₹1,000-crore venture capital fund to be set up for space technology start-ups

• The Department of Space received a marginal rise (0.02% points) as a share of outlays in the 2024-25 Union Budget compared with Revised Estimates of FY24.

Highlights

• The bulk of the absolute increase goes toward the development of space technologies. The allocation increased marginally for space applications, decreased for space sciences, and almost halved for INSAT satellite systems over the budgeted amount in 2023-2024.
• Ms. Sitharaman also announced a pool of ₹1,000 crore, or around $120 million, as venture capital funding for space start-ups, with the goal of “expanding the space economy by five times in the next 10 years.
• Director-general of think-tank Spaceport Sarabhai, said that the allocation is out of step with the Finance Minister’s ambitions considering “the total funds raised in 2023-2024 by all our space start-ups combined was a paltry $134 million”.
• “As an industry, we need to show some success beyond raising venture funding,” CEO of decision analytics start-up SatSure. “There is not a single start-up that has crossed ₹100 crore in revenue, so the demand metrics for increasing the financial risk appetite of venture capital funding and private equity is limited today.”
• Chief operations officer at satsearch, a space industry marketplace, was more optimistic about the impact of the government procuring from start-ups as an anchor customer. “The government acting as a customer is the best validation for many high-risk products to be then taken into the market,”.
• “The government is then creating a market for competition and not picking winners based on input, which means it allows the money on the table to be looked at as an opportunity for other investors to back companies that will compete against each other to get the pie,” he added.
• Mr. Basu also said the government “acting as a sponsor taking the catalytic first loss risk will cement trust in the ecosystem”.

Removing angel tax

• Ms. Sitharaman also proposed removing angel tax, which space industry members hailed as less friction against new investments.
• In February this year, the Indian government allowed 100% automatic foreign direct investment (FDI) in satellite component manufacturing and satellite and user ground segments; up to 74% in satellite-manufacturing and operations; and up to 49% in rockets and space ports.

Prelims Takeaway:

• ISRO
• GSLV