Approvals For Setting Up an Indian Satellite System and Provision of Satellite Service in India

Approvals, Registrations and Authorizations for Setting up an Indian Satellite System and Provision of Satellite Services by Satellite Operators in India

In my previous articles on provision of satellite services in India, we analyzed the regulatory framework and the possible entry options available to foreign satellite operators to establish its business presence in India and provide satellite services in the Indian subcontinent. One of the entry option is setting up an Indian Satellite System (“ISS”) by the foreign satellite operator for providing satellite based services on a commercial basis in India and be eligible for all the preferential treatment accorded to such systems in service provisioning in India. For the purposes of establishing an ISS, the foreign satellite operator and/or domestic Indian company, as the case may be, (“Satellite Company”) would need to obtain various approvals and registrations with the Indian regulatory authorities.

Incorporation of the Indian Company

For the purposes of setting up of an ISS, Satellite Company would need to incorporate a company (“Newco”) under Indian laws. Under the Companies Act, 1956 of India, a company limited by shares may be incorporated either as a private company or as a public company. Under tax and other statutes and regulations, private and public companies are ordinarily treated similarly. Therefore, Satellite Company may consider incorporating Newco as a private company.

Registration with CAISS

In the year 1997-1998, the Government of India (“GoI”) announced the Satellite Communication Policy Framework (“SatCom Policy”) and formulated the norms, guidelines, and procedure for registration of Indian satellite systems by private Indian companies and allowed limited use of foreign satellites (i.e., uplink from India) in special circumstances provided the satellites were coordinated with the INSAT satellites. Pursuant to the SatCom Policy, the GoI authorized Indian Space Research Organization (“ISRO”) to set up a Committee for Authorizing the establishment and operation of Indian Satellite Systems (“CAISS”), with its Secretariat at the Satellite Communication Programs Office at ISRO Headquarters at Bangalore.

For the purposes of registration with CAISS, Newco would need to submit a detailed project proposal to CAISS stating of its project including the aims, objectives and background of Newco including its equity structure; the satellite proposed to be launched or leased, spacecraft description, manufacturing and launch details of the satellite, capabilities of all payloads and system, network description and characteristics, orbit spectrum requirements, spacecraft launch vehicle; data and location of satellite launches proposed by Newco, etc.

The Satellite Coordination Programme Office, which serves as the Secretariat of CAISS, reviews and examines the application in light of the SatCom Policy and the norms and guidelines and procedures approved by the GoI. The Secretariat will, thereafter, put up the application for CAISS’ consideration.

In terms of DoS’s Internal Rules for the approval process, the applicant company is to provide its orbit-spectrum requirements with alternate choices indicating priority and the applicant company must have an orbital slot prior to submitting an application to CAISS.

Once CAISS grants its approval for operating the satellite system, Newco will need to coordinate with Wireless Planning & Coordination Wing to initiate inter-system co-ordination and issue authorization to operate the satellite in accordance with the ITU Radio Regulations. The GoI may also authorize Newco to directly co-ordinate with other satellite systems operators on technical aspects. The ISS implementation status would continue to be monitored by CAISS.

Foreign Investment Approval

GoI’s foreign direct investment (“FDI”) policy in Indian companies either by setting up of wholly owned subsidiaries or joint ventures is regulated by the Foreign Exchange Management Act, 1999, and the Foreign Exchange Management (Transfer or Issue of Security by a person resident outside India) Regulations, 2000 (“FDI Regulations”). In terms of the FDI Regulations, FDI is allowed on an automatic basis in almost all sectors except where the proposal (i) requires an industrial license; or (ii) falls outside notified sectoral policy/caps or under sectors in which FDI is not permitted; etc.

Proposals which do not satisfy the parameters prescribed for automatic approval, require prior approval from the Foreign Investment Promotion Board (“FIPB”) which is a competent body functioning under the Department of Economic Affairs, Ministry of Finance, to consider and recommend FDI. The FIPB consists of members from the Department of Economic Affairs, Department for Industrial Policy & Promotion, Department of Commerce, Ministry of External Affairs, amongst others.

In terms of the FDI Regulations, an Indian company can receive foreign equity investment upto 74 percent to establish and operate Indian satellite systems subject to obtaining prior FIPB approval. Once FIBP approval is obtained, the Indian company can directly receive funds through banks authorized to deal in foreign exchange and issue shares to foreign investor subject to submitting prescribed reports with the Reserve Bank of India (“RBI”) within 30 days from receipt of the share consideration amount and issue of shares to the foreign investors.

Satellite Company will need to submit a detailed application with the FIPB for obtaining its approval for foreign investment. The application would need to be supported by documents including the brochures and profiles of Satellite Company or its affiliates, business plan/project report, memorandum and association of articles of Newco (if Newco has already been incorporated), etc.

Submission of Report to the RBI

Once Satellite Company obtains FIPB approval, Newco would need to receive funds from Satellite Company by way of inward remittances through banking channels and submit a report with the RBI with in 30 days from the receipt of the amount of consideration.

Upon receipt of the funds, Newco can issue shares to Satellite Company and submit a report (in the prescribed form) together with an appropriate certificate from the company secretary of Newco. The price of shares to be issued by Newco to Satellite Company would need to be not less than the fair valuation of shares done by a chartered accountant as per the guidelines issued by the erstwhile Controller of Capital Issues.

Miscellaneous Licenses and Registrations

Newco would need to obtain additional registrations and licenses including a permanent account number and tax deduction account number under the Income Tax Act, 1961, registration under the Shops and Establishments Act, and trade tax and professional tax registrations depending on the State in which Newco is registered/incorporated. The operating licenses for services to be provided by the ISS (in addition to being a satellite operator, if any), will need to be obtained separately from the concerned administrative departments like the Department of Telecommunication for telecom services and the Ministry of Information and Broadcasting for TV and radio broadcasting.

There is presently only one ISS in India, which is Agrani (Zee Group/Dish TV venture). Agrani has however so far not been able to set up a satellite system even though it has entered into a long term collaboration with ProtoStar I Ltd. for /purchase of transponder capacity. No other application is presently pending before the CAISS for its consideration for setting up an ISS.

My next article on the subject will deal with the procedure and costs involved for registration of Newco as an ISS with CAISS in India.

Seema Jhingan

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