Commerce Ministry cautions of more trouble at WTO

Cocking a snook at the US, which had objected to compulsory local sourcing conditions imposed in the first phase of India’s National Solar Mission, the country is all set to extend similar norms to the second phase as well.

Domestic sourcing conditions would, however, be imposed on just 50 per cent of capacity earmarked for the second phase, a senior Government official has said.

But, this may fail to pacify the Americans as the Ministry for New & Renewable Energy (MNRE) has decided to expand the coverage of local sourcing norms to include solar thin films, mostly imported from the US during the first phase.

Interestingly, this MNRE move comes despite the Commerce Ministry warning it against continuing with its domestic sourcing clause, given it could lead to further acrimony at the World Trade Organisation.

Second phase

The MNRE is coming up with tenders for a 750 MW grid connected solar projects under the second phase of the Jawaharlal Nehru National Solar Mission on October 24.

Phase-1 of the Solar Mission only stipulated compulsory purchase of solar modules from local companies, and not thin films. Both modules and thin films can be used in solar projects, and are interchangeable.

“We made a mistake in the first phase by not including thin-film in the local sourcing norms as it led to power producers importing cheap thin films rather than use domestically produced modules,” the official said.

Flouting norms?

The US dragged India to the World Trade Organisation in February this year for stipulating local sourcing norms in Phase-1 of the Solar Mission on the grounds that it flouted norms that discourage discriminatory practices against foreign companies.

MNRE is of the view that it is important to continue protecting the fledgling domestic solar industry as it is operating way below capacity.

In 2013, analysts expect close to 1 GW worth of project installations in India, of which only 10-15 per cent will use domestically made cells and modules, even though the domestic industry has a capacity to provide for 100 per cent of these installations.

Since WTO rules are not binding on sourcing done by the Government, MNRE is hopeful that by restricting local sourcing clause to just half the projects, it may escape action, as it could claim that power produced is being used by the Government. However, proving this may be difficult.

amiti.sen@thehindu.co.in

richa.mishra@thehindu.co.in

(This article was published on October 20, 2013)
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