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India, US to thrash out solar procurement issue

Washington claims India's National Solar Mission's procurement policy discriminates against US solar equipment makers

Anindita Dey  |  Mumbai 

India may consult with the United States on the Centre's procurement policy on solar equipment, to dispel charges of discrimination in favour of domestic manufacturers of solar panels and modules for its National Solar Mission programme.

According to the US, India’s programme appears to discriminate against US solar equipment makers by requiring solar energy producers to use Indian-made solar cells and modules and by offering subsidies to those developers for using domestic equipment instead of imports. Thus, the forced localisation requirements of India’s national solar programme restrict India’s market to US imports. Australia has also joined the US in seeking consultations with India in this matter.

According to official sources in Ministry of Commerce, as per General Agreement on Trade in Services, government procurement for government purposes are exempt from agreements on most favoured nation, market access and national treatment (articles II, XVI and XVII). National Solar Mission is a government programme under the Jawahar Lal Nehru National Solar Mission (JNNSM) of Ministry of New and renewable energy. Thus the programme does not attract any norms which are applicable for commercial sale and resale, said officials.

The consultation will start soon as the 30 days' period is over since US filed the application for consultation in February 6, 2013.

According to the United States, India requires solar power developers to purchase solar cells and solar modules of domestic origin in order to participate in NSM and maintain power purchase agreements with National thermal power Company under the mission. By doing so, solar power developers receive benefits and advantages including subsidies through guaranteed long-term tariff for electricity contingent to their purchase and use for solar cells and modules from domestic companies.

This has affected US export of solar panels and modules to India, since the JNNSM programme requires India to develop solar photovoltaic projects employing silicon technology and use solar modules manufactured in India. The programme specifically requires expanding domestic sourcing further to solar thin film technologies, which currently comprise the majority of US solar exports to India. US has stated that India’s national solar policy violate General Agreement on Tariffs and Trade which prohibits measures that discriminate in favour of domestically produced goods versus imports. Besides it also violates WTO agreement on trade related investment measures and WTO agreement on subsidies and countervailing measures which prohibits conditioning of subsidies on use of domestic over imported goods.

United States has been vehemently against India government subsidies and has even asked India to notify its subsidy schemes including export promotion measures like market access schemes and focus marked schemes etc. Last year, India moved the World Trade Organisation (WTO) over US decision to categorise 50-odd export promotion schemes as subsidies. Speaking to Business Standard, officials then termed the US move "absurd" as it had dubbed every export scheme as subsidy. This attracted double duty -- of anti-dumping (AD) as well as CVD (countervailing duty) on every export.

Officials say the problem lies with the US government's "extremely broad" definition of CVD. It includes all export incentives given by the central or any state governments under any scheme, the Special Economic Zones Act and any rule on procurement from public sector units or loans from public sector banks.

First Published: Wed, March 13 2013. 15:43 IST