India eases curbs on Chinese equipment imports for power, coal as projects delayed: sources

India has begun easing its restrictions on buying equipment from China following a deadly border conflict in 2020, allowing state-run power and coal companies to begin limited imports as shortages and project delays mount, two government officials said. Reuters.

This is the first significant easing of restrictions in five years that have largely excluded Chinese firms from India’s $700 billion to $750 billion government contracting market.

Reuters reported in January that India was examining broader relaxations for Chinese bidders for government contracts as border tensions eased.

Since the conflict in 2020, New Delhi has required Chinese bidders to register with a government panel and obtain political and security clearances before competing for any government contracts.

Inter-ministerial panel to decide future exemptions

India has now allowed state-run utilities to procure a power transmission component from China without government approval. A similar, time-based exemption predominates for coal industry equipment, two officials said.

One of the officials said that the exemption was given in the “national interest” as blocking imports from China would harm India’s production capacity.

A panel of senior bureaucrats approved the waiver and a formal order is expected soon, two sources said.

Both officials said the relaxation followed repeated requests from government departments that faced shortages and project delays under the 2020 restrictions.

India may allow imports of critical Chinese equipment on a case-by-case basis rather than restarting purchases completely, officials said.

Strict rules impact capacity increase

India-China relations, strained since the border dispute, have slowed the exchange of capital, technology and talent.

New project awards to Chinese bidders fell 27% from the previous year to $1.67 billion in 2021, according to a 2024 report from the Observer Research Foundation.

India aims to add 500 GW of non-fossil capacity by 2030, but implementation delays and transmission bottlenecks remain.

Power transmission projects will face a nearly 40 percent shortage of transformers and reactors in the next three years, the second official said.

The change comes as India and China rebuild trade ties

Officials added that such time-bound exemptions would come after discussions with ministries and security agencies, given concerns that low Chinese bids would negatively impact domestic firms.

The ministries of finance, foreign relations, industry, interior, energy and coal did not immediately respond to this situation. Reuters’ requests for comments.

The calibrated shift comes at a time when India and China are trying to rebuild trade ties after US President Donald Trump imposed a 50% tariff on Indian goods.