Govt deals: China, Pakistan companies must show ownership plan

(This story originally appeared in on Oct 20, 2020)

NEW DELHI: From names of directors and their nationalities to a graph depicting the ownership structure, the Centre wants Chinese and Pakistan-based companies to bare it all to be eligible to bid for government and PSU contracts. Besides, details of all entities with over 10% shareholding has to be disclosed.

The move comes almost three months after the government decided to impose security checks on companies from countries sharing a land border with India — meant to do a security check on vendors from China and Pakistan.

The guidelines, released last week, will result in security clearance for contracts, which could range from supplying mobile phones and laptops to more sophisticated equipment and for building roads and tunnels across the country.

The move will impact not just the likes of China Light and Power, which built power projects in the country, and road construction firms, but also Xiaomi and Oppo that bid for contracts to supply phones.


Besides, the entry of companies such as Huawei and ZTE in the telecom infrastructure and 5G business will also depend on security clearance. The 14-page office memorandum issued by the department for promotion of industry and internal trade (DPIIT) follows the government’s decision to check the presence of Chinese companies in India after border tension escalated in Ladakh.
Based on the data submitted by the companies, a panel comprising key security and DPIIT officials will clear the entry of these entities into the country’s lucrative public contracts business. Unlike FDI, where the rules are still being debated, in case of government contracts, the Centre has decided to fix 10% threshold to decide if a Chinese company has a “controlling stake” or not.

In case of any change in the holding pattern, the foreign company has to inform the government. In fact, details of beneficial ownership have to be shared in case it is above the 10% threshold.

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