Approvals to establish an Indian satellite system and provision of satellite service in India

Approvals, registrations and authorizations required to establish an Indian satellite system and the provision of satellite services by satellite operators in India

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

Constitution of the Indian Company

For the purpose of creating an ISS, the Satellite Company would have to incorporate a company (“Newco”) under Indian law. Under the Companies Act of 1956 of India, a company limited by shares can be incorporated as a private company or as a public company. Under tax and other statutes and regulations, public and private companies typically receive similar treatment. Satellite Company may therefore consider the incorporation of Newco as a private company.

Registration in CAISS

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

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

The Satellite Coordination Program Office, which acts as the CAISS Secretariat, reviews and examines the request in light of the SatCom Policy and the rules, guidelines and procedures approved by the GoI. Subsequently, the Secretariat will submit the request for consideration by the CAISS.

In terms of the DoS Internal Rules for the approval process, the requesting company must provide its orbit spectrum requirements with alternative options indicating priority and the requesting company must have an orbital slot before submitting an application to CAISS.

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

Foreign Investment Approval

The GoI’s foreign direct investment (“FDI”) policy in Indian companies, whether through the establishment of wholly owned subsidiaries or joint ventures, is regulated by the Foreign Exchange Management Act 1999, and the Foreign Exchange Management (transfer or issuance of securities by a person resident outside India) Regulations, 2000 (“FDI Regulations”). In terms of the FDI Regulations, FDI is automatically allowed in almost all sectors except where the proposal (i) requires an industrial license; or (ii) falls outside the notified policy/sectoral boundaries or in sectors where FDI is not permitted; etc.

Proposals that do not meet the prescribed parameters for automatic approval require the prior approval of the Foreign Investment Promotion Board (“FIPB”), which is a competent body operating under the Department of Economic Affairs of the Ministry of Finance, to consider and recommend FDI. The FIPB is made up of members from the Department of Economic Affairs, Department of Industrial Policy and Promotion, Department of Commerce, Ministry of Foreign Affairs, among others.

Under the FDI Regulations, an Indian company may receive foreign equity investment of up to 74 percent to establish and operate Indian satellite systems subject to prior FIPB approval. Once FIBP approval is obtained, the Indian company can receive funds directly through banks licensed to deal in foreign exchange and issue shares to foreign investors subject to prescribed reporting with the Reserve Bank of India ( “RBI”) within 30 days after receipt of the amount of consideration of shares and issuance of shares to foreign investors.

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

Presentation of Report to the RBI

Once Satellite Company obtains FIPB approval, Newco will be required to receive funds from Satellite Company through internal remittances through banking channels and file a report with the RBI within 30 days of receipt of the consideration amount.

Upon receipt of the funds, Newco may issue shares to the Satellite Company and file a report (in the prescribed manner) together with an appropriate certificate from Newco’s company secretary. The price of the shares that Newco will issue to the Satellite Company shall not be less than the fair valuation of the shares performed by a certified public accountant under the guidelines issued by the former Capital Issuances Controller.

Miscellaneous Licenses and Registrations

Newco would need to obtain additional registrations and licenses, including a permanent account number and a tax deduction account number under the Income Tax Act of 1961, registration under the Stores and Establishments Act, and the business and professional tax records depending on the state in which Newco is located. registered/incorporated. Operating licenses for the services to be provided by the ISS (in addition to being a satellite operator, if applicable), will need to be obtained separately from the relevant administrative departments, such as the Department of Telecommunications for telecommunications services and the Ministry of Information and Broadcasting. . for TV and radio broadcast.

Currently there is only one ISS in India, which is Agrani (Zee Group/Dish TV company). However, so far Agrani has not been able to establish a satellite system even though it has entered into a long-term collaboration with ProtoStar I Ltd. for lease/purchase of transponder capacity. There are currently no other applications pending before the CAISS for consideration for the creation of an ISS.

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

Seema Jhingan