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India may settle solar case with US out of court

According to reports, finding itself on weak wicket, New Delhi will try to settle a complaint Washington filed in WTO challenging India’s policy on procuring equipments for its National Solar Mission. While the ministry of new and renewable energy, which made the policy, maintains that it did not violate global trade rules, the commerce and industry ministry is not so sure.

Under WTO norms, a member country cannot have a sourcing policy that is to the disadvantage of foreign suppliers unless it is for government’s own use. A commerce and industry ministry official said his ministry was not consulted when the ministry of new and renewable energy (MNRE) introduced domestic sourcing rules in phase-1 of the National Solar Mission that appeared to be biased against foreign suppliers. “A legal reply is being made, but we will like to sort the matter outside court,” the official said.

The Dispute Settlement Understanding of WTO has given India ten days to file a reply. There is a 60-day negotiation period after India submits its reply. If things are not sorted even then, a legal panel will sit over the matter.

Tarun Kapoor, joint secretary at MNRE, however, said the procurement policy did not flout any WTO regulations. “Whatever was done in solar mission phase 1 was government approved and back then it was important to safeguard the domestic industry,” he said. Another senior MNRE official said, “The power produced in phase 1 was procured by the government. The private players only developed the projects and we can impose any regulations if we are procuring the power.”

The matter goes back to 2010, when India launched the Jawaharlal Nehru National Solar Mission (JNNSM) Phase 1. The policy made it mandatory for all solar photovoltaic (PV) projects using crystalline silicon (CSi) technology to use cells and modules manufactured in India.

However, those going for modules made from thin film technology or concentrator PV cells, could source it from any country, provided the technical qualification criterion is fully met. In the solar thermal projects, it is mandatory for developers to source 30% of the domestic content.

The US has complained that the policy was inconsistent with India’s obligations under the WTO agreements such as Article III of the General Agreement on Tariffs and Trade 1994 (GATT 1994), which generally prohibits measures that discriminate in favour of domestically produced goods versus imports. An industry expert said lack of coordination between different ministries is leading to international arbitration issues. For phase 2 of JNNSM, for which bidding will start from June 2013, the MNRE is consulting the commerce ministry.

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