IIFCL Proposes Infrastructure Classification for Space Industry

India Infrastructure Finance Company Limited (IIFCL), a state-run infrastructure financing firm, has proposed to the government that the space sector should be classified as part of the infrastructure sector. This proposal comes at a time when the government has allowed up to 74% foreign direct investment (FDI) under the automatic route in various segments of the space industry.

Why IIFCL wants space sector to be classified as infrastructure

IIFCL, which plans to come out with a public offer next fiscal year, has disbursed around ₹18,000 crore in loans in FY24 and is also providing transaction advisory services to India’s premier space agency, the Indian Space Research Organisation (ISRO) and its commercial space missions arm, NewSpace India Ltd. (NSIL).

“We have requested the government to include space as a part of the harmonious list of infrastructure sectors,” said its chairman, PR Jaishankar, adding that IIFCL, through its subsidiary IIFCL Projects Limited (IPL), is already formulating a partnership framework for scaling up Launch Vehicle Mark 3 production on a public-private partnership (PPP) basis for ISRO and NSIL.

Jaishankar said that infrastructure financing firms, too, have an important role to play in the development of space technologies, and IIFCL is also providing transaction advisory services for the transfer of 10 in-orbit communication satellites from the Department of Space, ISRO, to NSIL.

How FDI policy in space sector has changed

Earlier this month, the government reviewed the extant FDI policy in the space sector and allowed up to 74% FDI under the automatic route in satellite manufacturing and operation, satellite data products, and ground and user segments.

The government has also announced a new policy framework for satellite communications (SATCOM) that aims to promote private sector participation and innovation in the space industry. The policy will enable private players to obtain licenses for providing satellite-based services in India and abroad.

The government hopes that these reforms will boost the growth of the space sector and attract more investments from domestic and foreign players.

What are the benefits of classifying space sector as infrastructure

Classifying space sector as infrastructure will enable it to access long-term and low-cost funds from infrastructure financing firms like IIFCL. It will also help in creating a level playing field for private players who want to enter the space industry and compete with ISRO and NSIL.

According to a report by PwC India, the Indian space economy was valued at $7 billion in 2019, accounting for 2% of the global space economy. The report projected that the Indian space economy could grow to $50 billion by 2024 if it leverages the potential of private sector participation and innovation.

By giving infrastructure status to the space sector, the government can facilitate its growth and development and make India a global leader in space technologies.

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