Domestic Content requirement of India’s Solar Mission challenged by US and India's response

 11-FEB-2014

Domestic content requirement of India's solar mission on 10 February 2014 was challenged by the United States, which it alleged as discriminatory and against international norms including the laws of WTO. It has badly affected the American domestic solar panel manufacturing industry.

The decision was taken by US as a measure to protect 10000 American jobs in solar industry and to have a significant pie in the second largest solar market of the world. Domestic content requirements of India’s solar mission in Phase II discriminates against US solar cells and modules by requiring to use India-manufactured solar cells and modules instead of US or other imported equipment. 


Background
India launched its National Solar Policy on 11 January 2010 named as Jawaharlal Nehru National Solar Mission (JNNSM). The Phase I of the national policy was composed of two parts 
• Batch 1 of policy implementation: India required developers of solar photovoltaic (“PV”) projects employing crystalline silicon technology to use solar modules manufactured in India. 
• Batch 2: India expanded this domestic sourcing requirement to crystalline silicon solar cells as well.
In the phase II of the solar draft policy, India has considered expansion of the scope of the domestic content requirements further to include solar thin film technologies  and the cells and at present the majority is comprised of US solar exports to India. 

India's response

This domestic content requirement was only for projects awarded under the NSM and not for those set up under the various states’ programmes. Notably, of the 1,200 MW of capacity in India today, about 850 MW has come under Gujarat’s programme. Most of those putting up projects under the states’ programmes are therefore importing their modules.

Thus, the NSM projects were importing thin films (mainly from the U.S.), those under states’ programmes are importing crystalline silicon modules (mainly from China) and nobody is buying from Indian manufacturers.

Giving in

Against this backdrop, India initiated anti-dumping investigations in November last year against manufacturers in China, USA, Taiwan and Malaysia, deferring to the pleas of the domestic manufacturing industry. The solar power generators were promptly up in arms, pleading that the duty would make their upcoming projects unviable, given that most of them were won under thin-margin tariffs determined through competitive bidding processes.

Now, the U.S. has taken India to WTO over the ‘domestic content requirement’ (DCR) under the NSM. India is likely to argue that the NSM is in the nature of government procurement — because the power is bought by a government-owned company. India is not a signatory to the Agreement on Government Procurement, hence, no violation.

Secondly, India will argue that the DCR rules have truly caused no damage to any overseas manufacturers, because it is applied on a very small portion of the country’s goals, the rules do not cover states’ programmes.