The World Trade Organisation (WTO) has set up a panel to resolve the dispute raised by India against the US with regard to the policies of eight American states in the renewable energy sector.
India had alleged that the domestic content requirement norms imposed by these eight US states are inconsistent with global trade rules.
As both the countries failed to resolve the issue in the bilateral consultation process, India had sought formation of dispute resolution panel.
"The dispute settlement body of WTO has agreed to establish a panel. It will soon start the hearing, a government official said.
On September 9, 2016, India had requested consultation with the US under the dispute settlement system of WTO regarding alleged domestic content requirements and subsidies provided by these states in the renewable energy sector.
Under the norms of domestic content requirements, it is mandatory upon domestic companies to source a portion of input from local markets' products.
India had alleged that the measures of those American states are inconsistent with WTO's Agreement on Trade-Related Investment Measures and the Agreement on Subsidies and Countervailing Measures.
They are inconsistent because they provide less favourable treatment to imported products vis-a-vis domestic products, and because the subsidies are contingent on the use of domestic over imported goods, India had stated in its application to WTO.
The eight states are Washington, California, Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota.
The request for consultation is the first step under the Dispute Settlement System of WTO. Consultations give the parties an opportunity to discuss the matter and find a satisfactory solution without proceeding further with litigation.
After 60 days, if consultations fail to resolve the dispute, the complainant may request adjudication by a panel.
Issues are cropping up in renewable energy area as the sector holds huge investment potential for businesses. With India focusing on this segment, companies in developed countries want to tap this market.