India is readying to defend its policy requiring companies to source local content for the national solar mission project, a rule that has triggered protests from the US and the EU.
The commerce department is talking to the ministry of new and renewable energy on how to argue its case should the dispute reach the World Trade Organisation. The ministry is responsible for executing the Jawahar Lal Nehru National Solar Mission, which was launched in 2010 to promote use of solar energy.
All solar mission project investors have to compulsorily use India-made solar modules and buy 30% of their inputs from within the country.
But the US and the EU have argued that the agreement on Trade Related Investment Measures (TRIMs) and certain provisions of the General Agreement Of Tariffs And Trade (GATT), the agreement that preceded the WTO, do not permit mandatory local sourcing.
“We are in talks with the ministry of new and renewable energy to strengthen our arguments in defence of the domestic sourcing clause. We have to be prepared in case a formal dispute is launched against our country,” a government official told ET.
Japan and the EU have already sought dispute settlement panels against Canada for a similar provision in its legislation to promote green energy, prompting India to take pre-emptive steps.
India has already argued the JNNSM programme does not violate WTO rules because GATT allows government agencies to source locally for specified purposes.
“Since public sector NTPC will buy solar power generated by the projects, India could argue that it actually amounts to government procurement. As India is not a part of the limited government procurement agreement of the WTO, it is not bound by any rules governing purchases made by government agencies,” a Delhi-based trade lawyer said.
Another line of argument being explored is that JNNSM’s domestic content requirement is not aimed at seeking an advantage over other countries and, therefore, it is not covered by the illustrative list of the agreement on TRIMs.
Although the US has not yet made any moves to drag India to the WTO, it has been lobbying hard to pressure the country into dropping the local content clause. “There is increasing concern about one recent action that has tilted the playing field (the solar mission) here in India away from the US businesses and other foreign firms,” US undersecretary for international trade Francisco J Sanchez had said at a meeting in New Delhi last November. “In clean technology, local content requirement explicitly discriminates against the imports.”