Home / News / India /  India nudges its power firms to end Chinese contracts

NEW DELHI: India plans to leverage its growing power sector market to ready an economic response against China. The strategy adopted as part of a wider decoupling exercise involves nudging Indian firms to explore ways of getting out of contracts inked with Chinese firms, said two people aware of the development.

This radical course of action was articulated by power minister Raj Kumar Singh during a conference with the industry captains on Tuesday, wherein Singh who also holds the new and renewable energy ministry portfolio said that ‘if possible’; Indian companies shall look at ways of getting out of contracts inked with Chinese firms, given that power is a strategic and sensitive sector.

The development assumes significance given that India’s electricity demand is poised to further grow from the current per capita of about 1149 kilowatt-hour (kWh), among the lowest in the world. In comparison, the world’s per capita consumption is 3,600 kWh. Also, India’s power demand that had nosedived is slowly getting to its pre-lockdown levels.

Given that the government’s new playbook involves regular inspections and rigorous testing of imported equipment to prevent any ‘trojan horse’ or malware slipping through; government officials believe that Indian firms may prefer avoiding Chinese equipment and technology.

“The issue of exploring the possibility of getting out of contracts inked by Indian power firms with Chinese companies was discussed in the Tuesday meeting. It is very important to use equipment manufactured in India, as power is a strategic sector," said a person who attended the meeting requesting anonymity.

It was at the same meeting that India’s strategy of erecting tariff barriers and other obstacles, including subsidizing finance for promoting local power equipment makers and prior-permission requirements for imports from countries with which it has a conflict was discussed.

A power ministry spokesperson confirmed the development and in an emailed response said, “The information in your story is mostly correct. During his interaction with power sector developers, the union power minister emphasised on strategic importance of the sector. He said that any malware attack on power infrastructure can lead to collapse of many other essential services that depends on power supply like communication, manufacturing, health, defence etc."

At play is large orders such as those from India’s proposed distribution reform scheme—tentatively named— Samarth—which involves a capital outlay of Rs3.5 trillion. The scheme was earlier slated to be called Atal Distribution System Improvement Yojana (Aditya).

Chinese firms have been active to get a slice of the Indian electricity sector across the conventional and the clean energy space. Around 48 giga watt (GW) of thermal power generation project orders have been placed with Chinese manufacturers. The country has an installed power generation capacity of 370 GW.

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