The World Trade Organization has passed judgement against India’s solar policy that had sought to promote the use of domestically manufactured solar power equipment.
Delivering a judgement on the complaint filed by the United States, the World Trade Organization (WTO) ruled that domestic content requirements under India’s National Solar Mission are illegal and violated international trade rules. India had set strict conditions on developers to use India-made solar panels during the first phase of the National Solar Mission, which saw an addition of around 570 MW of utility-scale solar photovoltaic power projects to the country’s development pipeline.
Developers using crystalline solar panels were required to use only Indian modules, while developers using thin-film modules had the option of using Indian or imported modules.
In the second phase, initial auctions had equal capacities reserved for projects that would be based on imported modules and those using domestic modules. While the auctions had no government intervention, developers who pledged to use imported modules inevitably quoted lower bids for capital cost support from the government.
Little Impact Expected
The new Indian Government that came to power last year significantly increased the capacity addition targets under the National Solar Mission. India now plans to have 100 GW solar power capacity installed by 2022.
The government also decided against levying anti-dumping duties on imported modules. While the domestic modules manufacturers had been calling upon the government to give them some relief from the flood of cheap Chinese and American modules, the government not only decided against anti-dumping duties but also reduced the share of solar power capacity required to be set up using domestic modules. For example, the government plans to add 2 GW worth of solar power capacity under phase 2 batch 3 of the National Solar Mission, with the capacity that must be installed using domestic modules has been restricted to just 250 MW.
A huge majority of the capacity to be auctioned by the central government will not have any restrictions on the use of panels. However, it is widely expected that all capacity to be auctioned by entities owned by the government, including government-owned power generating company NTPC Limited, the Indian Railways, and the Indian armed forces, would have stricter requirements for use of India-made modules — something which is allowed under WTO regulations.