No more govt contracts for China; India's biggest economic crackdown yet on the neighbor

'Centre amends General Financial Rules 2017 to strengthen national defence, security'
No more govt contracts for China; India's biggest economic crackdown yet on the neighbor
No more govt contracts for China; India's biggest economic

ITDC INDIA EPRESS/ ITDC NEWS The Centre has tightened the screws on Chinese business prospects in India with a further clampdown restricting companies from Mainland China from bidding for public procurement contracts. Though the order only names countries that share a land border with India, in practice it will directly undermine the efforts of Chinese entities from getting government and public sector businesses from India.

The latest order stipulates that no order or contract for goods, services or turnkey projects, including consultancy as well as non-consultancy work, shall be given to companies from countries that share a land border with India unless they are registered with a competent authority in India. As per the order, the competent authority in this case will be the registration department of the Department for Promotion of Industry & Internal Trade (DPIIT). Political and security clearances from both external affairs as well as home ministries will be mandatory.

“The government under PM Narendra Modi has amended the General Financial Rules 2017 to strengthen national defence and security,” stated Union commerce and industry minister Piyush Goyal on Friday afternoon.

The new ruling applies to orders from ministries, departments, PSUs, public sector banks and financial institutions, autonomous bodies, as well as all union territories (including Delhi). While the private sector has been kept out, it does apply to public-private partnership (PPP) projects receiving funds from the government or any of its undertakings. The only relaxation to the order is for medical supplies to contain Covid-19, which will be in force till the end of this year.

While India shares land borders with China, Pakistan, Nepal, Bhutan, Bangladesh and Myanmar, the order gives exemption to countries to which India has extended loans. This will rule out Bangladesh, Nepal and Myanmar, among the 60-odd countries India extends credit to (most of them are in Africa). With Pakistan and Bhutan nowhere in the picture when it comes to bagging Indian government contracts, this means the only country to be sorely impacted will be China, whose heavy engineering as well as infrastructure firms (like those in roads and railway construction) have been eyeing the lucrative business on offer from India's massive infrastructure expansion projects.

“Three months after China's stealth aggression in Ladakh caught India off-guard, India (has unveiled) its first major punitive trade action,” remarked strategic affairs expert Brahma Chellaney, adding, “(The new rules) have been carefully framed so as not to run afoul of the World Trade Organisation (WTO) rules. Exempt from the rules are neighbours that get Indian aid. So without naming China, the rules clearly target China!”

This is only the latest salvo in the fast-deteriorating relationship between the two Asian powers, with the deadly clash between soldiers on June 15 in the Galway valley catalysing it into a nosedive. Way back in April, the Centre had banned Chinese companies from investing in Indian firms through the automatic route. In that order as well, China was not named directly, though it did not stop the Chinese to condemn the move.

But after Galwan, it seems that the gloves are off. Ministries and public bodies had cracked down on Chinese businesses, with the Railways cancelling a Rs 471 crore worth signalling work done on the Kanpur-DDU line by the Chinese state-owned Beijing National Railway Research. While transport minister Nitin Gadkari had already said that Chinese firms will not be given any contracts for constructing highways, the power ministry had cancelled orders for 20 lakh smart meters placed with Chinese firms. Maharashtra cancelled three MoUs signed with Chinese firms, together worth around Rs 5,000 crore. Ironically, the Maharashtra MoUs were signed just a few hours before the bloody clash at Galwan.

While there are talks swirling of Chinese firms like ZTE and Huawei being kept out of India's 5G rollout, the only significant measure the government had taken against Chinese economic interests so far since Galwan was the ban on 59 Chinese apps, including the wildly popular TikTok.

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