India allows four Chinese-linked power equipment firms to bid for government projects

The Ministry of Finance's Department of Expenditure issued an official memorandum dated June 24, 2026 granting a two-year exemption to four Chinese-origin en...

What Happened

The Ministry of Finance's Department of Expenditure issued an official memorandum dated June 24, 2026 granting a two-year exemption to four Chinese-origin entities with manufacturing units in India, allowing them to participate in government and public sector tenders for critical power projects.
The four companies granted the exemption are: TBEA Energy (India), Nanjing Electric India, New Northeast Electric India, and Taikai Electric (India).
The exemption covers restrictions under Rule 144(xi) of the General Financial Rules, 2017 — the public procurement rule that, since 2020, requires firms from countries sharing land borders with India to obtain security and political clearances before bidding for government contracts.
The Ministry of Power had sought this exemption in January 2026, arguing that these entities, which have manufacturing facilities in India, are essential for executing critical power infrastructure projects where domestic alternatives are insufficient.
The exemption is explicitly non-precedential — the memorandum states it should not be treated as a basis for similar exemptions by other companies.
The announcement triggered a decline in shares of domestic power equipment manufacturers (CG Power, Hitachi Energy India, GE Vernova T&D, Taril) as markets interpreted the move as competitive pressure on the domestic supply chain.

Static Topic Bridges

Press Note 3 (2020) — FDI Restrictions from Land-Border Countries

Press Note 3 (2020), issued by the Department for Promotion of Industry and Internal Trade (DPIIT) on April 17, 2020, amended India's Consolidated FDI Policy to require prior government approval (the "Government Route") for all foreign direct investment originating from countries sharing a land border with India.

Affected countries: China, Pakistan, Bangladesh, Myanmar, Nepal, Bhutan, and Afghanistan.
The policy was triggered by concerns about opportunistic acquisitions of Indian companies whose valuations had fallen during the COVID-19 pandemic, with particular focus on Chinese entities increasing stakes.
The "beneficial ownership" principle is critical: even indirect investments — a Singapore-based fund with a Chinese beneficial owner, or a Cayman Islands SPV set up by Chinese investors — require government approval.
Press Note 3 was implemented through amendments to Rule 6 of the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (FEMA NDI Rules), gazette notified on April 22, 2020.
In March 2026, DPIIT issued Press Note 2 (2026) to partially ease these restrictions, signalling a gradual liberalisation of the regime for sectors where India needs Chinese capital or technology.

Connection to this news: The exemption granted to the four power equipment firms is structurally separate from FDI rules (it is a public procurement exemption under GFR, not an FDI approval), but it is part of the same policy arc — India calibrating its economic restrictions on Chinese entities based on sectoral necessity and strategic calculation.

Public Procurement Restrictions — Rule 144(xi), General Financial Rules, 2017

Beyond FDI, India imposed a parallel restriction on public procurement from border-country firms. Rule 144(xi) of the General Financial Rules, 2017 (inserted in 2020) requires that any bidder from a country sharing a land border with India must be registered with a competent authority (the Registration Committee) and obtain security clearance before being eligible to bid for any government contract.

This procurement restriction is broader than the FDI restriction — it applies to any supplier or contractor, not just investors.
The registration requirement was introduced in the wake of the 2020 Galwan Valley clash between Indian and Chinese forces along the Line of Actual Control (LAC).
The Ministry of Power's exemption request (January 2026) and the subsequent Finance Ministry approval (June 2026) represent a government determination that, for the specific set of Chinese-linked manufacturers with Indian manufacturing bases, the security rationale for blanket exclusion is outweighed by the infrastructure delivery imperative.

Connection to this news: The four firms are being exempted from this registration/clearance requirement for a defined two-year period — a targeted, time-bound carve-out rather than a policy reversal.

India's Import Dependency on Chinese Power Equipment

India is heavily dependent on China for power and clean energy equipment: approximately 70% of India's solar power generation capacity relies on Chinese-made components.
Coal power producers in India have persistently pushed for relaxation of Chinese equipment restrictions, citing an estimated 22 GW of stalled thermal power capacity whose economics are linked to lower-cost Chinese imports.
India's lithium-ion battery imports from China stood at approximately USD 1.85 billion in H1 2025, with China holding a 94% market share.
China has also imposed export controls on critical minerals (gallium, germanium, graphite, rare earth magnets) since 2023, creating vulnerabilities in India's electronics, EV, and clean energy manufacturing supply chains.

Connection to this news: The power equipment exemption illustrates the tension at the heart of India's China policy — strategic wariness and security-motivated restrictions coexisting with deep structural dependence on Chinese manufacturing for meeting India's infrastructure and energy transition targets.

Make in India and PLI Scheme for Power Sector

The Production Linked Incentive (PLI) scheme for the power sector (covering solar PV modules, advanced chemistry cell batteries, and related equipment) is India's primary policy instrument for building domestic manufacturing capacity to reduce import dependence.

PLI for solar PV modules (announced 2021): Target of 10,000 MW of integrated solar PV manufacturing capacity; incentive outlay of approximately ₹4,500 crore.
PLI for Advanced Chemistry Cell (ACC) batteries: ₹18,100 crore incentive to build 50 GWh of battery manufacturing capacity.
Atmanirbhar Bharat's infrastructure pillar explicitly identifies power equipment as a sector requiring domestic capability build-out.
Despite PLI incentives, domestic manufacturers have not yet scaled to displace Chinese suppliers entirely in transformers, switchgear, and certain transmission equipment categories — which is the practical gap the exemption addresses.

Connection to this news: The two-year exemption window, by allowing Chinese-linked manufacturers with Indian units to compete, paradoxically supports PLI objectives — these entities have Indian manufacturing operations and the exemption covers only Indian-manufactured supply, effectively encouraging their local production rather than imports.

Critical Infrastructure and National Security

The power sector is classified as Critical Information Infrastructure (CII) under the Information Technology Act, 2000 (Section 70), making it subject to special protection obligations.
Concerns about embedded cyber vulnerabilities in Chinese-supplied power equipment — including remote access capabilities, data exfiltration risks, and the potential for supply-chain sabotage — have been raised by multiple government and security agencies.
A 2020 incident in which Mumbai experienced a major power outage was subsequently investigated with a hypothesis (not conclusively established) of potential cyber intrusion via Chinese-supplied SCADA/control system components.
The National Cyber Security Policy and the CERT-In framework mandate security audits for critical infrastructure systems.

Connection to this news: The two-year, non-precedential nature of the exemption, combined with the restriction to firms with manufacturing units in India, suggests the government is attempting to manage — rather than eliminate — the security risk by keeping supply within Indian regulatory reach while monitoring whether domestic alternatives can fill the gap within the exemption window.

Key Facts & Data

Press Note 3 (2020): Issued April 17, 2020 by DPIIT; requires government-route approval for FDI from all land-border countries; implemented via FEMA NDI Rules amendment (April 22, 2020).
Press Note 2 (2026): Issued March 2026 by DPIIT; partially eased Press Note 3 restrictions for select sectors.
Rule 144(xi), GFR 2017: Public procurement restriction requiring registration and security clearance for bidders from land-border countries; inserted in 2020.
Four exempt companies: TBEA Energy (India), Nanjing Electric India, New Northeast Electric India, Taikai Electric (India).
Exemption period: Two years from June 24, 2026.
Exemption memorandum: Ministry of Finance, Department of Expenditure, dated June 24, 2026.
India solar dependency on Chinese equipment: approximately 70% of installed solar capacity.
Stalled thermal power capacity requiring Chinese equipment: approximately 22 GW [reported industry estimate].
China's share of India's lithium-ion battery imports: approximately 94% (H1 2025 data).