The World Trade Organization (WTO) ruled on Friday against India’s appeal to overturn a U.S. complaint regarding what it claims are discriminatory domestic content requirements (DCR) in India’s solar sector. The National Solar Mission (NSM) provision stipulates that 10% of the modules used in Indian solar plants should be produced locally.
The U.S. originally lodged a complaint with the WTO against India’s DCR in 2014, prompting the subsequent appeal and tit-for-tat filing of complaints from India regarding eight of the U.S.’s renewable energy programs.
Last week, however, the WTO appellate body upheld its original ruling that found India had broken WTO rules by requiring developers of solar power projects in India to use locally made cells and modules. The case reached a head in February when India lodged the appeal, claiming exemptions from WTO trade rules on the basis that its NSM and solar sector was included in government procurement, and that its domestic solar goods were in short supply.
These arguments were rejected. The WTO rules are clear: countries are not allowed to favor local producers of components while discriminating against imports. In seeking to boost India’s domestic manufacturing industry, the government’s NSM outlined certain local content requirements across the country, and thus was in violation of these regulations.
The unedifying spat between the U.S. has resulted in a 90% fall in U.S. solar exports to India, prompting the WTO’s decision to be welcomed by U.S. trader representative Michael Froman. “This report is a clear victory for American solar manufacturers and workers, and another step forward in the fight against climate change,” he said in a statement.
“We strongly support the rapid deployment of solar energy worldwide, including in India. But local content requirements are not only contrary to WTO rules, but actually undermine our efforts to promote clean energy by requiring the use of more expensive and less efficient equipment, making it more difficult for clean energy sources to be cost-competitive,” Froman added.
The Solar Energy Corporation of India (SECI) could not be reached by pv magazine for a response on the matter.
A statement by the U.S. Solar Energy Industries Association (SEIA) also applauded the decisions, calling it an “important victory for the U.S. solar industry and America’s hard-working 209,000-plus solar employees”.
“[India’s] National Solar Mission local content requirements unfairly discriminated against U.S. manufacturers and the decision will help even out the playing field,” said the SEIA statement.
“We applaud the Obama administration and the Office of the United States Trade Representative for their hard work ensuring the advancement of clean energy worldwide. Now that litigation is finally behind us, our hope is that India will quickly come into WTO compliance, and we look forward to a path where the solar supply in both our markets can grow.”
India preemptively strikes
Ahead of the WTO’s decision last week, India lodged its own complaints against eight U.S. renewable energy programs, arguing that a number of state-led policies include “buy local” stipulations, including one program in California that offers a rebate incentive for developers that use wind energy technologies manufactured in the state.
The mood in India following the ruling is sanguine. “We had known for the last couple of months that this would be the outcome,” said the MD and secretary of the Indian Solar Manufacturers Association HR Gupta. “It is business as usual for us. There are many other options to consume manufacturing capacity produced locally, including that of direct procurement by the government.”
Others, however, were not so at ease with the WTO’s decision. “The Indian solar industry is not happy over losing the WTO appeal, especially when it is fully aware that the U.S. itself pursued aggressive policies that are based on DCR and subsidies for the generation of solar power,” IndiaGoSolar CEO and founder Harish Ahuja told pv magazine. “India’s ambitious 100 GW solar program would not be seen as a success if it does not simultaneously stimulate local manufacturing, generate local employment and promote technological advancement. The industry now expects that until such time the government secures any favorable judgment from the WTO, it can offer generous incentives to spur local manufacturing.”
Ahuja added that these incentives could be capital grants for adding new manufacturing capacity, charging lower interest rates for working capital, free land allocation, tax breaks and – perhaps in the worst-case scenario, the imposition of countervailing import duties on cheap solar products coming from China, Taiwan, Malaysia and the U.S.
However, Hero Future Energies CEO Sunil Jain has warned that the government must not retaliate to this perceived slight by introducing draconian policies. “If the government was to impose anti-dumping duties on foreign modules, it could prove a problem for us,” Jain told the India Times. “Re-imposing anti-dumping duty on solar modules, which was abolished in late 2014, would raise their cost for Indian developers, thereby rendering solar tariffs less competitive. The government still has 12 months to figure out what to do.”
Others working directly in the manufacturing sector have remarked that India has already begun ramping up its solar cell and module production capacity by developing fully integrated facilities to shape a broader and more robust local industry.