Mains Paper 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
From UPSC perspective, the following things are important:
Prelims level: WTO, DCR scheme, trade remedies, etc.
Mains level: Complement this newscard with our previous newscards on the same issue of Solar Power.
Special attention from the Indian Government
- The 2018 Economic Survey identifies renewable energy as a champion sector under the Make in India 2.0 programme
An important issue
- India currently meets almost 90% of its annual requirement of solar panels through imports (mainly China), impeding the growth of a nascent domestic solar manufacturing sector
Some important questions
- Policy support for the solar sector is increasingly focussed on domestic manufacturing, both in the form of capital subsidies and considerations of trade regulation
- However, are these interventions the right signals to send to an already uncertain solar sector?
- Do they comply with the global trade regime?
- And will they keep our renewable energy (RE) ambitions on track?
Examination of the above questions
FIRST: Issues related to trade remedies
- Implementing trade remedies that have anti-competition implications has become commonplace, with clean energy becoming its newest victim
- Trade remedies are trade policy tools that allow governments to take remedial action against imports which are causing material injury to a domestic industry
- Trade remedies are attractive because they create tangible short-term benefits such as job creation, reduction in trade deficit, and higher local tax collection
- However, such a move would also result in higher tariffs and make solar power less attractive for the already financially strained and RE-sceptical utilities
SECOND: Compliance with the global trade regime
- It is vital that India remains compliant with the global trade regime
- Previous measures (for example, the domestic content requirement or DCR scheme) to assuage the concerns of the domestic solar manufacturers were challenged and overturned at the World Trade Organisation WTO
- The DCR scheme did not impose any restrictions on imported sources and only sought to secure an assured market for domestically manufactured panels
- Prioritising domestic goals without complying with international trade rules affects the much-needed stakeholder confidence required to achieve India’s clean energy target
THIRD: Inter-ministerial conflict
- India’s solar sector is currently caught in inter-ministerial cross-fire
- The Ministry of New and Renewable Energy (MNRE) has been grappling with issues posed by the MoF regarding:
the re-classification of solar panels as electrical motors (the current classification is photosensitive semiconductor devices), imposing additional duties and cesses on importers
- An inter-ministerial committee headed by the MNRE must be constituted to coordinate moves among the MoF, the MoCI, the Ministry of Power, and the Central and State Electricity Regulatory Commissions
FOURTH: Need of a unified representative
- Developers and manufacturers need to voice their needs clearly and respond to policy implications in an unequivocal manner
- The industry needs one unified voice representing the key concerns of each stakeholder-category, without ignoring the broader interests of the sector
The way forward
- To get ahead in the solar race, India will need a comprehensive strategy on issues such as effective sourcing of critical minerals, investment in R&D, access to patient venture capital, and fiscal benefits for the industries of the future