Infra Projects Facing Heat

Infra Projects Facing Heat
There is a strong clamour for cancelling infra projects awarded to Chinese companies following hostilities between the two countries. These projects could be in for a long-suspended animation state until the matter is resolved. The end result would certainly be delays; time and cost overruns, and more than this—postponing the benefits accruing from them. We need not be over exuberant about such moves, nor complacent, but view the matter in a pragmatic and prudent way. Both the parties need not overstretch themselves with their stated rigid stance and should step back.

By S.K. Khanna

Projects under heat
Amongst the projects under heat is the Meerut Rapid Rail Transport System awarded to Shanghai Tunnel Enterprise. It is an ADB aided project being implemented by the NCR Transport Corporation (NCRTC) under the Ministry of Housing and Urban Affairs.

The second project being scrapped is the ₹47crore contract given to a Chinese company. It is World Bank project under DFCCIL (Dedicated Freight Corridor Corporation) awarded in 2006. The project has been facing problems due to poor project management and failure in meeting contractual obligations. So far, only 20 percent of the work has been accomplished.

The Ministry of road and transport and highways is likely to cancel the bid submitted by a Chinese company for extension of a stretch on the Delhi-Mumbai expressway.

Following this trend, more and more states are coming forward to cancel projects awarded to Chinese companies. The Haryana government has cancelled two tenders for installation of a fine grade system for their thermal power plants at Hissar and Yamuna Nagar. The financial implication of these projects is about ₹780 crore.

The Uttar Pradesh government too is keeping Chinese companies away from participating in the state’s Metro projects. The Maharashtra government has suspended investment proposals worth ₹5020 crore from a Chinese company, which plans to build a passenger vehicle factory in India.

In a master stroke, India has banned all Chinese apps operating in the country as they were engaged in activities against India. This comes as a blow to China’s Digital Silk Route, eroding the valuation of the Chinese companies. It could lead to more countries going the Indian way. The United States of America is seriously considering this course of action of banning Chinese apps.

In a recent statement, the minister of road transport and highways made it clear that he would not allow any Chinese company or its joint ventures to participate in highway projects or in the MSEM sector.

Besides this, Chinese companies have a large presence in the Telcom sector, having more than 20 projects, which are also under heat. In addition, the government may direct States to discourage use of Chinese equipment and technologies in strategic power sector projects.

The Railways has decided to scrap a tender for thermal cameras meant for Covid surveillance, following complaints. BSNL could cancel a 4G tender of ₹800 crore. The government has also directed BSNL and MTNL not to use Chinese equipment and services.

Work on the ₹13,277 crore Talchar fertilizer project awarded to a Chinese company has been put on hold. Apart from this, the government is reviewing over 50 investment proposals from Chinese companies, following new screening guidelines.

India is exploring options to bar Chinese companies from Ladakh Solar project, including a 900-km transmission link to transport supplies. It is also drawing up plans to curb cheap imports not just from China but from other countries as well. The Indian Newspaper Society has urged the government to take steps to ban access to Chinese media in the country.

These measures in the immediate run up to the tension between the two countries may not bring any change in the Chinese behavior (though the decision to shut Chinese companies out of India’s growing consumer market and infra projects has unnerved China), but would work as incremental measures signaling India’s intent to be as self-reliant as possible and less dependent on Chinese economic largesse.

China today is facing a strong economic, political, and diplomatic blowback globally. We, on our part, must devise ways and means to impose costs for any misadventure, remain wary and modify our systems from time to time.

Modification in contract system
To safeguard itself from legal implications of cancelling infra projects, the government is modifying its contract policy to prevent Chinese companies from participating in infra projects. These include the introduction of a clause based on the principle of reciprocity that would restrict their entry. The ministry of law is examining this proposal. The clause will cover all the countries, and more specifically the Chinese companies. The Roads and Highway sector will be the first sector to have this clause, which will eventually be extended to other sectors.

Simultaneously, India is building up a strong deterrence to develop good platforms like BRICS, the Quad, and Bimstech to strengthen its political and diplomatic domains so as to gather enough support for its initiatives.

Overseas and domestic experts reckon that India’s aggressive push for infrastructure development in strategic areas and the global support that it enjoys could be some of the key triggers of the current face-off between the two countries. We need not bother much about it but only concentrate on our development work, they assert.

India has become the epic centre of modern infrastructure development with an ambitious plan in the next 3-4 years to be the second largest infrastructure development market - next only to China. To give its development task a global touch, it is to join the Blue Dot Network (BDN) initiative that seeks to promote high quality trusted standards for global infrastructure development to garner global long-term funds for important infra projects.

At this stage, when we are eyeing innovative means to finance infrastructure spending, and serious privatization drives are at work to give growth a boost, any hold up or disruption would be a setback. Keeping Chinese companies at bay from participating in India’s ongoing or future infra projects appears to be both symbolic as well as substantive logic as the country steps up economic, political and diplomatic pressure in the wake of multiple prolonged standoffs.

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