The government has rejected Chinese EV company BYD and Megha Engineering and Infrastructures Ltd (MEIL)’s proposal to set up a $1 billion four-wheeler manufacturing facility in India.
Background
On Jul 17, it was reported that the company, which is the world’s largest producer of EVs, has submitted a joint proposal with Hyderabad-based MEIL to form an EV joint venture to the Department for Promotion of Industry and Internal Trade (DPIIT).
“Investment for the project is going to be made by Megha while the technology and knowhow will come from BYD,” said one of the persons associated with the plan.
Government wary
However, the government was reportedly not keen on allowing the Chinese company to establish itself in India.
According to the Times of India report, there is “discomfort in the home and external affairs ministries over the entry of Chinese players in the wake of the government’s stand to keep players from across the border out of the Indian market, given the security concerns around several of them”.
Security concerns and existing guidelines
“Security concerns with respect to Chinese investments in India were flagged during the deliberations,” said an official familiar with the matter.
Another individual said that the existing guidelines do not permit such investments.
From April 2020, firms from land-border-sharing neighbours need approval from a committee headed by the home secretary to invest in Indian companies.
Using Indian firms as proxy
The DPIIT which received the proposal is currently probing Chinese automakers having ties with Indian firms.
It is being alleged that many joint ventures are “arranged” by the Chinese companies but the Indian firms have little power.
“The Indian company is more or less a dummy entity, with not much control on technology, decision-making, and other critical know-how,” the Times of India claimed.
Long term strategy
However, they express no strategic long-term intention of moving manufacturing units to India.
“Any proposal without a strategic long term plan for production defeats the purpose of making the country a manufacturing hub,” one of the sources said.
