Stopping China non-militarily: New policies to restrict JVs in highways, narrow infra sector entrance

Key Highlights

• Government has decided to discourage joint venture (JV) partnership with Chinese construction companies in the highways sector
• It is also considering a policy decision to not allow companies from any country which does not permit Indian firms to participate there to bid for projects in India
• Indian developers and contractors occasionally tie up with Chinese firms to meet technical qualifications for high-end EPC and HAM projects
• Mumbai-based MEP Infrastructure had bid for HAM projects with Chinese joint venture partner Long Jian Road & Bridge Co. Ltd

The government has decided to discourage joint venture (JV) partnership with Chinese construction companies in building highways as India responds to the killings of 20 soldiers by Chinese forces.

Qualification norms have been rationalised over a period to ensure Indian companies do not need to take foreign firms as partners, according to sources.

Targeting China, the government is considering a policy decision to not allow companies from any country which does not permit Indian firms to participate there to bid for projects back home, an official said.

"This clause will serve the purpose. The wording of the clause is being worked out. This will not target any particular country but serve the purpose. This is being discussed internally by various departments," an official said.

While Chinese firms show keen interest in Indian infrastructure projects, there are hardly any Indian companies doing the same in China. Industry experts pointed to a rare project involving now bankrupt Infrastructure Leasing & Financial Services (IL&FS) which had taken 49 per cent stake in Chongqing Yuhe Expressway Company in China. They couldn't recollect any other such project involving Indian firm.

In the road sector, Indian developers and contractors occasionally tie up with Chinese firms to meet technical qualifications for high-end engineering, procurement and construction (EPC) and Hybrid Annuity Model (HAM) projects. For instance, Mumbai-based MEP Infrastructure had bid for HAM projects with Chinese joint venture partner Long Jian Road & Bridge Co. Ltd.

As per the company website, MEP Infrastructure holds 51per cent stake in the JVs for various highway projects. These Chinese firms are minority partners and are roped in for projects where tunnelling or other sophisticated engineering works are to be undertaken. In sensitive Himalayan regions such as North East and Jammu and Kashmir, Chinese firms are excluded from road projects.

"Other areas had been left open for Chinese firms but not much participation has happened there either. Chinese participation is far and few between and they are not primary concessionaires," the official said.

While the government is actively considering the suggestions to bar Chinese investment, policy experts say there can be some regulatory problems. For instance, while the proposed move to disallow firms from foreign countries limiting Indian participation is in compliance with World Trade Organisation (WTO) norms, India will have to prove that Indian firms are indeed barred.

"In case a country raises a dispute then India will have to prove that its companies were not allowed. Then evidence would need to be presented. I am not too sure if that is very easy," said an official who earlier held a key position in the road transport ministry.

Also read: PM Modi launches auction of 41 coal mines, says India will turn COVID-19 crisis into opportunity

Also read: Why Xi Jinping is called Winnie the Pooh on Twitter? It's a long story