 crore as ‘Viability Gap Funding’ to set-up new infrastructure. This can give a much-needed thrust towards cutting-edge tech development by reducing the revenue risk (of startups) to recover costs — while providing a financially attractive return,” said Kranthi Chand, head of strategy and special projects at Hyderabad-based homegrown space startup, Dhruva Space.

Chand added that an allocation of ₹1,000 crore to the Centre-affiliated Defence Space Agency (DSA), to facilitate procurement of new technologies from private space startups, could help create demand for these startups within India’s own ecosystem.

To be sure, IN-SPACe is already in the process of setting up an R&D facility that private startups can use to build their products. In an interview with Mint on January 3, Pawan Goenka, chairman of IN-SPACe, said that the facility will be ready and functioning by later this year. While the space policy will reduce the need for IN-SPACe to authorize private space projects on a per-case basis, Goenka said that the nodal body will continue to play a mentoring and facilitative role for the private space industry — which the latter reinforced in their expectations from the Union Budget 2023.