NEW DELHI: India has raised the pitch of its economic response against China, with New Delhi' plan of restricting financing from state owned public sector lenders—-Power Finance Corporation (PFC), Rural Electrification Corporation (REC) and Indian Renewable Energy Development Agency (IREDA)—-to those states who don’t use equipment and technology manufactured in India, said two people aware of the development.
“Today PFC, REC and IREDA account for a majority of financing to the Indian power sector including the state discoms and electricity firms. The idea is to ensure that they don’t use Chinese equipment or technology. These financing lines may be made conditional to that," said an Indian government official cited above.
An Indian power ministry spokesperson did not respond to queries emailed by Mint on Saturday.
The development assumes significance given that these three companies are the largest lenders to the Indian power sector and the move will discourage states from placing orders on Chinese firms. This is in addition to subsidizing finance for promoting local power equipment makers.
Also, the Union power ministry may codify sanctions in the electricity sector to discourage Chinese power equipment and technology vendors.
At play is 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) which involves reducing electricity losses to less than 12%, negating tariff gaps and having compulsory prepaid smart metering across the power distribution chain, including 250 million households.
Apart from securing large orders in India’s clean energy space, large thermal power generation project contracts totalling round 48 giga watt (GW) have been placed with Chinese manufacturers. Also, firms use supervisory control and data acquisition (Scada) systems from China in electricity distribution and transmission space. The country has an installed power generation capacity of 370 GW.
With the hardening of stand between the neighbours and mounting tensions along their, India is working on a wider decoupling exercise, that involves imposing more tariff barriers to check Chinese imports, including prior-permission requirements for imports from countries with which it has a conflict.