US wins WTO ruling against India in solar panel dispute
25 February 2016
The United States has won a ruling against India at the World Trade Organisation over the rules on the origin of solar cells and solar modules used in India's national solar power programme, which aims to generate additional power without further polluting the atmosphere.
The WTO panel has found that India's domestic content rules (DCR) are trade-related investment measures (TRIMs) and are inconsistent with both the GATT and the TRIMs agreements.
DCR provides all solar developers who opt for locally made panels and modules a subsidy of up to Rs1 crore for every megawatt installed. This, the US argued, denied global players a level playing field.
The DCR measures do accord ''less favourable treatment'' within the meaning of GATT provision as well, the panel stated in its ruling.
The US trade representative's office called the ruling a significant victory that would hasten the spread of solar energy across the world and support clean-energy jobs in the United States.
India is expected to appeal against the ruling. The decision to move to WTO's appellate body would be taken after consulting the ministry of new and renewable energy, an official source said.
India has about three months' time to appeal in the appellate body.
The appellate body is a standing body of seven persons that hears appeals from reports issued by panels in disputes brought by WTO members. The body can uphold, modify or reverse the legal findings and conclusions of a panel, and the body's reports, once adopted by the Dispute Settlement Body, must be accepted by the parties to the dispute.
The United States complained to the WTO in 2013 about the Indian solar programme, which required that certain cells and modules be made in India, saying that it violated WTO rules on discriminating against imports. The United States said its solar exports to India had fallen by 90 per cent from 2011, when India imposed the rules.
The WTO ruling was repeatedly delayed as the two sides tried to negotiate a settlement, but the two sides failed to arrive at compromise that would have allowed India to subsidise state projects.
The claims brought by the United States concern domestic content requirements (DCR measures) imposed by India in the initial phases of India's ongoing National Solar Mission.
These requirements, which are imposed on solar power developers selling electricity to the government, concern solar cells and/or modules used to generate solar power.
The panel found that the discrimination relating to solar cells and modules under the DCR measures is not covered by the government procurement derogation in the GATT agreement. In particular, the panel found that the electricity purchased by the government is not in a ''competitive relationship'' with the solar cells and modules subject to discrimination under the DCR measures.
India argued that the DCR measures are justified under the general exception in provided in the GATT agreement, on the grounds that its lack of domestic manufacturing capacity in solar cells and modules, and/or the risk of a disruption in imports, makes these ''products in general or local short supply'' within the meaning of that provision.
However, the panel found that the terms ''products in general or local short supply'' refer to a situation in which the quantity of available supply of a product, from all sources, does not meet demand in a relevant geographical area or market.
The panel also found that the terms ''products in general or local short supply'' do not cover products at risk of becoming in short supply, and found that in any event India had not demonstrated the existence of any imminent risk of a short supply. The panel therefore found that India failed to demonstrate that the challenged measures are justified.