Telecom equipment maker Huawei probably became the first Chinese company to get a security clearance to set up a factory in India, with the Union Home Ministry giving its conditional approval to the company's Rs 25-crore project in Tamil Nadu.
The FDI proposal, which was pending with the Central government since December 2013, was approved by the Modi government on Wednesday, signalling a policy shift as far as Chinese investments in the sector are concerned.
The move is being seen as a welcoming signal to Chinese investors and comes within two months of Prime Minister Narendra Modi's China visit.
As part of the conditional approval, the home ministry has told the Department of Industrial Policy and Promotion (DIPP) and the Department of Telecom (DoT) to reserve key posts, such as officer-in-charge of technical operations and chief security officer, for Indians.
Besides, the company will have to seek security clearance from the Union Home Ministry to appoint foreign nationals as chairman, managing director, chief executive officer (CEO) and chief financial officer (CFO) for its India operations, reports The Times of India.
Huawei had submitted a proposal to build an electronics/telecom hardware manufacturing unit at the Special Economic Zone in Sriperumbudur, Tamil Nadu three years ago.
Security agencies have been opposing the company's plan on grounds that its shareholders may have possible links to the People's Liberation Army (PLA) or the company's software could be embedded with malware to indulge in espionage, both ways posing a threat to India's interests.
Huawei's presence in India is currently in the form of a research and development centre in Bengaluru, which did not entail any security clearance.
The home ministry had recently finalised a new national policy to ensure faster security clearance for telecom sector investments.
Accordingly, the DoT will come out with "mandatory security parameters in addition to technical, quality and interface parameters to clearly define security standards for technical equipment relating to networking systems."
Besides, the policy also envisages that any foreign equipment that enters India is subjected to security clearance at a state-of-the-art laboratory and certification facilities to be set up by the DoT.