India Drops 20% Local Sourcing Rule, Keeps Security Guardrails For Satcom

For years, the biggest question surrounding India’s satellite broadband market wasn’t whether global players such as Starlink, Eutelsat OneWeb and Amazon’s Leo would enter the country. It was under what conditions they would be allowed to operate.

Those conditions became clearer this week after the Centre notified the Telecommunications (Authorisation for Provision of Principal Telecommunication Services) Rules, 2026, completing the transition from the country’s decades-old telecom licensing regime.

The new regime omits the draft proposal that would have required satellite operators to source at least 20% of the value of their ground-segment equipment and infrastructure from India within five years of launching commercial services.

The move comes as Starlink and Eutelsat OneWeb await commercial rollout after securing key regulatory approvals, while Amazon Leo remains in the approval pipeline. 

At the same time, the Centre will retain powers to issue directions and suspend or revoke authorisations.

Taken together, the rules suggest that India is keen to attract global satellite operators but is equally determined to retain sovereign control over the communications infrastructure they build and operate.

What’s Changing?

The decades-old telecom licensing regime has been replaced with an authorisation framework under the Telecommunications Act, 2023, bringing multiple telecom services under a common authorisation framework.

Applicants can now seek government-issued authorisations instead of telecom licences. The Centre will separately notify service-specific conditions such as rollout obligations, validity, fees and quality-of-service requirements.

To facilitate migration for existing operators, the existing telecom licensees will be allowed to migrate to the new authorisation framework under separate migration rules and government guidelines.

However, satellite operators will have to continue complying with Indian gateway requirements, lawful interception, monitoring and other national security-related obligations.

Entry fees, authorisation fees, spectrum-related charges and financial guarantees continue under the new framework. Rollout obligations will be notified separately for each authorisation category.

Will Dropping Local Sourcing Pay Off? 

According to Utkarsh Sinha, managing director at Bexley Advisors, dropping the provision removes a significant commercial barrier and signals India’s intent to attract global satellite operators and investment into its digital infrastructure.

“The removal of the requirement removes a major commercial hurdle and shows that India wants to attract global satellite operators,” Sinha said. “At the same time, the gateway requirement is probably the single most important provision in the entire framework because it ensures that all domestic satellite traffic ultimately passes through sovereign-controlled infrastructure.”

The decision also sheds light upon the current state of India’s satellite hardware ecosystem. While India has built capabilities across several segments of the space sector, experts say domestic manufacturing of advanced satellite ground equipment is still at an early stage, making a mandatory local sourcing requirement difficult to implement.

“The removal of the local sourcing requirement might reflect the reality on the ground that competitive Indian hardware is perhaps still not readily available,” Mahesh Uppal, director at ComFirst (India) Pvt Ltd said.

As per industry experts, the Centre’s decision reflects a pragmatic approach, with the proposed local sourcing requirement seen more as an industrial policy measure than a core national security necessity. 

Instead of mandating localisation upfront, the government appears to be betting that India’s large market, expanding electronics manufacturing ecosystem and trusted supplier frameworks will encourage companies to manufacture locally over time.

Ismael Moreno-Gomez, principal at Analysys Mason, believes the approach could ultimately strengthen the broader satellite ecosystem despite increasing reliance on imported technologies in the short term.

“While removing the local sourcing requirement can increase dependence on foreign suppliers, it also facilitates adoption of global technologies. Given the size of the Indian market, an incentive system could provide a stimulus for the local industry. There are recent examples in India of local companies becoming renowned vendors and developing cutting edge technology,” he said.

He added that the greater regulatory clarity offered by the framework is likely to encourage investment by global satellite companies while creating opportunities for India’s broader spacetech ecosystem.

Over the next few years, Moreno-Gomez expects the reforms to accelerate satellite broadband deployment in rural and underserved areas, encourage investment in ground infrastructure and support growth across the satellite value chain.

For global satellite operators, the message is clear: India is lowering commercial barriers to attract investment, but participation in one of the world’s largest connectivity markets will continue to come with stringent security and regulatory obligations.

At the same time, the removal of the localisation mandate reflects a pragmatic recognition that India’s satellite hardware ecosystem is still maturing. The bigger question now is whether easier market access and growing demand will organically create the manufacturing and technology capabilities that policymakers had originally sought to mandate. 

As experts note, the answer will ultimately depend on execution, timely approvals and whether increased global participation translates into long-term domestic capability.

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