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India & US at loggerheads on the Solar Panel dispute

What is the origin of the dispute?

In 2010, India launched its national solar programme, which aims at adding 1,00,000 MW of solar power capacity by 2022.

So, govt. wanted to incentivise the production of solar energy within the country. Therefore, they agreed to enter into long-term power purchase agreements with solar power producers, providing the guarantee for the sale of the energy produced. Thereafter, it would sell such energy through distribution utilities to the ultimate consumer.

Bone of Contention

However, there was a clause that a solar power producer, to be eligible to participate under the programme, is required compulsorily to use certain domestically sourced inputs, namely solar cells and modules for certain types of solar projects. In other words, unless a solar power producer satisfies this domestic content requirement, the govt will not ‘guarantee’ the purchase of the energy produced.

What is India’s argument?

India principally relied on the ‘govt procurement’ justification, which permitted countries to deviate from their national treatment obligation provided that the measure was related to “the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or use in production of goods for commercial sale”.

India also argued that the measure was justified under the general exceptions since it was necessary to secure compliance with its domestic and international law obligations relating to ecologically sustainable development and climate change.

What is US’ argument?

In 2013, the U.S. brought a complaint before the WTO arguing that the domestic content requirement imposed under India’s national solar programme is in violation of the global trading rules.

It said that India has violated its “national treatment” obligation by unfavourably discriminating against imported solar cells and modules. In other words, India was discriminating between solar cells and modules (which were otherwise identical) on the basis of the national ‘origin’ of the cells and modules, a clear violation of its trade commitment.

Us has argued that India can achieve its clean energy goals faster and more cost-effectively by allowing solar technologies to be imported from the US and other producers.

What was the WTO judgment on the issue?

WTO concluded that India had violated its national treatment obligation, by imposing a mandatory domestic content requirement. The panel found India violated global trade rules by imposing local content requirements for solar cells and solar modules.

Agreement’s Violated: India violated its commitments under the global trading rules, specifically the General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade Related Investment Measures (TRIMs).

Explanation: The product being subject to the domestic content requirement was solar cells and modules, but the product that was ultimately procured or purchased by the govt was electricity. Therefore, the domestic content requirement was not an instance of “government procurement”.

Room for Negotiation

The verdict was delayed for over 2-3 months, so that India and US can reach an agreement. In this regard, changes were suggested by New Delhi to its solar power programme. India proposed that it would use the domestic content requirement measures for buying solar panels for its own consumption such as by the railways and defence and would not sell the power generated from such subsidized panels for commercial use. However, the US may have rejected India’s offer.

Why is the ruling being criticized?

Various environmentalists have criticized the ruling, as it undermines India’s efforts towards promoting the use of clean energy. It threatens the clean energy economy and undermined actions to tackle the climate crisis.

What is the criticism to India’s stand?

There appears to be no rational basis for how mandatory local content requirements contribute towards promoting the use of clean energy. If the objective is to produce more clean energy, then solar power producers should be free to choose energy-generation equipment on the basis of price and quality, irrespective of whether they are manufactured locally or not.

It is also argued that by mandatorily requiring solar power producers to buy locally, the govt is imposing an additional cost for the production of clean energy, which will be ultimately passed on to the ultimate consumer.

What is alternative in India’s hand?

Though, the WTO decision may impact the ‘Make in India’ campaign. But, the govt. can give preferential treatment to clean energies in the form of tax rebates for solar power producers, tax breaks, ensuring a strong line of long term credit at low rates, collaborating with global leaders to enhance domestic research and development.

Future

The reports indicate that India will prefer an appeal to the appellate body. Simultaneously, India may be exploring the option of filing a counter complaint against the US, as many of its state’s such as Michigan, Texas and California having also reportedly been accused of employing mandatory local content requirements in the renewable energies sector.

Experts argue that govt should work towards building a business and regulatory environment, which is conducive to manufacturing. The need is for systemic changes in the form of simpler, transparent and consistent laws and effective dispute resolution mechanisms.

Published with inputs from Pushpendra

Any doubts?


  1. Profile photo of Debodyuti Dutta Debodyuti Dutta

    could not understand India’s argument. someone please tell in simple sentences.

    1. Profile photo of Pushpendra Rana Pushpendra Rana

      First, you need to understand what is national treatment? It simply means that a country cannot discriminate between products manufactured in domestic territory or in other country.

      There are some exceptions which allows countries to violate this principle.

      Basically, there is a WTO provision which allows countries to deviate from national treatment, provided it is used only by govt. agencies and not for commercial purposes ( that is govt. should not involve in purchasing/ selling of the commodity)

      In 2nd argument, India is asking US to be a kind of altruistic on the lines that it the issue should not be challenged, since it is trying to fulfill its national/ international obligations to control climate change.

      Both arguments have failed to convince WTO, because, govt. intended to indulge in selling of the energy produced through solar plants for commercial purpose. Second argument fails to explain, how procuring from US/ any foreign country will impact India in fulfilling it’s International/national obligations since the solar power producers will get cheaper panels ( as US solar panels are cheaper than what is being produced in India)

      1. Profile photo of insanity iloveit insanity iloveit

        Where is it written that govt intended to indulge in selling the electricity? Intention is not enough IMO. The argument was that govt was procuring electricity while content requirement was for solar panel.

      2. Profile photo of Debodyuti Dutta Debodyuti Dutta

        thanks. clear.

Ministries bicker over strategy in U.S. solar case

  1. Context: India lost a case in WTO pertaining to local content requirements in the Jawaharlal Nehru National Solar Mission for solar cells/modules
  2. News: There are inter-ministerial differnces over strategy to be adopted by India to drag US to WTO’s Dispute Settlement Body
  3. The renewable energy policies of several State govt’s in US violates the global trade body’s norms
  4. How? Many State govts in US had “very significant” domestic content requirements “violating” the US obligations under the WTO agreements

India to appeal WTO verdict in solar case filed by the U.S.

WTO_25TH_BU_TRADE-WTO_2788924f


  1. News: India will appeal against the World Trade Organisation’s (WTO) verdict over its policy relating to solar power equipment
  2. Context: India had, as part of its National Solar Mission, imposed a stipulation that solar cells and solar modules be locally sourced
  3. Relevance: U.S. had filed a case against India at the WTO demanding a level-playing field for Indian and foreign solar component manufacturers
  4. WTO ruled in favour of the U.S.
  5. From India’s side: India’s capacity to produce solar components and solar cells comprises only a portion of the demand in India
  6. Indian manufacturers had a complaint against the U.S. counterparts for dumping in India
  7. In the U.S., nine states had similar programmes to protect their domestic manufacturers

India may appeal against WTO’s panel ruling in solar case

  1. India’s appeal: Against the WTO’s panel ruling that the country’s power purchase agreements with solar firms were “inconsistent” with international norms
  2. Context: Rulings of the WTO’s dispute settlement panel can be challenged in the WTO’s appellate body
  3. Why? The U.S. had filed a complaint before the global trade body alleging discrimination against American firms
  4. Background: U.S. had dragged India to WTO on this issue in 2014
  5. Why U.S. alleging? because clause relating to domestic content requirement in the country’s solar power mission were discriminatory in nature and “nullified” the benefits accruing to U.S solar power developers

WTO Ruling against India

  1. WTO ruled against India’s imposition of local content requirements in its solar power programme.
  2. India will appeal against this ruling in the dispute which was raised by the US.
  3. WTO members are not supposed to insist on national content requirements and provide “national” treatment under which imports must be treated at par with domestic products.
  4. India maintains the ruling shall not affect its solar power programme or ‘Make in India’ initiative.


:( We are working on most probable questions. Do check back this section.







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