The United States has announced that it is moving the World Trade Organisation against India’s “discriminatory” domestic content requirements in its National Solar Mission-Phase II.
“These domestic content requirements discriminate against US exports by requiring solar power developers to use Indian-manufactured equipment instead of US equipment,” US Trade Representative Michael Froman said as he announced the trade enforcement measure. Froman took the stand that the Indian stipulations are against WTO rules. Besides constituting “an unfair barrier to US exports”, he said the “localization” measures would raise the cost of solar energy and hinder its deployment around the world, including in India.
While the US action added another wrinkle to the recent strains in ties with India over the Devyani Khobragade affair, American officials maintained that this issue had been in the works much before the two countries were locked in the protracted diplomatic spat. Ahead of the USTR’s announcement, the speculation was that the trade enforcement would deal with the allegations of India’s poor protection of patents in the pharmaceutical sector that had prompted Corporate America to demand India’s designation as a “Priority Foreign Country”.
The USTR’s action, however, was restricted to the solar issue. Stating that the Indian Government had already been notified in the matter, Froman said the United States has requested WTO dispute settlement consultations with India on this subject. “The domestic content requirements discriminate against US solar cells and modules by requiring solar power developers participating in Phase II to use Indian-manufactured solar cells and modules instead of US or other imported equipment,” he said, noting that New Delhi has now extended these requirements to more solar energy products than what was covered under Phase I of the solar mission.
The Union Cabinet had, in October 2013, approved measures governing the implementation of Phase II of the mission. Under this, solar power developers are required to use Indian-manufactured solar cells and modules instead of American or other imported equipment, Froman said, adding the list has been expanded to cover thin film technology that was exempt in the earlier phase.
“As thin film currently comprises the majority of US solar product exports to India, these domestic content requirements are likely to cause even greater harm to US producers than under Phase I,” the USTR said. A year ago, the US had sought similar WTO consultations with India over the domestic content requirements in respect of Phase I, but the formal consultations at that time had “failed to resolve US concerns”.
A request for WTO consultations is the first step in the dispute settlement process, intended to help parties find a solution at this stage. If there is no resolution within 60 days, the United States may ask the WTO to establish a dispute settlement panel, Froman indicated. India launched the first phase of the solar mission in 2010. To participate in that phase, solar power developers were required to agree to use certain solar cells and modules manufactured in India.