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Solar power: US gives India time till year-end to scrap local sourcing rules

According to reports, the United States has agreed to give India time till December 14 this year to remove the requirement for mandatory domestic sourcing of solar panels and modules under its national solar power generation programme.

“This means that all contracts for solar power production entered into with power producers after December 14 under the Jawaharlal Nehru National Solar Mission (JNNSM) should not include compulsory domestic sourcing norms which the World Trade Organisation has ruled against,” a government official told BusinessLine.

Washington decided to give New Delhi up to 14 months to change its rules and bring them in conformity with the Dispute Settlement Body’s (DSB) recommendations following intense consultations between the two countries on the reasonable period of time for implementation of the WTO verdict against India’s local sourcing norms.

The usual implementation period at the WTO (decided by the complainant) is between 12 months and 15 months, but sometimes it could be lesser.

The DSB had ruled in favour of a US complaint against the requirement that power producers under the JNNSM should compulsory procure a part of solar panels and modules for their projects from local producers as it argued that the provision discriminated against foreign producers.

While the JNNSM aims to add 100,000MW of solar power by 2022, the local content requirement is only for 8,000 MW for rooftop and land-based projects where the government provides a subsidy.

“Now that the US has agreed to give India 14 months (from date of adoption of DSB ruling on October 14, 2016) it should utilise the time to make the necessary change its rules and not wait for the last minute to do so as it did in the case of the poultry dispute,” a trade expert based in Delhi said.

The US, in a separate dispute on import restrictions on poultry, imposed a demand for $450 million annual compensation from India for alleged failure to implement a WTO verdict within the reasonable period of time.

“India moved to change its rules in poultry only after the US demanded compensation. The disagreement between the two countries on the matter is still on. Such a situation should be avoided through timely action by all Ministries and Departments concerned in the solar case,” he added.

In the solar dispute, what also needs to be seen is whether the US would want the contracts signed before December 14, 2017, but were being still implemented, to be re-worked.

“WTO judgements are implemented with prospective effect. Hopefully, the US would not insist on re-working old contracts as it could lead to a serious set back for the programme,” the official said.

The WTO judgement against India in the solar power dispute is a big blow to the country’s fledgling solar component manufacturing industry which faces huge competition from imports from China and the US.

The Ministry of New and Renewable Energy has, however, assured the industry that it was looking at alternative ways of supporting local manufacturers.

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