New Delhi — The Ministry of Power on Tuesday granted a “special exemption” that allows four Chinese firms with joint‑venture plants in India to compete for government tenders involving turbines, generators and other critical power‑generation equipment. The move ends a two‑year prohibition that barred Chinese‑origin companies from participating in such contracts and is framed as a step to keep large‑scale power projects on schedule as the country races to add about 150 gigawatts of capacity by 2030.
What happened
The Ministry of Power announced that Dongfang Electric Corporation, Shanghai Electric, Harbin Electric Corporation and Zhejiang Huaxia Electric Co. have been cleared to submit bids for ongoing and upcoming power‑equipment contracts. The exemption is issued under the Foreign Investment Promotion Board (FIPB) rules that permit “special exemptions” for firms that already have manufacturing facilities in India and can demonstrate compliance with local‑content and technology‑transfer requirements.
According to the ministry’s statement, the decision follows a review of each company’s adherence to Indian regulations, including the Public Procurement (Preference to Make in India) Order, which gives priority to domestically manufactured goods. The exemption is limited to projects that are already underway or slated to begin within the next 12‑18 months, and the firms must continue to meet the stipulated local‑content thresholds.
Why it matters
India’s power‑generation sector is under pressure to close a supply‑gap that threatens both economic growth and energy security. The Central Electricity Authority estimates that the country will need an additional 150 GW of capacity by 2030 to meet rising demand and to replace aging plants. Delays in equipment supply have already slowed several thermal and hydro projects, prompting the government to seek reliable sources that can meet tight timelines and cost targets.
Chinese manufacturers dominate the global turbine market, accounting for roughly 70 % of installed capacity worldwide, according to industry data. Their established supply chains and competitive pricing are seen as potential accelerators for India’s ambitious capacity‑addition plans. By allowing firms that already operate Indian factories to bid, the government aims to avoid further project delays while still enforcing “Make in India” preferences for new foreign entrants.
Background and context
In 2020, India introduced a sweeping “self‑reliance” policy that barred new Chinese foreign‑direct investment (FDI) in 30 sectors, including telecom, e‑commerce and certain manufacturing segments. The policy was a response to geopolitical tensions and security concerns following the 2020 border clash in the Himalayas. However, the power‑equipment sector was excluded from the ban because of its strategic importance and the lack of sufficient domestic capacity to meet the country’s rapid expansion goals.
During the intervening two years, the Ministry of Power imposed a blanket restriction on Chinese firms from participating in government tenders, even if they had Indian subsidiaries. This led to supply shortages for several large projects, notably the 1,320 MW Kahalgaon thermal plant in Bihar and the 1,200 MW Koyna hydro‑electric expansion in Maharashtra, where equipment delays were cited as primary causes of cost overruns.
The exemption aligns with a broader trend of selective relaxations in India’s FDI regime. In early 2024, the government allowed certain Japanese and Korean firms in the semiconductor supply chain to receive “fast‑track” approvals, citing similar continuity‑of‑supply arguments.
Competing claims and uncertainty
The clearance has sparked a debate between industry analysts, political groups and labor unions.
Pro‑exemption arguments – Analysts at the Centre for Policy Research note that the four firms collectively contribute over 30 % of turbine capacity installed in India over the past decade and that their Indian joint‑ventures employ roughly 4,500 workers. They argue that the exemption “provides a pragmatic bridge” while domestic manufacturers scale up.
Security and domestic‑industry concerns – The All India Trade Union Congress (AITUC) and several opposition MPs have warned that allowing Chinese firms to supply critical infrastructure could expose the power grid to espionage or sabotage, especially given the strategic nature of turbine control systems. They cite a 2022 report by the Ministry of Home Affairs that flagged “potential vulnerabilities in imported control‑software” from certain jurisdictions.
Regulatory scrutiny – The Ministry of Power has emphasized that all bids will be evaluated under the existing Public Procurement (Preference to Make in India) Order, which awards points for local content, technology transfer and after‑sales service. However, the exact weighting of these criteria for the exempted firms has not been disclosed, leaving room for speculation about whether the exemption effectively circumvents the “Make in India” preference.
Market impact – Domestic equipment makers such as BHEL and Larsen & Toubro have expressed concern that the exemption could depress prices and erode market share, potentially leading to layoffs. Conversely, some market observers suggest that competition could force Indian firms to improve efficiency and reduce costs, benefiting the broader economy.
What to watch next
1. Tender outcomes – The first set of bids under the exemption is expected to be submitted for the 1,200 MW Koyna hydro‑electric expansion by the end of August. Monitoring which firms win contracts will indicate how the exemption translates into market share.
2. Regulatory audits – The Ministry of Power has announced a “post‑award compliance audit” for all exempted firms, focusing on local‑content fulfillment and cybersecurity standards. Results of these audits could shape future exemptions.
3. Parliamentary scrutiny – Opposition parties have pledged to raise the issue in the upcoming Lok Sabha session, potentially prompting a review of the exemption’s scope or duration.
4. Domestic capacity build‑up – The government’s “National Power Equipment Manufacturing Initiative,” launched in 2023, aims to increase domestic turbine production capacity to 20 GW by 2027. Progress on this initiative will affect the perceived need for foreign participation.
5. Geopolitical developments – Any escalation in India‑China border tensions could trigger a policy reversal, as seen in past instances where security concerns overrode economic considerations.
Conclusion
The special exemption for four Chinese power‑equipment firms reflects a calculated trade‑off by the Indian government: balancing the urgent need to expand electricity generation against longstanding security and self‑reliance concerns. By limiting participation to companies that already operate Indian joint‑ventures and by subjecting bids to existing “Make in India” criteria, the Ministry of Power seeks to mitigate foreign‑investment risks while leveraging established supply chains. The real test will be whether the exemption delivers timely project completion without compromising domestic industry development or national security. Ongoing audits, parliamentary debate and the performance of the first exempted bids will provide early indicators of the policy’s effectiveness and its potential as a template for other critical sectors.
Sources
Indian Express. “Chinese power equipment firms cleared to bid for government tenders after two‑year exemption.” https://indianexpress.com/article/india/chinese-power-equipment-firms-government-tenders-two-year-exemption-10770333/
Story synopsis gathered from: Indian Express – India — source
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