WTO Solar Panels Dispute in India has another Surprising Twist

A dispute before the World Trade Organization (WTO) has surprised many; India has appealed a ruling by the WTO and now seeks a compromise in a dispute regarding domestic content requirements for the nation’s solar panel programs. The dispute has caused a number of companies in India’s renewable energy industry to halt expansion until a resolution can be reached.

A dispute before the World Trade Organization (WTO) has surprised many; India has appealed a ruling by the WTO and now seeks a compromise in a dispute regarding domestic content requirements for the nation’s solar panel programs. The dispute has caused a number of companies in India’s renewable energy industry to halt expansion until a resolution can be reached.

According to The Economic Times, the dispute regarding the solar panels began in February 2013. At that time, the United States protested a domestic content requirement (DCR) that was integrated into an initiative launched by the Indian government. The U.S. asserted that the initiative contradicted three separate agreements created by the WTO and signed by India. Specifically, the DCR provided incentives to entities installing solar power panels if they used panels that contained a certain percentage of components that were locally sourced. According to the U.S., this program denied foreign manufacturers fair access to the Indian market.

In August 2015, the legal dispute led to a WTO resolution panel ruling against India. While most analysts believe the WTO made the only logical ruling, India appealed the decision in January 2016. Many believed the Indian government may finally have seen the light when, a few weeks after filing the appeal, the Ministry of Commerce and the Ministry of New and Renewable Energy agreed to withdraw the DCR.

However, things took a strange turn when, just a few weeks after that, Tarun Kapoor, Joint Secretary of the Ministry of New and Renewable Energy, commented that the DCR definitely would not be abandoned. “Local industry interests will never be compromised,” he said.

At this point, those outside the Indian government can only guess at what it has in mind. Some believe that it may restrict the DCR to solar installations performed by government contractors, such as for infrastructure and defense programs. Currently, the DCR actually does not require government projects to follow the local sourcing requirements, and such a requirement would not violate the WTO’s rules. However, in an ironic twist, these projects have largely used foreign made solar modules, mostly imported from China, Malaysia, and Taiwan.

Only a small percentage originates in the United States. Many developers prefer to use the imported panels—especially ones made in China—because they tend to be between eight and ten percent cheaper than domestically manufactured ones. If Indian manufacturers take the WTO’s rulings to heart, it might actually help them in the long run. If they enhance their own production through investments in research and development, India could become a leading producer of solar panels in the global marketplace.

Some estimate that India could have even more competitively priced solar panels than China, thanks to the prices of labor and manufacturing in the nation. If India can begin producing panels of a quality and at a price point that is better than their competitors are, the country will not need to worry about the DCR bolstering the fledgling industry.