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

Approvals, Registrations and Authorizationsowned subsidiaries or joint ventures is regulated
Required for Setting up an Indian Satellite Systemby the Foreign Exchange Management Act, 1999,
and Provision of Satellite Services by Satelliteand the Foreign Exchange Management (Transfer
Operators in Indiaor Issue of Security by a person resident outside
In my previous articles on provision of satelliteIndia) Regulations, 2000 ("FDI Regulations"). In
services in India, we analyzed the regulatoryterms of the FDI Regulations, FDI is allowed on an
framework and the possible entry optionsautomatic basis in almost all sectors except
available to foreign satellite operators to establishwhere the proposal (i) requires an industrial license;
its business presence in India and provide satelliteor (ii) falls outside notified sectoral policy/caps or
services in the Indian subcontinent. One of theunder sectors in which FDI is not permitted; etc.
entry option is setting up an Indian SatelliteProposals which do not satisfy the parameters
System ("ISS") by the foreign satellite operatorprescribed for automatic approval, require prior
for providing satellite based services on aapproval from the Foreign Investment Promotion
commercial basis in India and be eligible for all theBoard ("FIPB") which is a competent body
preferential treatment accorded to such systemsfunctioning under the Department of Economic
in service provisioning in India. For the purposes ofAffairs, Ministry of Finance, to consider and
establishing an ISS, the foreign satellite operatorrecommend FDI. The FIPB consists of members
and/or domestic Indian company, as the casefrom the Department of Economic Affairs,
may be, ("Satellite Company") would need toDepartment for Industrial Policy & Promotion,
obtain various approvals and registrations with theDepartment of Commerce, Ministry of External
Indian regulatory authorities.Affairs, amongst others.
Incorporation of the Indian CompanyIn terms of the FDI Regulations, an Indian
For the purposes of setting up of an ISS, Satellitecompany can receive foreign equity investment
Company would need to incorporate a companyupto 74 percent to establish and operate Indian
("Newco") under Indian laws. Under the Companiessatellite systems subject to obtaining prior FIPB
Act, 1956 of India, a company limited by sharesapproval. Once FIBP approval is obtained, the
may be incorporated either as a private companyIndian company can directly receive funds through
or as a public company. Under tax and otherbanks authorized to deal in foreign exchange and
statutes and regulations, private and publicissue shares to foreign investor subject to
companies are ordinarily treated similarly.submitting prescribed reports with the Reserve
Therefore, Satellite Company may considerBank of India ("RBI") within 30 days from receipt
incorporating Newco as a private company.of the share consideration amount and issue of
Registration with CAISSshares to the foreign investors.
In the year 1997-1998, the Government of IndiaSatellite Company will need to submit a detailed
("GoI") announced the Satellite Communicationapplication with the FIPB for obtaining its approval
Policy Framework ("SatCom Policy") andfor foreign investment. The application would need
formulated the norms, guidelines, and procedureto be supported by documents including the
for registration of Indian satellite systems bybrochures and profiles of Satellite Company or its
private Indian companies and allowed limited useaffiliates, business plan/project report,
of foreign satellites (i.e., uplink from India) in specialmemorandum and association of articles of
circumstances provided the satellites wereNewco (if Newco has already been incorporated),
coordinated with the INSAT satellites. Pursuant toetc.
the SatCom Policy, the GoI authorized IndianSubmission of Report to the RBI
Space Research Organization ("ISRO") to set up aOnce Satellite Company obtains FIPB approval,
Committee for Authorizing the establishment andNewco would need to receive funds from Satellite
operation of Indian Satellite Systems ("CAISS"),Company by way of inward remittances through
with its Secretariat at the Satellite Communicationbanking channels and submit a report with the RBI
Programs Office at ISRO Headquarters atwith in 30 days from the receipt of the amount
Bangalore.of consideration.
For the purposes of registration with CAISS,Upon receipt of the funds, Newco can issue
Newco would need to submit a detailed projectshares to Satellite Company and submit a report
proposal to CAISS stating details of its project(in the prescribed form) together with an
including the aims, objectives and background ofappropriate certificate from the company
Newco including its equity structure; the satellitesecretary of Newco. The price of shares to be
proposed to be launched or leased, spacecraftissued by Newco to Satellite Company would
description, manufacturing and launch details of theneed to be not less than the fair valuation of
satellite, capabilities of all payloads and system,shares done by a chartered accountant as per
network description and characteristics, orbitthe guidelines issued by the erstwhile Controller of
spectrum requirements, spacecraft launch vehicle;Capital Issues.
data and location of satellite launches proposed byMiscellaneous Licenses and Registrations
Newco, etc.Newco would need to obtain additional
The Satellite Coordination Programme Office,registrations and licenses including a permanent
which serves as the Secretariat of CAISS,account number and tax deduction account
reviews and examines the application in light ofnumber under the Income Tax Act, 1961,
the SatCom Policy and the norms and guidelinesregistration under the Shops and Establishments
and procedures approved by the GoI. TheAct, and trade tax and professional tax
Secretariat will, thereafter, put up the applicationregistrations depending on the State in which
for CAISS' consideration.Newco is registered/incorporated. The operating
In terms of DoS's Internal Rules for the approvallicenses for services to be provided by the ISS (in
process, the applicant company is required toaddition to being a satellite operator, if any), will
provide its orbit-spectrum requirements withneed to be obtained separately from the
alternate choices indicating priority and theconcerned administrative departments like the
applicant company must have an orbital slot priorDepartment of Telecommunication for telecom
to submitting an application to CAISS.services and the Ministry of Information and
Once CAISS grants its approval for operating theBroadcasting for TV and radio broadcasting.
satellite system, Newco will need to coordinateThere is presently only one ISS in India, which is
with Wireless Planning & Coordination Wing toAgrani (Zee Group/Dish TV venture). Agrani has
initiate inter-system co-ordination and issuehowever so far not been able to set up a satellite
authorization to operate the satellite in accordancesystem even though it has entered into a long
with the ITU Radio Regulations. The GoI may alsoterm collaboration with ProtoStar I Ltd. for lease
authorize Newco to directly co-ordinate with otherpurchase of transponder capacity. No other
satellite systems operators on technical aspects.application is presently pending before the CAISS
The ISS implementation status would continue tofor its consideration for setting up an ISS.
be monitored by CAISS.My next article on the subject will deal with the
Foreign Investment Approvalprocedure and costs involved for registration of
GoI's foreign direct investment ("FDI") policy inNewco as an ISS with CAISS in India.
Indian companies either by setting up of wholly