The Telegraph
Since 1st March, 1999
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Pat & punch for Chinese investors

New Delhi, Sept. 6: In a two-pronged strategy for investors from China, the government is considering a proposal to facilitate easy entry into India for ‘soft’ products such as consumer durables, while making the rules tough in sensitive areas where investments will either be barred or vetted to allay security fears.

The government is under pressure to draw up guidelines following repeated protests from China on the discrimination against its investors. Indian industry, too, has been asserting the need for a quid pro quo, as it gets considerable freedom in China.

Senior government officials feel there is absolutely no need for security clearance in ‘soft’ sectors such as consumer durables and pharmaceuticals.

“Yes, certainly, proposals in areas like ports, airports, cargo or courier handling, airlines, telecom should be governed by security norms,” the officials said.

The move is a relief to Chinese companies who had to bear the indignation of their applications being put on ice by the Indian authorities. Telecom solutions company ZTE managed to make a headway after getting stuck for many years with its application to set up base in India.

The government officials, however, said that security regulations would apply on Chinese workers hired by the companies from China.

The government had earlier refused security clearance to Chinese telecom company Huawei and infrastructure developer Hutchison Ports.

The home ministry denied permission to Hutchison Ports to build two container terminals at the Mumbai Port but not before keeping in abeyance for a year the application for the security clearance.

Hutchison Ports also lost out to Singapore Port Authority in the race to build a new terminal at Chennai port.

The ministry earlier turned down a proposal by Oil India Limited (OIL) to hire drilling rigs from a Chinese company for prospecting in Assam.

The company’s plans to do seismic surveys have been held up as it wanted a Chinese company for the work.

The new regulations will not ease investment flows in critical sectors such as oil. The guidelines will be even more tough for industries considered critical and regions deemed sensitive by the government. However, less sensitive plans such as those on toys or fridges will be treated on a par with other investment proposals.

The policy on sensitive areas, however, is as yet quite opaque with ministries speaking in different voices.

The home ministry is cautious on the issue as China has been staking its claim to Indian territories in the North East. With Sino-Indian relations passing through a cordial phase and the countries aiming to maximise trade opportunities, the home ministry is loath to take any action that will damage bilateral relations.

The defence ministry, on the other hand, wants to completely bar companies from Malaysia, China, and Pakistan from exploring oil in border areas and Indian islands.

The ministry even wants oil companies of other nations to be minority partners while prospecting in the border and island regions.

The commerce ministry points out that Indian companies have committed investments of $235 million in China mainly in pharma, auto components, software and machine tools.

Chinese investments in India have, however, not picked up yet, although companies like the Haier group have made inroads into India. The ministry feels India should should be flexible wit the investment proposals.

Meanwhile, the Congress government has decided to frame uniform rules relating to employment of foreign nationals in sensitive industries as part of a new legislation enveloping the security issues linked to foreign direct investment (FDI).

The government is also mulling exchange of intelligence with major economic partners in select cases of FDI proposals from transnationals who may have been barred elsewhere.

This will be done by intelligence agencies and not be an official policy or part of the new legislation covering security aspects of foreign direct investment.

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