Economy

Solar dispute cloud over Indo-US relations

M Ramesh Chennai | Updated on January 24, 2018


The solar dispute hangs like wisp of a cloud over the growing friendship between India and the US; observers in India are watching what the US would do between now and February 3, when a dispute panel of the World Trade Organisation will hear the US complaint.

The Americans feel that India’s ‘domestic content requirement’ of the Jawaharlal Nehru National Solar Mission programme violates WTO rules. The DCR provision requires some of the solar power projects to be build using only India-made photo voltaic cells and modules. (Solar modules are made with cells, which are produced from polysilicon.)

In August, the Indian government refrained from imposing anti-dumping duties on solar cells and modules imported from a few countries including the US. The anticipation, therefore, is that the US would reciprocate by dropping its complaint against the DCR provision, at the WTO.

The latest round of JNNSM bid out projects worth 750 MW—solar companies had to bid for ‘viability gap funding’ given by the government. Half of that capacity was mandated to be with DCR.

Industry observers believe that the Indian government has provided sufficient grounds for the US to withdraw its complaint.

First, the Indian government has since raised the solar capacity target to 1,00,000 MW to be achieved by 2022, up from 20,000 MW earlier. As such, the part of the capacity that would be created with domestic modules will be too small to affect business opportunities for American companies.

Second, India is getting the government-owned, companies such as NTPC, to set up solar power projects, with domestic modules. For starters, public sector undertakings will set up 1,000 MW of projects and the Defence another 300 MW. This, the government hopes, will be treated as ‘government procurement’—WTO rules allow local product preference under ‘government procurement’.

“The market is large and American companies may not be too keen on lobbying against India,” says Jasmeet Khurana, an analyst at Bridge-to-India, an India-centric solar consultancy.

Khurana feels that in any case, the Indian government intends to abolish subsidies for solar beyond 2017, and if there is no subsidy there can be no DCR. As such, the buy-India mandate is also for a small period, for a small slice of the market.

“The US has been talking so much about clean energy. I hope they would allow India to develop its solar industry,” a senior official of the Ministry of New and Renewable Energy told Business Line today.



Published on January 29, 2015

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