Curbs on companies from countries illegally holding Indian land

As tensions run high along the border with China, the government is examining a proposal to impose trade and procurement curbs on companies from countries ‘illegally occupying Indian territory’, specifically those active in territories such as Pakistan-Occupied Kashmir (PoK).

ET has gathered that while a final call is yet to be taken, high-level discussions are underway to scrutinize the proposal threadbare and discuss its implementation and business implications.

Any decision would directly impact Chinese firms as the northern neighbour ‘illegally occupies’ 38,000 sq km of Indian territory in Ladakh. Also,Pakistan which has occupied a part of Kashmir has ceded over 5,000 sq km in the Shaksgam Valley to China.

If the proposal is accepted, the curbs are likely to be brought in through changes in the Public Procurement (Preference to Make in India) Order of 2017, sources said. Some changes may also have to be made in the General Financial Rules. Officials confirmed that the proposal is being looked at carefully, given its ‘high sensitivity’ and possible ramifications on diplomatic ties with China.

In April, without naming China, the government had removed FDI coming in from that country from the automatic route, fearing hostile takeovers. “An entity of a country, which shares land border with India or where the beneficial owner of investment into India is situated in or is a citizen of any such country, can invest only under the government route,” the notification said.