Chinese companies currently operating in India or have bagged contracts for projects in the country may face trouble owing to the recent violent face-off between the two sides in Eastern Ladakh's Galwan Valley.
The Centre is mulling several tough economic measures against China following the incident. Although the government had not taken any action on trade bodies' demand to ban Chinese goods, the killing of 20 Indian soldiers late Monday night may lead to a dramatic change in its stance.
There could be a two-level economic retaliation, government sources told India Today TV.
This scrutiny can spell trouble for Chinese stakes in Indian companies, sources added.
Meanwhile, no action will be taken on projects where the work has already been allocated.
The first casualty of this approach could be Shanghai Tunnel Engineering Co Limited (STEC). The Chinese company has successfully bid for the construction of an underground stretch of Delhi-Meerut RRTS (Regional Rapid Transit System) project.
STEC emerged as the lowest bidder for the construction of a 5.6 km underground section between New Ashok Nagar and Sahibabad of Delhi-Meerut RRTS corridor.
Interestingly, the tendering process took place in November last year and the financial bids opened in the second week of June when Indo-China standoff in Eastern Ladakh was at its peak.
Meanwhile, BJP's affiliate outfits-the Rashtriya Swayamsewak Sangh (RSS), the Swadeshi Jagran Manch (SJM), have urged the Modi government to cancel STEC's bid and award the project to Indian companies.
The government's second plan is to make domestic players stronger by looking at the eligibility level for Indian contracts.
According to government sources, Chinese companies have always had an edge over Indian firms in global bids because of the stringent clauses set in tenders.
"The ground eligibility rules are going to be changed to make domestic players eligible. The technical norms for project tenders need a serious relook. This can act as another level of filtering," another government source told the news channel.
Another measure the government is considering is to study the bids and screen them to identify Chinese players as it plans to reduce the ease of doing business for the latter through a method of filters.
The Centre had in April amended the foreign direct investment (FDI) rules for neighbouring countries, including China, whereby FDI from these nations will now have to go through government checks instead of a more direct route.
The move has been seen as an attempt to protect Indian companies.