India’s negotiating skills at the multilateral trade body WTO will be put to test as it tries to buy time for implementing the recent verdict against local content requirement in the Jawaharlal Nehru National Solar Mission.
With the appellate body of the World Trade Organisation ruling in favour of the US, which had complained against the compulsory domestic sourcing of solar panels and modules for power producers under the JNNSM, India has been left with little option but to re-strategise its policy.
While reworking its policy, India would like to persuade the US to give it the longest allowed time-frame for compliance — 15 months, sources in the know told BusinessLine. US and India will start their consultations for a reasonable period of implementation once the Appellate Body report is adopted by the Dispute Settlement Body in its meeting next month.
New Delhi hopes that a longer time-frame will allow it to continue with the provisions of the on-going second phase of the mission, likely to end sometime next year, without removing the domestic content requirement norms, a government official said.
Support in 3rd phase
“In the third phase that will follow (in 2017), there will definitely be provisions for supporting domestic manufacturers of solar panels and modules, but they will be drafted with the WTO ruling in mind,” the official said.
These could include direct subsidies paid to the manufacturers of solar panels and modules as well as direct procurement by the government for use in its own power generation projects.
Although the JNNSM mandates that just a small fraction (about 8,000 MW of a total of 1,00,000 MW) be created with domestic modules and cells, the domestic content requirement is meant to give an assured minimum market to the fledgling local industry..
“We had given 15 months to the US to implement the WTO decision against anti-subsidy duties imposed on our steel imports. This situation is also quite complex and we would need more than a year to re-work norms as the interest of our domestic industry is at stake,” a Commerce Ministry official said.
Ball in US court
However, it is up to the US to decide whether it wants to accept India’s request. The WTO allows a maximum of up to 12 months under normal circumstances and up to 15 months under ‘exceptional’ circumstances to implement the verdict.
New Delhi is also concerned that the US might insist that it re-work all power generation contracts with domestic content clause which are valid for periods that run beyond the agreed implementation period.
“India will fight against it as it would then require the government to re-work most of the contracts granted under JNNSM. It would make things very difficult for both the government and the power producers,” the official said.
The US first complained against India in 2013 after 950 MW solar projects were granted by the Ministry of New and Renewable Energy with a clause that all solar modules for the projects have to be purchased locally.
It requested for supplementary consultations the following year after the MNRE granted projects totalling 750 MW under the first batch of the second phase.Despite India restricting domestic sourcing to just half the projects in the second phase, the US objected to its scope being expanded to include thin films, which were being exported by US companies to India.