India has lodged a complaint against the United States with the World Trade Organization (WTO) accusing it of favouring its domestic solar industry through subsidies, three years after the US got a similar subsidy stuck off from the national solar program.
This is the first complaint against the US’ domestic clean energy policies and officials in New Delhi say more would be filed to expose subsidies that hinder “fair” competition in violation of WTO rules prohibiting such largesse.
The TRIMs Agreement under WTO calls for treatment of imported products “no less favourable” than the ones produced domestically in terms of trade and distribution.
The commerce ministry in the complaint said that incentives provided to solar companies in eight American states - Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota - were in violation of national treatment and other provisions of the WTO.
The California solar incentive program prescribes manufacturing of photovoltaic modules and solar power equipment within the limits of the City of Los Angeles. Other states have replicated the California module to boost domestic solar industry which was hit by cheaper solar photovoltaic from China.
India said sellable renewable energy credits was being offered to companies for each megawatt hour of power generated provides the equipment used in manufactured in these states. In addition, the workforce should be a resident of these states.
“This distorts the level playing field for companies,” a senior government official said, explaining that most Indian companies will not be eligible to compete in these states.
As a first step, the US will have to respond to the complaint filed on September 9 within 30 days and after that India can call for an establishment of a dispute settlement plan if the two sides fail to amicably resolve the issue.
The complaint is, however, a tit-for-tat action from India after the US complained against 33% domestic content requirement in the solar photovoltaic projects funded under the Jawaharlal Nehru National Solar Mission.
In 2013, a settlement panel of WTO ruled in favour of the US terming the requirement a violation of norms for fair trade. The programme provides a guaranteed rate of return for a period of 25 years through a tariff fixed through auction.
The solar tariff has fallen below Rs 4 per unit in the latest auctions, probably among the lowest in the world.
The low tariff provides India with a business opportunity in the global market as it can provide cheaper solar energy while giving a push to domestic manufacturers through domestic content requirement.
“We can be global players in the solar market if we have a strong domestic market and for that, we need a favourable WTO ruling,” an official, who was not willing to be quoted, said.