U.S. trade action over Indian solar subsidies: source

By Frank Jack Daniel

NEW DELHI (Reuters) - The United States plans to take India to the World Trade Organisation over subsidies New Delhi gives to its solar power industry, an Indian government source said on Monday, a step that could further strain relations between the countries.

There was no immediate comment from U.S. Trade Representative Michael Froman, who is due to make a trade enforcement announcement linked to India at 2 p.m. (1900 GMT) on Monday. The Indian official said Washington had informed New Delhi of the trade action it planned to take.

The United States filed a challenge with the WTO last February over elements of India's national solar program, which it said discriminates against foreign solar products in violation of a core global trade rule.

It was not immediately clear how Monday's scheduled announcement relates to that action.

India's solar program, launched in 2010, appears to discriminate against U.S. solar equipment by requiring solar energy producers to use Indian-manufactured solar cells and modules and by offering subsidies to those developers for using domestic equipment instead of imports, the U.S. trade office said last February.

Last April, India hit back at the U.S. accusations, suggesting Washington was also guilty of the banned practices. It asked Washington to justify incentives offered to U.S. companies to use local labour and products in renewable energy and water projects, in filings to the WTO.

The trade spat comes on the heels of a recent case involving an Indian diplomat in New York that seriously damaged India-U.S. ties. The diplomat was arrested in connection with visa fraud and strip-searched, sparking fury in India and prompting retaliatory measures against U.S. diplomats there.

India is widely perceived by lawmakers and business groups in Washington as a serial trade offender, with U.S. companies unhappy about imports of everything from shrimp to steel pipes they say threaten U.S. jobs.

Both countries have taken disputes to the World Trade Organization on several occasions.

(Reporting by Peter Cooney in Washington and Manoj Kumar in New Delhi; Additional reporting by Krista Hughes and David Brunnstrom in Washington; Editing by Frank Jack Daniel, John Stonestreet, Ross Colvin and Meredith Mazzilli)