Space Industry Looks for PLI-like Scheme, More Govt Procurement Mandate from FM Sitharaman

India’s space industry is entering a new phase as private companies take on a bigger role following the Space Policy 2023. However, industry bodies say stronger budgetary allocation and policy support will be crucial in the upcoming Union Budget 2026 if India wants to become one of the world’s leading space powers.

The Indian Space Association (ISpA), along with Deloitte, has shared a set of recommendations for the government to focus on helping private space companies grow faster. The proposals aim to make it easier for businesses to raise money, build space infrastructure, and compete globally.

One of the main demands is to officially recognise space and satellite projects as critical infrastructure. Space projects usually require heavy investment and take several years to start generating returns. Despite their importance in areas like telecommunication, defence, weather forecasting, navigation and banking, space assets are not yet treated as infrastructure in India.

The ISpA-Deloitte report suggests that giving space this status would allow companies to access long-term loans, infrastructure funding and lower-cost financing, making projects more viable.

The space industry is also asking for assured demand from the government. While Indian private companies now have the capability to build satellites, launch systems and provide space-based services, lack of guaranteed orders has slowed expansion.

ISpA has proposed that a fixed share of government spending on space-related services and equipment be sourced from Indian private firms. This would help companies plan long-term investments, while allowing ISRO to focus on advanced research and strategic missions.

The report backed its case by pointing to global best practices. It noted that NASA procures over 80% of its systems from private industry, while the European Space Agency follows a model where nearly 90% of execution is led by industry. Drawing from these examples, it recommended a mandate under which at least 50% of government procurement for space-based services, hardware and missions should be sourced from Indian private entities.

Another key area is the use of satellite data. As satellite images and geospatial data are increasingly used for governance, agriculture, urban planning and commercial purposes, the report has suggested a structured system under which government agencies obtain such data only from approved Indian companies. This, it says, would support domestic firms while ensuring national security and data protection.

On the financial side, the space industry has sought a specialised fiscal framework to address its high upfront costs, long development timelines and rapidly evolving technology.

It has proposed production-linked incentive (PLI) schemes for satellites, launch vehicles and critical components, along with a five-year tax holiday for space manufacturing, launch services and space-based service providers.

The sector has also called for R&D tax credits of 20–30%, capital investment incentives for launch and ground infrastructure, and faster depreciation benefits on satellites and rockets to help lower costs and attract long-term private and global capital

To boost exports, ISpA has recommended giving SEZ-like benefits to space technology parks and manufacturing clusters, along with simpler rules for foreign investment and exports. This could help India become a global hub for space manufacturing and services, while creating skilled jobs.

It has also proposed an interest subsidy of 2–5% on long-term loans taken for satellite manufacturing, launch services, ground infrastructure and space-related research, to be implemented through IN-SPACe in coordination with banks and development finance institutions (DFIs).

To support innovation and job creation, the sector has sought the restoration of higher tax deductions for in-house research and development, along with tax benefits linked to hiring skilled scientific and technical professionals, and lower GST and customs duties on R&D equipment.

At the same time, the industry has called for changes in GST rules, noting that current exemptions block input tax credit and push up costs for domestic missions. It has recommended treating satellites, launch vehicles and launch services as zero-rated supplies so companies can claim full tax credits and refunds, including on capital goods, with a special refund mechanism for projects that take longer to complete.

To help Indian companies compete globally, the sector has also sought simpler rules for international collaboration, including tax relief on foreign services, a single-window system under IN-SPACe for export approvals, incentives for space exports, and higher foreign direct investment limits in launch vehicle companies and their key components.

Finally, the industry has highlighted the need for clear and stable regulations. It has called for a comprehensive space law and stronger powers for IN-SPACe as a regulator, so private investors have clarity on rules, approvals and dispute resolution.

The report noted that this year's Budget offers an important chance for the government to move from being just a provider to becoming a long-term partner.