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US concerned over domestic content requirements in India’s solar sector

As Panchabuta had reported  in December last year, the U.S. was aggressively trying to push  India to lift solar import restrictions on Jawaharlal Nehru National Solar Mission.

Since that lobbying by the US, the government had announced that it may postpone mandatory use of locally made photovoltaic cells in solar power projects being set up under the national solar mission to speed up projects and allow access to the best-available technology although the move would be a blow to local suppliers such as Moser Baer, Tata BP Solar, KSK Surya and IndoSolar.

Just days after this, FICCI had cautioned against any move to do away with domestic content requirement in solar energy sector.

This immediately led the ministry to issue a clarification, as reported by Panchabuta, that stated, “Under the Jawaharlal Nehru National Solar Mission, the Government had announced a policy to introduce domestic content wherein 30% domestic content is mandatory for the solar thermal power projects in the first phase of the Mission. Solar Photovoltaic (PV) grid power projects are to be selected in two stages. In the first stage 150 MW capacity projects are being selected, where the crystalline silicon modules should be manufactured in the country. However, for the second stage of selection of about 300 MW capacity projects, it is mandatory to use domestic solar cells and modules. There is no move to defer this policy. “

The mandatory use of domestic content for utility scale grid connected solar power  is a topic that has witnessed a lot of debate and there have been strong views on both for and against the same sometimes from two group companies each on one side of the same corporate house like Tata BP Solar for the domestic content requirement and Tata Power against the requirement saying it impedes them from choosing the best available equipment and vendor that suites their requirements.

In January this year, Ron Summers of lobby group Indo-US business council was pushing for the removal of technology limitations in Solar and last month, U.S. Commerce Secretary Gary Locke said he conveyed a “message of great concern” to Indian officials  about the country’s restrictions on imports of solar-power technology, rules that are making it difficult for American firms to enter one of the world’s fastest-growing solar-energy markets.

Once again in February this year, speaking to the Wall Street Journal, U.S. Commerce Secretary Gary Locke said he conveyed a “message of great concern” to Indian officials Monday about the country’s restrictions on imports of solar-power technology, rules that are making it difficult for American firms to enter one of the world’s fastest-growing solar-energy markets.

According to reports, the United States is using every available forum to protest against the domestic content requirements in India’s solar energy sector that prevent the import of foreign-made solar panels.

A US trade official who asked not to be named told Business Standard that the United States Trade Representative’s office has recently submitted comments to the government of India expressing its concerns about the “trade-restrictive domestic content mandates”.

The comments were submitted at the end of June 2011 in response to a request by India’s Ministry of New and Renewable Energy for input from the public on guidelines that would apply to projects under Phase 1, Batch 2 of the National Solar Mission.

The official said these comments highlighted, among other things, the importance of meeting the objectives of the National Solar Mission without recourse to trade-restrictive measures such as domestic content requirements.

The US has repeatedly complained that the domestic content requirements under India’s National Solar Mission hurt manufacturers in the United States as well as American investors developing solar projects in India. “They explicitly shut out foreign products, including high quality US solar equipment, from commercial opportunities in India’s solar market, and interfere with the commercial decisions of solar developers,” the trade official said.

While the longstanding US complaint could be among the various economic and trade issues that will be discussed at the Strategic Dialogue in New Delhi, the issue is also before the Indo-US Trade Policy Forum, the primary bilateral mechanism for addressing trade and investment issues between the two countries.

India has set an ambitious target of generating 20,000 Mw of solar power by 2022. The US is especially keen to grab a major share of this market, given the US President Barack Obama’s aim of doubling US exports by 2015, as well as his promise during the 2008 presidential election campaign to create five million “green collar” or clean energy sector jobs for US workers.

The timing of this concern is no surprise, as the  US Secretary of State Hillary Clinton is set to visit India next week and the strategic dialogues on energy are about to take place. Further, according to sources, the World Bank is likely to make some large commitments to India for the development of the solar mission and hence the timing of the announcement regarding the domestic content requirement.

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