Domestic Content requirement of India’s Solar Mission challenged by US

Domestic content requirement of India’s solar mission on 10 February 2014

was challenged by the United States, which it alleged as discriminatory and against international norms including the laws of WTO. It has badly affected the American domestic solar panel manufacturing industry. The decision was taken by US as a measure to protect 10000 American jobs in solar industry and to have a significant pie in the second largest solar market of the world. Domestic content requirements of India’s solar mission in Phase II discriminates against US solar cells and modules by requiring to use India-manufactured solar cells and modules instead of US or other imported equipment.

At present the WTO dispute consultations with India has been requested by US in relation of concerning domestic content requirements in Phase II of India’s Solar Mission. Union Cabinet in October 2013 approved the measures governing the implementation of Phase II of its National Solar Mission. Under the Phase II of the Solar Mission implementation, India has imposed domestic content requirements under which solar power developers should use Indian-manufactured solar cells and modules instead of US or other imported equipment.

Background

India launched its National Solar Policy on 11 January 2010 named as Jawaharlal Nehru National Solar Mission (JNNSM). The Phase I of the national policy was composed of two parts

• Batch 1 of policy implementation: India required developers of solar photovoltaic (“PV”) projects employing crystalline silicon technology to use solar modules manufactured in India.

• Batch 2: India expanded this domestic sourcing requirement to crystalline silicon solar cells as well.

In the phase II of the solar draft policy, India has considered expansion of the scope of the domestic content requirements further to include solar thin film technologies and at present the majority is comprised of US solar exports to India.

Elements of India’s national solar policy appear to be inconsistent with India’s obligations under the WTO agreements.

These obligations include

• Article III of the General Agreement on Tariffs and Trade 1994 (GATT 1994), which generally prohibits measures that discriminate in favor of domestically produced goods versus imports

• Article 2 of the WTO Agreement on Trade-Related Investment Measures, which prohibits trade-related investment measures that are inconsistent with GATT Article III

• Article 3 of the WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement), which prohibits conditioning a subsidy on the use of domestic over imported goods

• Article 5 of the SCM Agreement, which prohibits causing adverse effects on other WTO Members through subsidies that discriminate against imported goods