The trade war slowly makes its way into India. Indian manufacturers have lodged a complaint against the Chinese on charges of dumping modules at unacceptable prices as well. Madhavan Nampoothiri of RESolve Energy Consultants elaborates.
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Solar Trade wars – Next stop India?
Trade tensions between different countries over the subject of unfair trade practices to help the domestic solar industry have been escalating over the past several months. One the one hand, there is the issue of dumping of PV modules. While the US slapped anti-dumping penalties over some of the Chinese firms, EU will begin its investigations if it feels that there is a clear case for it. As a retaliatory measure, China is investigating similar charges against US manufacturers.In India, the domestic PV manufacturers have lodged a complaint against Chinese manufacturers about dumping of modules.
On the other hand, the issue of Domestic Content Requirement (DCR) in some of the countries is causing trade tensions. Japan, EU and USA had complained to the World Trade Organisation (WTO) against the Canadian province Ontario’s mandate for using at least 60% of domestic content for projects to qualify for its Feed-in-Tariff(FiT) scheme. The hearing on this complaint is going on in Geneva, Switzerland.
India, which also has aDCR, appears to be the next destination for trade disputes. The Indian daily, Economic Times, recently reported that US, EU and Japan have been pressurizing the Indian government to remove the DCR clause its Jawaharlal Nehru National Solar Mission (JNNSM).The Phase 1 of the JNNSM had a DCR clause which mandated the use of Indian made PV cells and modules for PV projects allotted under the mission. Thin Film PV technologies were exempt from this mandate. The Ministry of New and Renewable Energy (MNRE), which administers the JNNSM programme, is deliberating onthe possibility of extending the DCR clause to the Phase 2 of the mission.
US has been a vocal critic of the DCR in the JNNSM and had raised this issue in the past, and in late March2012, US accused India of violating its obligation as a WTO member, arguing that the DCR was against the principles of General Agreement on Tariffs and Trade (GATT) as well as Agreement on Trade Related Investment Measures (TRIMs). It is alleged that the DCR infringes upon some key agreements within the structure of the WTO including
• Article 2.1 of TRIMs – stipulating the use of domestically manufactured products and equipment thereby favouring domestic manufacturers and indirectly restricting imports which may infringe the National Treatment principle
• Article III: 4 of GATT – creating ‘disincentive’ against purchase of imported products
• Article XI: 1 of GATT – quantitative restriction on importation
In response, India defended its DCR saying that the requirement would continue as the capacity additions came under the scenario of procurement by the Government of India which was outside the WTO regulations. It is to be noted that India is not a signatory to the Government Procurement Agreement. Thus the argument stands to reason that since the procurement procedures under JNNSM need not conform to the regulations specified under WTO agreements as the purchases are made by the government through NTPC VidyutVyapar Nigam (NVVN) which is a state entity.
Further to this response, the players in the US solar industry urged their government to take up the issue formally at the WTO with the US basedSolar Energy Industries Association (SEIA) reiterating the claims that the DCR was a violation of India’s WTO obligations.
The interesting aspect is whether DCR has any impact at all. JNNSM phase 1 Batch 1had over 50% of the projects opting for importing thin film modules and this percentage is likely to increase in the Phase 1, Batch 2. Moreover, the Gujarat policy, under which more than 600 MW of the capacity addition has taken place(more than double than that under the MNRE sponsored programmes), has no DCR thereby creating a bigger market for imported modules.
The questions that await an answer are
a. whether the MNRE will continue with the DCR since it hasn’t been very effective and also due to the pressure from its trade partners like US, EU and Japan and
b. if MNRE goes ahead with the DCR, whether the US and the other partners will lodge a formal complaint with WTO.
The answers to these questions will perhaps be known by the end of this year. Procurement by the Government of India which was outside the WTO regulations. It is to be noted that India is not a signatory to the Government Procurement Agreement. Thus the argument stands to reason that since the procurement procedures under JNNSM need not conform to the regulations specified under WTO agreements as the purchases are made by the government through NTPC VidyutVyapar Nigam (NVVN) which is a state entity.
Further to this response, the players in the US solar industry urged their government to take up the issue formally at the WTO with the US basedSolar Energy Industries Association (SEIA) reiterating the claims that the DCR was a violation of India’s WTO obligations.
The interesting aspect is whether DCR has any impact at all. JNNSM phase 1 Batch 1had over 50% of the projects opting for importing thin film modules and this percentage is likely to increase in the Phase 1, Batch 2. Moreover, the Gujarat policy, under which more than 600 MW of the capacity addition has taken place(more than double than that under the MNRE sponsored programmes), has no DCR thereby creating a bigger market for imported modules.
The questions that await an answer are
a. whether the MNRE will continue with the DCR since it hasn’t been very effective and also due to the pressure from its trade partners like US, EU and Japan and
b. if MNRE goes ahead with the DCR, whether the US and the other partners will lodge a formal complaint with WTO.
The answers to these questions will perhaps be known by the end of this year.