India relaxes rules for some state-run firms to procure critical equipment from China

NEW DELHI: India authorised some state firms including Bharat Heavy Electricals BHEL.NS and Steel Authority of India on Friday to procure critical equipment from China, according to a government source and document, after easing restrictions.

Reuters reported last month that India would relax restrictions on buying Chinese equipment imposed after a deadly 2020 border clash, allowing state-run power and coal companies to start limited imports as shortages and project delays mounted. India has since then also eased investment curbs on China.

Under the relaxation of the rules, India’s largest state-run power equipment maker Bharat Heavy Electricals can procure 21 types of critical equipment from China, the government order said. A similar authorisation has been given to Steel Authority of India for certain critical components, and for sourcing of coal-gasification equipment by other state-run firms, a government source said.

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The deadly clashes in 2020 between Indian and Chinese troops along the Himalayan frontier prompted New Delhi to tighten rules on Chinese procurement and investments, but a global realignment of trade sparked by ​U.S. tariffs ⁠has prompted India to consider a calibrated reset with China to keep supply chains steady and attract investments.

Last August, Indian Prime Minister Narendra Modi visited China for the first time in seven years, meeting Chinese President Xi Jinping to discuss improving ties, after which the two countries resumed direct flights and New Delhi eased visa procedures for Chinese business professionals.

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The government order issued this month, seen by Reuters, exempts Chinese bidders participating in state contracts from registration with a government committee to obtain political and security clearances.

Earlier this month, New Delhi also eased restrictions on Chinese investments in select sectors to help ease a capital squeeze, marking a significant reset of economic ties.