India’s solar plan flouts global trade rules: WTO
Domestic
content restrictions on the production of solar cells and modules as
part of the National Solar Mission was deemed a violation of global
trade rules
World Trade Organization (WTO) dispute settlement panel has struck a
blow to India’s solar power programme, ruling that New Delhi violated
global trade rules by imposing domestic content restrictions on the
production of solar cells and modules as part of its National Solar
Mission.
The ruling comes three years after the US launched a dispute against
India at the WTO, complaining that its domestic content requirement
(DCR) measures violated core norms of trade-related investment
provisions, national treatment provisions for treating imported products
on a par with domestically manufactured products, and financial subsidy
rules.
The three-member panel, chaired by former New Zealand trade envoy
David Walker, said India’s domestic content requirement measures “are
inconsistent with Article 2.1 of the TRIMS (Trade-Related Investment
Measures) and Article III:4 of the GATT (General Agreement on Tariffs
and Trade) 1994”.
The DCR measures are not “justified” under the general exceptions in
Article XX (j) or Article XX(d) of the GATT 1994, the panel ruled in its
140-page report.
The panel, however, did not pronounce a verdict on the financial subsidies provided by India for its solar power projects.
Its final report, which was delayed by more than two months, was
issued on Wednesday after India and the US were unable to reach an
agreement on the changes suggested by New Delhi to its solar power
programme, according to a person familiar with the dispute.
India proposed that it would use the domestic content requirement
measures for buying solar panels for its own consumption such as by the
railways and defence and would not sell the power generated from such
subsidized panels for commercial use.
A commerce ministry official, speaking on condition of anonymity,
said the US may have rejected India’s offer because of a difference in
perception and expectations.
“We have the option of going for an appeal against the ruling at WTO.
It is too early. We will take a final call on the matter in due course
of time,” he added.
The office of the United States Trade Representative (USTR) said in a
statement that the US has consistently made the case that India can
achieve its clean energy goals faster and more cost-effectively by
allowing solar technologies to be imported from the US and other
producers.
“This is an important outcome, not just as it applies to this case,
but for the message it sends to other countries considering
discriminatory ‘localisation’ policies,” USTR Michael Froman said.
Under the previous United Progressive Alliance government, India
embarked on an ambitious solar power programme as part of the National
Solar Mission, aimed at adding 100,000 megawatts (MW) of solar power
capacity by 2022. However, the local content requirement is only for
5,000 MW each of rooftop and land-based projects where the government
provides a subsidy.
The government has offered financial support of up to
Rs.1 crore per MW to the implementing agency for setting up large solar capacities by placing orders with domestic manufacturers.
WTO members are not supposed to insist on national content
requirements that discriminate against foreign products. Governments are
also required to provide “national” treatment, under which imports must
be treated on a par with domestically manufactured products.
In a confidential report issued to the US and India in August last
year, a three-member dispute settlement panel headed by Walker,
pronounced that New Delhi violated global trade rules by imposing local
content requirements for solar cells and solar modules under the
National Solar Mission,
Mint reported on 27 August 2015.
Significantly, the final ruling comes at a time when there is growing
international pressure for promoting green industries to address
climate change. It will hinder India’s solar power programme and will
hold consequences for other countries planning to embark on renewable
energy programmes, according to global environmental groups such as the
Sierra Club.
Environmental groups were critical of the preliminary ruling, saying
it threatened the clean energy economy and undermined actions to tackle
the climate crisis.
“Today, we have more evidence of how free trade rules threaten the
clean energy economy and undermine action to tackle the climate crisis,”
said Ilana Solomon, director of Sierra Club’s Responsible Trade
Programme, on the preliminary ruling when it was issued in August last
year.
India’s national solar programme, said Solomon, “has driven dramatic
growth of India’s solar capacity that will help reduce its reliance on
dirty coal and spur the development of new clear energy jobs”.
“The US should be applauding India’s efforts to scale up solar
energy, not turning to the WTO to strike the programme down,” she had
maintained.
Global environmental pressure groups led by Sierra Club and others
have repeatedly called on WTO to exit the business of hampering climate
action in countries around the globe.
The final ruling comes soon after the Paris climate agreement, where
developing countries were promised technological and financial
assistance for promoting renewable energy programmes.
At Paris, Prime Minister Narendra Modi launched the ambitious
International Solar Alliance, with the aim of switching “sunshine
nations” in tropical areas to solar energy.
The government has also scaled up its renewable energy target from 30
gigawatts (GW) by 2016-17 to 175GW by 2021-22, which could result in
the abatement of 326.22 million tonnes of carbon dioxide equivalent per
year. Of this 175GW, solar power will account for 100GW.