The Indian Space Association (ISpA) has presented a comprehensive set of recommendations to the government, aimed at propelling the private space sector forward.

These proposals seek to bolster domestic manufacturing, safeguard national security, generate high-value employment, and elevate India's global competitiveness. Central to this vision is ensuring controlled access to strategic satellite and geospatial data, positioning India as a resilient space power.

India's space industry is poised for explosive growth, yet it faces structural hurdles, particularly in securing finance. The sector's capital-intensive projects often span five to seven years before yielding returns, deterring investors. Unlike global counterparts that designate space assets as critical infrastructure, India's ecosystem lacks this formal status, restricting access to affordable, long-term capital.

Recognising space infrastructure as a dedicated sub-sector under the Ministry of Finance and Reserve Bank of India (RBI) harmonised master list would be transformative. This would unlock infrastructure-grade financing, slashing the cost of capital by 2-3 per cent and bolstering national resilience across key domains.

Space infrastructure forms the backbone of telecommunications, defence, navigation, finance, weather forecasting, disaster management, and governance. Formal classification would enable long-term bank loans, development finance institution (DFI) support—including from NaBFID—infrastructure bonds with tax perks, viability gap funding (VGF), and credit-enhanced instruments.

ISpA urges the notification of a distinct infrastructure category encompassing launch vehicles and spaceports, satellite manufacturing facilities for low Earth orbit (LEO), medium Earth orbit (ME O), and geostationary orbit (GEO), ground stations, telemetry, tracking, and command (TTC) networks, mission control centres, Earth observation (EO) and communication constellations, navigation systems, and space situational awareness (SSA) networks.

Predictable demand remains the most potent catalyst for private investment. Indian private firms have demonstrated prowess in satellites, launch systems, EO data, and ground infrastructure, but without assured government orders, scaling remains elusive. A mandated procurement policy would stabilise growth, freeing ISRO for high-risk strategic and exploratory missions.

Key to this is requiring at least 50 per cent of government procurement for space-based services, hardware, and missions to come from Indian non-governmental entities (NGEs). This would cover satellite manufacturing and payloads, EO data and analytics, satcom services, ground infrastructure, launch subsystems, deep-tech components, and SSA networks.

A standard procurement clause should stipulate: "Where a viable Indian NGE capability exists, a minimum of 50 per cent of contract value shall be reserved for Indian private entities." Ministries would act as anchor customers, with oversight by the Indian National Space Promotion and Authorisation Centre (IN-SPACe) through empanelment and regular compliance audits.

As satellite-derived data permeates governance and commerce, standardisation and security are paramount. ISpA recommends that all ministries, state governments, and urban local bodies (ULBs) source satellite imagery and geospatial data exclusively from empanelled Indian companies.

A robust geo-tagging framework for space entities and authorised users would ensure data security and compliance. Access to sensitive data must be restricted to geo-tagged, authorised parties, with incentives tied to adherence. This balances industry support with national security imperatives.

The sector's high upfront costs, rapid obsolescence, and deferred revenues demand a bespoke fiscal regime, distinct from traditional manufacturing. Predictable incentives would attract private and foreign capital, hastening indigenous capabilities.

ISpA advocates product-linked incentive (PLI) schemes for satellites, launch vehicles, space-grade components, and critical subsystems. A five-year tax holiday for space manufacturing, launch services, and space-based providers would provide vital relief.

Further, research and development (R&D) tax credits of 20-30 per cent for qualifying space R&D, capital investment tax credits for launch pads, ground stations, and production plants, and accelerated depreciation on satellites, rockets, and launch hardware would drive innovation.

Space activities are intrinsically export-focused, and extending special economic zone (SEZ)-like benefits would cement India's status as a global hub for space manufacturing and services. Deemed SEZ status for space tech parks and clusters is essential.

This would include duty-free imports of components and equipment, zero-rated supplies between SEZs, and streamlined foreign currency handling for exports. SEZ-to-domestic tariff area (DTA) movements based on end-use relaxations for space products would further ease operations.

Financing costs critically undermine project viability in space manufacturing and launches. An interest subvention of 2-5 per cent on term loans for satellite production, launch services, ground infrastructure, and space R&D—implemented via IN-SPACe in tandem with banks and DFIs—would address this.

Sustained R&D and a skilled workforce are linchpins of India's space ambitions. Restoring the 150 per cent weighted deduction under Section 35(2AB) for in-house space R&D would reignite investment.

Employment-linked tax deductions for hiring scientists, engineers, and technicians, alongside concessional goods and services tax (GST) and customs duties on R&D equipment (verified by end-use certification), would build talent pipelines.

Current GST exemptions hinder input tax credit (ITC) claims, inflating costs for domestic missions and eroding competitiveness. Classifying satellites, launch vehicles, and services as zero-rated supplies—rather than exempt—would enable full ITC refunds, including on capital goods.

A dedicated ITC refund mechanism for long-cycle satellite manufacturing, plus carve-outs under Section 17(2), would rectify distortions and level the playing field.

To integrate with global value chains while maintaining oversight, exemptions from Tax Deducted at Source (TDS) under Section 195 for foreign services in space operations are needed. IN-SPACe should serve as the single-window for export approvals.

Export incentives for satellites, launch services, and space-based offerings, alongside raising the foreign direct investment (FDI) cap to 74 per cent automatically for launch vehicle firms and 100 per cent for subsystems and components, would spur international ties.

A stable regulatory landscape is vital for long-term private investment. Enacting a comprehensive Space Act to formally recognise spacetech as an industry, granting statutory powers to IN-SPACe as an independent regulator, and defining licensing, authorisation, and dispute resolution would provide certainty.

India stands at a pivotal juncture in its space odyssey. By classifying space as critical infrastructure, enforcing private participation mandates, streamlining taxes, incentivising R&D, and ensuring regulatory clarity, the Union Budget 2026-27 can recast the government's role from sole provider to strategic partner and anchor buyer.

These reforms would not only catalyse private investment but also align India with global leaders like the US and Europe, fortifying defence capabilities amid rising geopolitical tensions. In an era of hypersonic threats and SSA imperatives, a vibrant private sector will enhance sovereignty over orbital assets.