India-US WTO-solar dispute

Contents

• India-US solar dispute

• NSM, is one such initiative

• NSM and US’s objections

• Dispute 1

• Dispute 2

• India’s counter argument

• Judgement

• Options left with India

• Why is India insisting on Local Content Requirements (LCR)

• Advantages of LCR

• Disadvantages

• Effects on Indo-US relations

India-US solar dispute

• India’s energy requirements are unprecedented.
• Production from renewable sources is meager.
• India’s has to make great efforts to increase the share of power from renewable energy sources.

NSM, is one such intitative

• NSM: National Solar Mission OR Jawaharlal Nehru National Solar Mission (NSM).
• Launched in 2010.
• Goal: Deploying 20,000 MW of solar panels by 2022, lower the cost of generating solar power and making New Delhi a "global leader in solar energy."

NSM and US’s objections

Dispute 1

• The NSM is divided into three phases, with Phase I being the subject of the February 2013 challenge.
• At the time, Washington had complained that New Delhi was requiring developers of photovoltaic projects using crystalline silicon technology to source their solar cells and modules domestically.

Dispute 2

• Since 2011, the level of US’s solar exports to India has fallen. According to Washington, NSM is to be partly blamed.
• The implementation of Phase II was approved by India's cabinet.
• According to Washington, this second stage maintains the original domestic content requirements, requiring new Indian solar projects to obtain at least half of their content from local producers.
• The US also claims that Indian solar power developers are provided with certain benefits - such as long-term tariffs on electricity (subsidy).
• Furthermore, these local requirements have now been expanded to cover thin film technology, which were not included in Phase I.
• Thin film makes up the bulk of US solar exports to India, and over half of the projects under NSM have relied on imports of the product.
• These terms, Washington says, puts New Delhi in violation of WTO rules.

India’s counter argument

• US states follow equally restrictive policies to protect their domestic industry.
• US provides subsidies to their local manufacturers.
• Sourcing of power generated under the solar mission is done by a Government-owned agency, it is Government procurement which does not fall within the purview of the multilateral agency.

Judgement

• WTO ruled against India in 2015.
• The panel found India violating global trade rules by imposing local content requirements for solar cells and solar modules.
• The panel also struck down incentive policies such as subsidies provided for domestic solar companies to manufacture cells and solar modules.

Options left with India

• India can invoke anti-dumping provisions against US’s cheap dumping companies.

Why is India insisting on Local Content Requirements (LCR)

• LCR is a protectionist policy.
• LCR mandates procurement of certain proportion of solar equipment form domestic manufacturers.
• This is done for two reasons

1. To boost solar manufacturing and related industry in India.
2. To prevent countries like US from dumping cheap and outdated equipment into India.

Advantages of LCR

• Protects local industry, creating jobs locally.
• Prevents dumping of cheap and outdated technology.

Disadvantages

• It might raise the cost of solar energy due to lack of competition from international manufacturers.

Effects on Indo-US relations

• The new dispute comes during a period of increasingly strained trade and diplomatic (Khobragade Issue) ties between Washington and New Delhi (disputes on subjects as patent protection policies, poultry import bans, and steel duties)

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