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US, India to hold second round of talks on solar trade dispute

Amiti Sen Richa Mishra New Delhi | Updated on March 18, 2014 Published on March 18, 2014

New Delhi to defend its local-buying norms in phase II of National Solar Mission

The second phase of India’s solar mission will come under the scrutiny of the US this week as the two countries begin consultations on compulsory local-buying requirements for certain components used in the programme.

The US has alleged that the domestic sourcing requirements flout World Trade Organization (WTO) norms as they discriminate against foreign companies.

The consultations, scheduled on March 20-21, will give an opportunity to India to explain its stand. If the US is not satisfied it may ask the WTO to set up a dispute settlement panel to fight the case.

“We are ready to explain our position. Our arguments remain the same as those made when the US had complained against the first phase,” a Government official told Business Line.

Govt procurement

Since the power produced by the projects under the Jawaharlal Nehru National Solar Mission will be bought by a Government agency, India has argued that all equipment purchases fall under the category of ‘Government Procurement’.

As India is not a member of the Government Procurement Agreement of the WTO, it is not obligated to follow multilateral rules laid down for Government procurement.

India has already faced one round of consultations on the matter in 2013 after the US complained against the first phase that stipulated that all solar modules have to be purchased locally.

It launched a fresh complaint in February after the second phase of the mission — that will produce 750 MW of energy — continued with the sourcing norms. Although half of the project in the second phase will not have to conform to local sourcing conditions, for the remaining half it has been mandated that domestic procurement will also cover solar thin films.

“The US had gone slow after filing the first complaint as it had hoped that India would discontinue the domestic sourcing clause in the second phase. Since that did not happen, it has launched a second attack,” another official said.

The US counter-argument to India’s defence is that since the local sourcing condition has been applied on purchase of power equipment and not power (which will be bought by the Government), it cannot qualify as Government procurement.

Published on March 18, 2014

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