After months of deliberations, the government may finally insert ‘national security’ clauses which could prohibit Chinese companies from participating in border regions and in certain ‘strategic industries’—Chinese firms are competing in major tenders in the telecom sector, and sources say this is likely to be one of the ‘strategic industries’. Defence, defence R&D, and space will be other strategic industries.While the clause, to be decided by the Cabinet Committee on Security (CCS) later this week will not debar Chinese firms in toto, what it will do is to allow the government to debar a Chinese firm on security considerations.While finalising the ‘Guidelines for the Participation of Chinese companies in projects in sensitive areas and Industries’, the CCS will consider issuing a notification informing all central and state government ministries and departments as well as public sector undertakings to ‘‘include with immediate effect a security clause that reads that while evaluating tenders, regard would be paid to national defence and security considerations in all national and global tenders issued by them.’’ The Ministry of Industrial Policy and Promotion would be the nodal ministry overseeing this.The CCS is also likely to consider introduction of a security clause in ‘‘the regulations pertaining to the FIPB and RBI automatic approval route. Both the Ministry of Finance and Industry would oversee the automatic approvals in various sectors in the light of the Chinese companies. The CCS is also likely to define the list of ‘sensitive’ sectors where Chinese companies may have to face the ‘security’ test. These may include sectors like — defence, space, telecom and other strategic areas.The CCS may consider setting up of a committee headed by the Cabinet secretary and including the secretaries from the ministries of Home, Defence, External Affairs, Industry, as well as the Revenue secretary and the Director of the Intelligence Bureau to give case by case clearances whenever the issue of clearance for participation of Chinese companies comes up.The issue of inserting the ‘national security’ clause specially in connection with Chinese companies came into prominence after there was a furore which was created earlier this year when it was found that Chinese nationals working for Chinese company Huawei in Bangalore which had earlier made software and equipment for the Taliban in Kabul. While later the government in Karnataka and at the centre gave the company a clean chit, a need was felt to have a comprehensive policy regarding the participation of Chinese companies in Indian businesses.According to a note prepared by the Ministry of External Affairs for the CCS, it is necessary to have ‘‘appropriate guidelines and adequate safeguards in place to address this problem without impeding bona fide economic and investment activities from China.’’
