Focus on Local Demand to Win WTO Solar Dispute - Timothy Meyer's Insight

The Backstory

• The Jawaharlal Nehru National Solar Mission was unveiled on January 11, 2010, by the then Prime Minister of India.

• The Mission was ambitious, aiming to deploy 20,000 MW of grid-connected solar power by 2022. The goal was to reduce the cost of solar power generation in India through long-term policy, large-scale deployment goals, aggressive R&D, and domestic production of critical raw materials, components, and products.

The ultimate aim was to achieve grid tariff parity by 2022. In simpler terms, this means that by 2022, solar technology should be able to produce electricity at the same cost as the electricity available on a utility’s transmission and distribution grid.

• The National Solar Mission was designed to create a policy framework that would enable this objective to be met and position India as a global leader in solar energy.
• This opened up a massive market for private players worldwide, as it presented a significant business opportunity in Solar.
• With the new government in power, India has enhanced its commitment towards Renewable energy.
• The Union Cabinet, led by Prime Minister Narendra Modi, approved a five-fold increase in India's solar power capacity target under the Jawaharlal Nehru National Solar Mission (JNNSM), reaching 1,00,000 MW by 2022.
• The target primarily includes 40 GW Rooftop and 60 GW through Large and Medium Scale Grid Connected Solar Power Projects.
• With this ambitious target, India will become one of the largest Green Energy producers globally, surpassing several developed countries.

The Controversy

• To promote the local industry, generate employment, and boost investment in the "Make in India" initiative, the government insisted that solar companies providing Solar equipment should have a certain percentage of components of the solar panels made in India.
• This clause, known as Domestic Content Requirement (DCR), has become a point of contention. Many private companies/suppliers of Solar equipment from the USA, China, and Europe will now not be eligible to benefit from the government’s long-term guarantee of purchasing solar power if they do not fulfill the above clause.

The WTO Dispute

• In 2013, the U.S. lodged a complaint before the WTO, arguing that the domestic content requirement imposed under India’s national solar programme violates global trading rules.
• Specifically, the U.S. claimed that India had violated its "national treatment" obligation by discriminating against imported solar cells and modules.
• India has defended its stance in the WTO by using the 'government procurement' justification, which allows countries to deviate from their national treatment obligation provided the measure is related to "the procurement by governmental agencies of products purchased for governmental purposes and not with a view to commercial resale or use in the production of goods for commercial sale."
• India also argued that the measure was justified under the general exceptions as it was necessary to comply with its domestic and international law obligations relating to ecologically sustainable development and climate change.
• However, as of March 2016, the WTO Dispute Settlement Panel concluded that India had violated its national treatment obligation by imposing a mandatory domestic content requirement.

What's Next for India?

• India plans to appeal the WTO verdict in the solar case filed by the U.S.A.
• Piyush Goyal, Minister of State (Independent Charge) for Power, Coal, and New & Renewable Energy, stated that the government is considering filing a case against the U.S. in the World Trade Organisation, based on programs run by American state governments that protect domestic manufacturers.

Timothy Meyer's Insights

1. Local content requirements for renewable energy are quite common at the state and local level in the U.S.A.
2. Meyer suggests that if India (or China, which has raised similar concerns) ever brings a claim against the United States based on these programs, it wouldn't be surprising.
3. By focusing its arguments (or future measures) on the goal of developing a manufacturing capacity that serves a domestic demand not adequately served by international markets, India might have greater success,” Meyer added.

Students preparing for competitive exams should keep an eye on developments in this issue, as it may feature in the UPSC Main Examination this year.

Tags: US- India Solar dispute, WTO