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Dispute over solar energy: India launches counter-attack against US at WTO

Catch Team | Updated on: 20 September 2016, 20:50 IST

Recently, India lost an appeal at the World Trade Organisation in its dispute with the United States over the solar energy industry.

India was giving preference to companies with domestic manufacturing units. The US objected to this, citing WTO rules that prohibit discrimination against imported products, and the WTO ruled in the US's favour.

India appealed, but the appellate body of the WTO upheld the earlier ruling against India's local content rules for manufacturing solar cells and modules.

However, all is not lost.

Counter-punch

In order to bring the US to the negotiating table, India has dragged the US to the WTO against the policies of eight American states for the renewable energy sector. India has alleged that the measures of these American states are "inconsistent with WTO's Agreement on Trade-Related Investment Measures and the Agreement on Subsidies and Countervailing Measures".

At present, India has sought consultations with the US in the WTO on the matter. The eight states are Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota.

The request for consultation is the first step under the Dispute Settlement System of the WTO. It lasts for 60 days and, if the parties involved fail to come to a consensus on the disputed matter, the complainant party may request adjudication by a panel.

According to experts, the renewable energy policy in the US is quite similar to the one followed by India, which has been indicted by the WTO panel.

One such programme is California's Self Generation Incentive Program, which offers a 20% discount to in-state businesses that install California-made solar panels or other renewable energy technologies.

In such a scenario, India should be able to get a decision in its favour at the WTO. And if this happens, it will force the US to come to the negotiating table and resolve the issue amicably.

But in case India fails to get a ruling in its favour, it would be a major concern for India's domestic solar equipment manufacturers. In that case, it would not be possible for India to negotiate with the US to stop raising objections against the Indian solar policy, which promotes local manufacturing.

This would mean that India would have to make major changes in its solar power policy under the National Solar Mission (NSM) which seeks to build a 100 GW solar capacity in India by 2022.

Back-up strategy

According to the Business Standard,the government is considering revamping its domestic sourcing scheme under the National Solar Mission (NSM).

This would mean pushing local manufacturing through subsidies and increased procurement of homemade solar panels by government agencies and public sector utilities (PSUs).

How the original dispute arose

India and the US have been at loggerheads since February 2013, when the US initiated this dispute because it considered that India's domestic content requirements were inconsistent with WTO rules.

To promote domestic manufacturing capacity in the solar power sector, India launched the Jawahar Lal Nehru National Solar Mission in 2010, mandating domestic content requirement or DCR on solar power developers.

This irked the US solar power companies that were interested in supplying solar power panels to India. Therefore, they first filed a case in 2013 at WTO, which went against India in a ruling passed in February 2016. An appeal against that ruling was filed by India, which was lost on 16 September.

Edited by Shreyas Sharma

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First published: 20 September 2016, 20:50 IST
 
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