Solar dispute with US: WTO rules against India

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In another case that India has lost to the US in recent times in the WTO, a WTO panel gave a ruling against India over its solar power programme, requiring the government to offer a level playing field to both foreign and domestic manufacturers of solar panels, according to officials in the commerce ministry quoted by Mint, an Indian business newspaper. This comes as a setback at a time when India has ambitious solar energy plans to boost the energy sector and the economy.

India will most likely appeal against the verdict of the dispute settlement panel, which is expected to give it a two year breather to implement the programme. This is the second case that India has lost against the US in the WTO since June when the WTO’s appellate body upheld an earlier ruling against an Indian ban on poultry meat and eggs supplied by American producers.

The US had raised the dispute after concerns over the Indian government’s decision to impose local content requirements for solar cells and solar modules. Under WTO guidelines, members are not supposed to insist on national content requirements that discriminate against foreign products and governments are also expected to treat imports on a par with domestically manufactured products. The panel is also said to have struck down the government’s incentive policies, especially subsidies provided for domestic solar companies for manufacturing solar cells and solar modules.

India has also been charged by the US of violating provisions in the Trade Related Investment Measures (TRIMS) and in this case it is the provision of imposing local content requirements that discriminate against foreign products. The US claimed that the Indian government’s measures to impose national content provisions and deny “national” treatment have impaired benefits accruing to American companies. After the negotiations failed between India and the US on the issue, the request to set up a dispute settlement panel was blocked by India, but the panel had to be set up under the WTO guidelines after the US made the request for a second time.

Impact on manufacturing

According to some analysts, the move will not impact Prime Minister Narendra Modi’s ‘Make in India’ programme which aims to attract foreign investments and make India a manufacturing hub as manufacturers will not like to miss new opportunities  emerging in India. Some of incentives offered by India such as increasing the modified special incentive package scheme by five years has been welcomed by manufacturers.

Impact on India-US relations

While the overall relations between both countries has been at its peak recently, there are differences in some areas which continue to exist. India and the US have been at opposing ends on many major issues in the WTO due to differences between the perceptions of a developed economy and a developing economy. India and the other emerging countries have usually been on the same side on many major issues in the WTO, while the US and EU have been ranged at the other end. The relations between India and US will continue to flourish, but it is unlikely that they would come together in the WTO on many issues with both sides taking strong contrasting positions. The issue could continue to remain a point of contention between both the countries.

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