The US has challenged India's solar energy policy before the World Trade Organisation (WTO), saying it favours domestic sourcing of solar panels. The challenge, filed on February 6, says the Jawaharlal Nehru National Solar Mission (JNNSM) flouts global trade norms.

“A provision in India's solar energy programme asks power producers to acquire equipment from within the country,” said Ron Kirk, US trade representative. "Trade enforcement is critical for ensuring that our clean energy goods and services can compete on an equal footing around the world," he added. 

Replying to the challenge, the Indian government maintains that its policies are not discriminatory against foreign solar equipment makers. Indian NGOs have also sprung to the defence of the government. They point to the unfair trade practices of US. The complaint at WTO is an attempt to browbeat India, they say.  
 
The US has asked for a consultation with the Indian government on the matter. As per WTO rules, India has 10 days to respond from the date of complaint. “We are working on our response,” said Rajeev Kher, additional secretary with the ministry of commerce. 

Tarun Kapoor, joint secretary, with the Ministry of New and Renewable Energy (MNRE), on the other hand said, “We are not violating any WTO rule. There is an exception under WTO if the government is the power procurement agency. Besides, the domestic content requirement pertains to only 500MW of solar power in the first batch of solar mission.” India's solar programme envisages the installation of 20 gigawatts of solar capacity in several phases by 2022. However, the definition of public procurement is not clear.

Kapoor also added that India, like other countries, also has a right to protect its solar equipment makers who are struggling to cope with cheaper imports from China, the US, Malaysia and Taiwan.

An anti-dumping probe launched by Indian commerce ministry is already under way. The Indian solar equipment manufactures had complained last year to the government that cheap products from China, the US, Malaysia and Taiwan are eating into their business.     

Is US resorting to unfair trade practices?

The Centre for Science and Environment (CSE), a New Delhi based non-profit, says that by dragging India to the WTO, US is trying to browbeat India to further the interest of its own solar companies.  “Since the start of JNNSM, the US has used the loopholes and the climate finance to the advantage of its manufacturers, who have sold highly subsidised solar panels to India.

This in turn has made Indian solar manufacturing companies uncompetitive,” said Chandra Bhushan, deputy director general of CSE. It is estimated that currently 80 per cent of the Indian manufacturing capacity is in a state of forced closure and debt restructuring with no orders coming to them, while the US manufacturers are getting orders from Indian solar power developers.

“The United States has been able to do so by using the climate 'fast start financing’ to its advantage,” said Bhushan. Fast start financing is a US $30 billion fund set up under the United Nations Framework Convention on Climate Change.

The fund, adopted at the Copenhagen climate meeting in 2009, was supposed to help developing countries deal with climate change impacts and limit greenhouse gas emissions. The US has very ingeniously used this fund to promote its own solar manufacturing. The US Exim Bank and the Overseas Private Investment Corporation (OPIC) have been offering low-interest loans to Indian solar project developers on the mandatory condition that they buy the equipment, solar panels and cells from US companies. This has distorted the market completely in favour of US companies.

An estimation done by CSE shows that about half of all solar modules installed under the JNNSM were manufactured by US companies. The US is the biggest winner of the Indian solar mission so far, says CSE.

Bhushan says the US is worried about two things. One, the anti-dumping probe launched by the commerce ministry which suggests that there is sufficient prima facie evidence of dumping of solar cells from the four countries. Obviously, with major imports coming from the US, its domestic companies are threatened the most.

Another is, increasing demand from Indian manufacturers to make domestic content requirement also applicable to the thin-film technology. If this comes about, this will completely stop the imports of subsidised solar modules from the US.