Solar row: US seeks to penalise India for ‘non-compliance’

The US has sought the World Trade Organisation’s (WTO) nod to suspend trade concessions to India to compensate for losses caused by the country’s alleged non-compliance with the multilateral body’s ruling in the solar dispute case.

Indian trade officials have, however, said that the country was in full compliance with the ruling of the Dispute Settlement Body (DSB) on the issue and had nothing to fear.

“New Delhi will first try to get into a sequencing agreement with Washington so that there is clarity between the two on the sequencing of various stages of implementation of the obligation. In case that fails, seeking the setting up of a compliance panel could be the next step,” a government official told BusinessLine.

Interestingly, just three days ago, India submitted a status report to the DSB stating that it is in compliance with the findings and recommendations of the DSB in the dispute on solar cells and solar modules.

It added that it has ceased to impose any measures in its national solar power programme, such as compulsory sourcing of solar cells and modules from local producers, as found inconsistent in the DSB’s findings and recommendations.

However, Washington, in its communication to the DSB on December 20, stated that India had failed to comply with the recommendations and rulings and should be penalised.

“The parties have not reached agreement on compensation. Therefore, the US is entitled to authorisation by the DSB to take countermeasures under Article 22 of the DSU,” it said.

The countermeasures would consist of suspension of tariff concessions and related obligations (including most-favoured-nation obligations) on a list of products of India to be drawn from the harmonised tariff schedule of the US, it added. The US request will be taken up by the DSB in its next meeting on January 22. One reason why the US rejected India’s status report could be to push the country to change the provisions of contracts entered into with power producers before December 14, 2017 — the mutually agreed date for implementing the DSB ruling.

“The demand for bringing about changes in laws retrospectively is not something provided under the DSB. Changes have to be prospective in nature and we are hopeful that the DSB will point that out to the US,” the official said.

Last year, the DSB had ruled in favour of a US complaint against the requirement that power producers under India’s national solar power generation programme — the Jawaharlal Nehru National Solar Mission — should compulsory procure a part of solar panels and modules for their projects from local producers as it argued that the provision discriminated against foreign producers.

After several rounds of consultations, the United States agreed to give India time till December 14 this year to change its rules. India has now made changes in the JNNSM to ensure that contracts for solar power production entered into with power producers after December 14 should not include compulsory domestic sourcing norms.

It is not the first time that the US has adopted an aggressive stance against India.

In a separate dispute on import restrictions on poultry, it imposed a demand for $450 million annual compensation from India for alleged failure to implement a WTO verdict within the reasonable period of time.

New Delhi managed to convince the WTO to set up a compliance panel to establish that it had not failed to comply with the given verdict.