Solar WTO Dispute: It’s getting hot

By Hansa Sinha

In a predictable sequence of events, India has decided to appeal the WTO ruling in solar case. At the heart of the issue is a government scheme by the name of Jawaharlal Nehru National Solar Mission (JNNSM). You and I know that there is a wave of renewable energy utilisation encouragement that has the gripped the world especially in the wake of global warming and related threats. You have wind you utilize that India has sun, a lot of sun. In fact wikipedia tells me that solar energy available to India far exceeds the energy output of all the fossil fuel energy reserves in India. So therefore, it is no surprise that India decided to count its blessings and formed this scheme under which all the solar panels or modules that are being set up in India need to sourced from Indian manufacturers. Also, it offered certain subsidy benefits to those utilising the domestic sources. The government was encouraging and backing the solar industry simply because the industry was almost non existent and still in nascent stages.

This grabbed a lot of eyeballs in the world. At first the domestic industry tried to utilize trade remedy measures by putting a petition for anti dumping duty on the solar cells, panels and modules being imported from countries such as USA, China PR , Chinese Taipei and Malaysia. Although the investigation resulted in recommendation of anti dumping duties on these countries by the Ministry of Commerce, it was not followed up by actual imposition by the Ministry of  Finance and therefore the recommendation rendered no effect as such.

Around the same time USA complained at WTO saying that the JNNSM scheme was unduly favouring the domestic manufacturers and was prejudicing the interests of importers. Their complaint alleged that the support given by JNNSM was inconsistent with the Trade Related Investment Measures Agreement to which both the countries are signatories. A three member dispute settlement panel was set up at WTO in 2014. The panel was to give it’s report by August, 2015, which was delayed as the report came in February 2016. The report of the Panel finds the domestic content requirements under JNNSM to be inconsistent. Further it said that these measures gave ‘less favourable treatment’ and that they were not even justified under the general exception clause of Article XX(j). In short, the panel report was in against India on all accounts.

India will of course prefer an appeal now against the ruling. However, what is interesting that although US has preferred this appeal, there are fairly low imports from USA to India in this sector. The real threat is actually faced by imports from China. China has reserved third party rights like many other countries in this case and is therefore choosing to mark present in this scenario. Although it is difficult to predict India’s win at the appellate stage. However, a compromise of sorts cannot be ruled out yet. Fingers crossed!

Read the panel report and all the background details here.

Thank you for reading!

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