Ambanis Reliance Power has placed orders worth $10 billion with Shanghai Electric for equipment for its under-construction and upcoming projects. It has also secured $1.1 billion loans from three Chinese banks to finance purchase of equipment for its Sasan ultra mega power project in Madhya Pradesh.
Every time in the past several years when an enthusiastic Intelligence Bureau or home ministry or National Security Council Secretariat have waved red flags on Chinese equipment on security grounds, Indian companies in the telecom and power sector have risen in opposition.
Chinese vendors provide equipment at half the rates of their European and American counterparts, commission networks faster and offer vendor finance to Indian companies.
In the telecom sector, post-2008 all network contracts, whether by incumbents or new operators, have been awarded to Chinese vendors, either Huawei or ZTE.
In power, Chinese power equipment suppliers like Shanghai Electric and Dong Fang have made deep inroads.
Consider the facts: In 2011-12, India imported Rs 52,400 crore worth of telecom equipment, more than half of which were from Chinese mobile gear vendors.
Business between Indian mobile operators and Chinese vendors carries on even as security-related concerns are routinely raised by government agencies. For instance, the National Security Council Secretariats April report states that according to the Intelligence Bureau, Chinese vendors such as Huawei and ZTE were part of a Chinese Army project called PLA-863. "As per this programme, Huawei was mandated to focus on switches and routers, ZTE on mobile and fibre networks, Julong on switchboards and Legend on computers with the objective of dominating the world telecom scene and strengthening its electronic warfare capabilities," said the secretariat report.
To be fair, India is not the only country ringing alarm bells over Chinese telecom equipment. Australia recently disqualified Huawei from building that countrys broadband network. The US has also effectively blocked off Huawei from crucial telecom infrastructure contracts.
In India Chinese firms like Huawei and ZTE have always reacted with alacrity each time security-related concerns are raised. The two have offered the Indian government unrestricted access to the software source codes of all their products. Huawei through its continuous innovation and open cooperation has participated in the establishment of international standards, protects the strength and security of the network, and has won the trust of its customers and the industry. In addition to being partners with 45 of 50 global telecom operators, today Huawei also partners with almost all Indian telecom network operators, said Cai Liqun, CEO, Huawei India.
It costs anywhere between Rs 15 crore and Rs 50 crore for audit, inspection and correction of mobile equipment in each circle. No operator is in a financial state to make this kind of investment, said DK Ghose, an industry expert, formerly with Siemens and ZTE in senior management positions.
In the power sector, according to an estimate, Chinese vendors have bagged contracts to supply equipment worth Rs 2.5 lakh crore during the current 12th Plan, double what they got in the previous Plan period.
Private players prefer these overseas suppliers who offer prices 20-25% lower than Indian suppliers like Bharat Heavy Electricals and Larsen & Toubro, and have a better track record in timely project execution.
Chinese suppliers entered the Indian market in 2002-03 as trade ties between the two Asian giants expanded in the wake of growing mutual confidence.
The Indian government recently slapped duty on power equipment imports to provide a level playing field to domestic industry against overseas vendors, especially those from China. But this move may not impact the flow of Chinese equipment into India in a big way given the wide cost differential between equipment supplied by Chinese and domestic vendors.