NEW DELHI: India will soon bar Chinese power companies from projects in the power sector on security concerns after a policy that will define new conditions for foreign firms eyeing the multibillion-dollar market in one of the fastest growing major economies in the world.
A formal office memorandum, expected in a month, will insulate the power transmission sector from companies based in countries that do not allow Indian entities in similar projects, a senior power ministry official told ET. The restriction will be gradually extended to the power generation and distribution sectors as well.
Officials said the new reciprocity-based approach would impact Chinese companies that are looking to invest in the Indian electricity transmission sector. China does not approve of overseas investments in its electricity grid for security reasons but India allows 100% foreign direct investment (FDI) in the power sector.
The move will help India in many ways, including protection from cyber attacks because the power sector is increasingly software driven with intelligent technology and control systems being used, said Indian Electrical & Electronics Manufacturers' Association (IEEMA) director general Sunil Misra.
Last week, US conglomerate GE's renewable energy CEO Jerome Pecresse told ET that reciprocity was a fair idea.
Power, coal, renewable energy and mines minister Piyush Goyal had told ET in an interview on May 10 that India won't allow power companies to invest from countries where Indian firms are banned.
"Discussions have already been held with the commerce ministry. There should be reciprocity in trade. Other countries should not be allowed to exploit the Indian market while they protect their domestic players and space," a government official said.
Another official in the power ministry said state governments will also be made aware of the reciprocity factor. The memorandum is under preparation and is likely to be issued within a month, he said. IEEMA's Misra said the principle of reciprocity operates in all diplomatic relations, economic or otherwise.
"We should buy good and services for critical infrastructure only from a country which does not have any serious dispute with us and the relationship is not suspect," he said. "We will not buy a fighter aircraft or aircraft carrier from China. Similarly, we should not buy intelligent and smart transmission and distribution equipment from them given the fact that the Grid is becoming intelligent and increasingly vulnerable to cyber threat also."
The power ministry is already working on a security management system to prevent cyber attacks on the electricity grid, a critical infrastructure sector whose destruction could cause a debilitating impact on national security, governance, economy and social wellbeing of a nation. Transportation, banking, telecom and defence are the other sectors.
The domestic electrical equipment industry has been raising concerns on contracts awarded to Chinese companies for installation of supervisory control and data acquisition systems (SCADA) for power distribution that can lead to foreign control over a sector critical to the country's growth. Many contracts for implementation of SCADA—for better power distribution and management— in Tamil Nadu, Rajasthan, Madhya Pradesh and Puducherry have been bagged by foreign firms.
Domestic power equipment manufacturers have said it could also be a threat to national security as electricity distribution systems carry power to pipelines, water systems, telecommunications and other critical infrastructure, while also serving key government and military facilities.
Source: economictimes.indiatimes.com