India seeks to curb Chinese power equipment imports amid tensions

CHENNAI/BENGALURU (Reuters) - Indian companies will need government permission to import power supply equipment and components from China, an order by the power ministry said, amid rising military tensions between the two countries.

India has long relied on Chinese equipment for power generation and transmission to provide affordable electricity. While the new rules will benefit Indian companies, it could also make electricity more expensive in the long term.

The power ministry said India will inspect all imports related to electricity supply to see if they pose a cyber threat, adding that it seeks to “protect the security, integrity and reliability of the strategically important and critical power supply system and network.”

“This is something we can’t tolerate, we have a country that transgresses and kills our soldiers and yet we are creating jobs there,” Power Minister R.K. Singh told a virtual conference of state power ministers on Friday.

India has said 20 of its soldiers were killed in a clash last month with Chinese troops in a major escalation of a weeks-long standoff between the two countries in the western Himalayas.

The power ministry’s move is a boost for Indian companies, which have lobbied for a long time against Chinese involvement in the power sector, raising security concerns and saying they get no reciprocal access to Chinese markets.

“Indian companies are the big winners, and this move will make European and Japanese equipments manufacturers competitive here,” said Sunil Misra, director-general of the Indian Electrical and Electronics Manufacturers’ Association.

Shares of state-run power plant equipment manufacturer Bharat Heavy Electricals Ltd BHEL.NS, which have lost nearly a sixth of their value this year, rose 5.3% to 38.65 rupees in late afternoon trade on Friday.

Singh also said that the government planned to incentivise local buying by asking state-run companies Power Finance Corp PWFC.NS and Indian Renewable Energy Development Agency Ltd to lend at lower rates to power companies procuring parts and equipments in India.

India’s imports from China’s power industry totalled 210 billion Indian rupees ($2.81 billion) in 2018/19, Singh said, adding that he had asked the country’s domestic industry to check which imported products are available from local manufacturers.

Chinese companies such as Harbin Electric 1133.HK, Dongfang Electric 000682.SZ, Shanghai Electric 601727.SS and Sifang Automation either supply equipment or manage power transmission networks in India.

The shift away from China could hamper India’s plans to clean up its air, as Chinese companies sell Flue Gas Desulphurisation (FGD) units to India, which cut emissions of sulphur dioxide.

A majority of Indian coal-fired plants are set to miss deadlines to install FGDs, and private producers have sought an extension that is being considered by the power ministry, Singh said.

India also imports a majority of its solar cells and modules requirements from China, and is considering imposing a 20-25% import tax on it.

Separately, the minister said that state distribution companies have a provision to make available soft loans from state-run lenders such as Power Finance Corp PWFC.NS worth 1.25 trillion rupees ($16.74 billion), more than a third higher than the previous allocation.

($1 = 74.6918 Indian rupees)

Reporting by Sudarshan Varadhan; editing by John Stonestreet/Ana Nicolaci da Costa/Jane Merriman