They have so far limited themselves to selling equipment

China’s biggest power companies have, for the first time, agreed to set up a permanent presence in India by opening power equipment service centres to address concerns of their increasingly large customer base, according to an agreement signed by the two governments here on Wednesday.

Landmark move

“This is a landmark move, as it will pave the way for Chinese power companies to eventually even consider setting up manufacturing bases in India,” senior Indian officials told The Hindu .

Under the XI Plan (2007-12), 18 GW of thermal power projects were commissioned, using Chinese-manufactured equipment. Besides, 40 GW of power projects are now being built using equipment from China — more than from any other country.

The Wednesday’s pact, which was signed by Wu Xinxiong, Administrator of China’s National Energy Administration, and India’s Ministry of Power, was one of nine agreements signed between both countries, following talks here between Prime Minister Manmohan Singh and his counterpart, Chinese Premier Li Keqiang.

A move, earlier this year, to impose a 20 per cent import duty on power equipment from China — on account of concerns expressed by the domestic industry — has prompted Chinese companies to revise their plans for the Indian market. The import duty has also concerned Indian industry, particularly as there is a growing shortfall in capacity.

Chinese power companies had, so far, limited their business to selling equipment, despite the growing import demand from India and needs for servicing.

Servicing, main issue: Montek Singh

“This is a major issue because we have 60,000 MW-plus of Chinese equipment, most imported by the private sector for purchases of power equipment,” said Montek Singh Ahluwalia, Deputy Chairman of the Planning Commisison. “One issue is that there isn’t adequate capacity to service this equipment. If there is a problem, the interruption in the process is long,” he said.

“From our point of view, this is creating a new institutional mechanism that will deepen economic co-operation between the two countries in a very important area.” Through the setting up of power servicing centres, Chinese power companies will, for the first time, establish a permanent presence in India, officials said. “What we will see is that some of China’s biggest companies such as Shanghai Electric or Dongfang Electric, each will set up their own service centres,” officials said. “We have been telling these companies they should consider setting up manufacturing facilities in India, rather than only look to sell. This, we hope, will pave the way towards that.” This would also enable companies to work around any import duties.

Other agreements signed on Wednesday included an MoU between the two Ministries of Transport to co-operate in the roads sector, and exchange ideas on transport policy and transport technology, as well as ‘sister cities’ agreements between New Delhi and Beijing, Kunming and Kolkata, and Chengdu and Bengaluru aimed at boosting tourism.

The two countries also discussed ways to bridge the increasingly widening trade imbalance, which, this year, is on track to exceed even last year’s record $28 billion. After nine months of this year, the deficit reached $24.7 billion, with India’s exports down by 22.5 per cent. Bilateral trade last year reached $66 billion.

Following Wednesday’s talks, Dr. Singh said Mr. Li was “receptive to my concern about the unsustainable trade imbalance between our two countries, and we have agreed to explore avenues to bridge this gap.”

In an earlier interview with Chinese State media, Dr. Singh said concerns in India about the trade imbalance would pose a barrier to taking forward negotiations on a Regional Trade Arrangement.

“We are taking forward the suggestion made by Premier Li in New Delhi for a Chinese industrial park to act as a magnet for Chinese investment in India,” he said. “We are determined to inject new dynamism into our economic relations by working with wider stakeholders.”

Both countries were, however, unable to reach an agreement on industrial parks, officials said, with the Chinese side yet to decide on a location with around five sites under consideration.

A joint statement issued after Wednesday’s talks said both countries would also explore the feasibility of taking forward a Bangladesh-China-India-Myanmar (BCIM) economic corridor — an initiative that the Chinese side has been pushing since Mr. Li’s May visit to India.

Visa simplification

Dr. Singh said he also conveyed his “commitment to visa simplification to facilitate travel of Chinese nationals to India”, and “expressed hope that China will also facilitate such exchanges.” An agreement to liberalise the visa regime was delayed, officials said, with India viewing the timing as unsuitable after China recently issued stapled visas to two archers from Arunachal Pradesh.

‘This is creating a new institutional mechanism that will deepen economic co-operation’