India has launched an investigation into the financial affairs of Chinese device makers Xiaomi, Oppo and Vivo, according to local media reports.
The country's agencies are looking into reports of losses by those companies when they have been able to grab a huge share of India's smartphone market.
The latest investigation follows one by India's tax authorities into several international handset makers.
Xiaomi was subsequently asked to pay a fine of 6.53 billion Indian rupees ($88.4 million) for alleged violations of India's Customs Act. Authorities claimed it had evaded duties by not including royalty and license fees in the transaction value of its imports.
Indian agencies will also reportedly examine whether Chinese phone makers were concealing income or deliberately suppressing profits to evade taxes. The Chinese device makers have been reporting operational losses even as they emerge as market leaders in India.
There are now suggestions that India's competition commissioner may launch a separate investigation into whether Chinese device makers were abusing their dominant market position.
Xiaomi is the market leader in India with a 23% share, while Vivo and Oppo have 15% and 10% respectively, according to Counterpoint's latest quarterly report.
Over the last few years, the market share of the Chinese device makers has been consistently growing at the cost of domestic phone makers, including Lava, Intex and Micromax.
Another concern of the Indian authorities is that Chinese device makers depend on Chinese companies only to source material and components, thus depriving Indian firms of that business.
Oppo and Vivo also use Chinese companies for distribution instead of local Indian partners.
In the wake of geopolitical tensions between India and China last year, India has come up with several measures to counter the growing influence of Chinese firms.
In the meantime, Huawei and ZTE have yet to secure necessary government approvals for participation in India's nascent 5G market.
— Gagandeep Kaur, contributing editor, special to Light Reading