The Indian government is planning to retaliate against China by tightening its economic hold on the latter. State governments are to be discouraged from using Chinese technology and equipment in the strategic power sector. The Centre is set to withhold funding to the projects using Chinese imports.
Indian Renewable Energy Development Agency (IREDA), Power Finance Corp. Ltd (PFC), and Rural Electrification Corp. Ltd (REC) are the largest contributors to the Indian power sector, all of which are state-run. However, it is the Chinese firms which are the cheapest suppliers. In order to deter them and promote domestic power equipment makers, the government is also panning to provide low-cost funds to local manufacturers.
This comes amid mounting tensions along the India-China border. After the military showdown from both sides, India is now working on a wider decoupling exercise against China. The new strategy involves imposing tariff and non-tariff barriers to check Chinese imports. This also includes prior-permission requirements for power equipment imports from countries with which it has a conflict.
According to a report by Jefferies Equity Research, trade ties between India and China have seen a major setback in last few months. The government had brought the FDI in Indian companies from ‘bordering nations’ under an approval route from the automatic route in April 2020. The Indian Prime Minister also made ‘self-reliance’ a key point of his post-Covid stimulus.
The focus on self-reliance becomes more evident from a government statement referring to Power and Renewable Energy Minister, Raj Kumar Singh’s meeting with industry leaders and lobbyists. According to the official statement, the minister pointed out that power is a strategically important sector, since several essential services including communications, data management and manufacturing depend on it. Therefore, ‘Aatmanirbhar Bharat’ campaign holds a much greater significance there.