Not surprisingly, the decision to allow ultra-mega power projects (UMPPs) to buy only equipment that is made in India is being justified on grounds that the Chinese alternatives on offer are of inferior quality. In other words, the government is not being protectionist, it is actually saving the nation’s money, preventing greedy producers from making a sub-optimal choice. While it is obvious those using Chinese equipment would challenge the report’s findings, what the government needs to appreciate is there is no such thing as absolute quality—all quality is benchmarked to prices. If Chinese equipment costs a third less than Indian equipment does, then it is worth buying even if it is a quarter less efficient. Add in generous loan financing that comes along with Chinese equipment and the equation changes even more.
Given how China is a world-beater in most products, the findings of the report do strain the credulity a bit. In any case, why not let buyers decide for themselves? And if that is unacceptable, stop complaining when the US puts a buy-America clause in various projects.