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Solar issues at WTO: India treading cautiously this time

According to reports, ‘Once bitten, twice shy’, the Commerce Department wants to avoid fresh troubles at the World Trade Organisation vis-à-vis India’s solar energy projects.

With the US breathing down its neck for allowing the first phase of the project to have a heavy local-content norm, the Commerce Department wants to ensure that the provisions of the second phase are more aligned to the multilateral pact.

It wants the Ministry for New and Renewable Energy (MNRE) to share the draft of the bid documents for the next phase of the solar mission to ensure they are compatible with WTO norms. “The first time the MNRE did not share its first phase draft with us. But, this time, we have insisted that the draft be shown to us before finalisation as we have to face the music at the WTO,” a senior Commerce Department official said.

The US has dragged India to the WTO for incorporating a local content requirement in the first phase of the Centre’s Jawaharlal Nehru National Solar Mission which, it says, is in violation of the multilateral agency norms. The Mission, which seeks to promote the use of solar energy and build local capacities, made it mandatory under the first phase for all investors to use solar modules made in India and to source 30 per cent of the inputs locally.

The MNRE is to tender 750 MW of grid-connected solar photovoltaic projects that would help light over one lakh Indian houses. The grid-connected projects, expected to be tendered from April 1, are yet to be issued.

During Commerce and Industry Minster Anand Sharma’s recent visit to the US, top officials, including the US Commerce Secretary and the US Trade Representative, spoke against the domestic content requirement envisaged in both the solar energy and telecom policies. The US has, so far, not showed any signs of setting up a WTO panel against India to judge its policies on sourcing.

An MNRE official said the general perception is that the US is still waiting for India to formally launch the second phase. “I think the US wants to see how much capacity the second phase leaves open and then react,” the official said.

India’s defence for making local buying compulsory in the first phase is that as the power will be purchased by an arm of public sector NTPC, it qualifies as a Government purchase, and is , hence, exempt from The Agreement on Trade Related Investment Measures (TRIMs) rules.

Unimpressed by this argument, the US Government is pushing India to make changes at the earliest in the second phase so that American companies can resume sale of thin films.

The US is, however, determined not to allow India to extend the domestic sourcing norm to solar thin films (exempt so far) in its second phase as American companies are major suppliers of these films for Indian solar projects.

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