India plans to scrap curbs on Chinese firms bidding for government contracts, sources say
NEW DELHI,
Jan 8 (Reuters) –India’s finance ministry plans to scrape five-year-old restrictions on Chinese firms bidding for government contracts, two sources said, as New Delhi seeks to revive commercial ties in an environment of eased diplomatic and border tensions.
The curbs, imposed in 2020 after a deadly conflict between the countries’ troops, required Chinese bidders to register with an Indian government committee and obtain political and security clearances.
The measures effectively barred Chinese companies from competing for Indian government contracts that were estimated to be worth $700 billion to $750 billion.
“Officials are working to remove the registration requirement for bidders from bordering nations,” said one government source, declining to be named as they were not authorized to speak publicly.
The final decision will be made by Indian Prime Minister Narendra Modi’s office, both the sources said.
The restrictions had a significant impact: Months after they were uncovered, China’s state-owned CRRC was disqualified from bidding for a $216 million train-manufacturing contract.
The Ministry of Finance’s plan to ease curbs followed requests from other government departments that are facing scarcity and project delays due to the 2020 restrictions.
“Several ministries have requested exemptions to overcome the constraints that could derail projects in their sectors,” the second government source said.
Reuters is the first to report on the plan to ease restrictions on Chinese companies in Indian government contracts.
Soon after India imposed its restrictions, the value of new projects awarded to Chinese bidders fell 27% from a year previously to $1.67 billion in 2021, according to a 2024 report from the Observer Research Foundation.
Specifically, curbs on imports from China of equipment for the power sector have hindered India’s plans to raise its thermal power capacity to about 307GW over the next decade.
A high-level committee headed by a former cabinet secretary, Rajiv Gauba, has also recommended relaxing the restrictions. Gauba is now a member of a top government think tank.
India’s finance ministry and the prime minister’s office did not reply to Reuters requests for comment.
TRUMP’S IMPACT
Last year, Modi visited China for the first time in seven years and agreed to nurture deeper commercial ties with Beijing following U.S. President Donald Trump’s 50% punitive tariff on Indian goods and in light of Washington’s warming ties with Pakistan.
Following the visit,India and China restarted direct flights and New Delhi cut red tape to speed approvals for business visas for Chinese professionals.
Even though ties between the two Asian giants have improved, India’s approach still appears cautious, with limitations on foreign direct investment from Chinese firms still in place.
Meanwhile, the U.S. continues to send mixed signals regarding signing a Washington-New Delhi trade deal, which experts said could allow for the India-China relationship to improve.
This is the biggest single-day drop that the Bhel stock has seen since June 4, 2024, when the stock had declined 21%. That day happened to be the day of the Lok Sabha election results.
According to a Reuters report citing sources, India‘s Finance Ministry is planning to scrape a five-year-old restriction on Chinese firms bidding for Government Contracts.
These curbs, that were imposed in 2020 following the Galwan border clash, required Chinese bidders to register with a government committee and obtain political and security clearance.
The report goes on to state that curbs on imports from China of equipment for the power sector have hindered India’s plans to raise its thermal power capacity to almost 307 GW over the next decade.
A high-level committee headed by former cabinet secretary Rajiv Gauba has also recommended relaxing these restrictions, as per the report.
CNBC-TV18 has not managed to verify the story independently.
Shares of BHEL ended with losses of 9% seeing a modest intraday recovery, while shares of L&T finished lower by 2.7%, while those of ABB India and Siemens India ended with losses of 5% and 4.2% respectively.
India‘s finance ministry plans to scrap five-year-old restrictions on Chinese firms bidding for government contracts, two sources said, as New Delhi tries to revive commercial ties in an environment of eased diplomatic and border tensions.
The curbs, imposed in 2020 after a deadly conflict between the countries’ troops, required Chinese bidders to register with an Indian government committee and obtain political and security clearances.
The measures effectively barred Chinese companies from competing for Indian government contracts that were estimated to be worth $700 billion to $750 billion.
“Officials are working to remove the registration requirement for bidders from bordering nations,” said one government source, declining to be named as they were not authorized to speak publicly.
The restrictions had a significant impact: Months after they were uncovered, China’s state-owned CRRC was disqualified from bidding for a $216 million train-manufacturing contract.
The Ministry of Finance’s plan to ease curbs followed requests from other government departments that are facing scarcity and project delays due to the 2020 restrictions.
“Several ministries have requested exemptions to overcome the constraints that could derail projects in their sectors,” the second government source said.
Reuters is the first to report on the plan to ease restrictions on Chinese companies in Indian government contracts.
Soon after India imposed its restrictions, the value of new projects awarded to Chinese bidders fell 27 per cent from a year previously to $1.67 billion in 2021, according to a 2024 report from the Observer Research Foundation.
Specifically, curbs on imports from China of equipment for the power sector have constrained India’s plans to raise its thermal power capacity to about 307GW over the next decade.
A high-level committee headed by a former cabinet secretary, Rajiv Gauba, has also recommended relaxing the restrictions. Gauba is now a member of a top government think tank.
India‘s finance ministry and the prime minister’s office did not reply to Reuters requests for comment.
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