In the ongoing saga of the World Trade Organization (WTO) solar Domestic Content Requirement (DCR) case between the U.S. and India, the U.S. has communicated to the WTO that India failed to comply with the rulings and recommendations made by the WTO Dispute Settlement Body (DBS).

The U.S. has requested DBS authorization to suspend concessions or other obligations with India at an annual level based on a formula proportionate to the trade effects caused on U.S. interests by India’s failure to comply.

At the moment, it is unclear what specific part of the ruling India failed to comply with. Mercom was not able to get a response from the Office of the U.S. Trade Representative on the matter. However, Mercom’s source in the Ministry of Commerce and Trade, said, “We are aware of the development. We have our facts ready. There have been no DCR tenders of late, and Captive Consumption Projects (CCP) don’t come under the WTO norms.”

Background

In 2013, the U.S. requested consultations with India through the WTO regarding India’s DCR program, which was part of the country’s National Solar Mission which mandated that only domestically manufactured solar cells and modules could be used to build solar projects auctioned under DCR category. The case was eventually referred to the DSB in 2014.  A final report was issued by the WTO in February 2016.

India appealed the decision in April 2016, but WTO upheld its earlier ruling in October 2016 and agreed with the U.S. that India’s DCR program discriminated against American and other imported solar products, like cells and modules, in breach of international trade rules.

In June 2017, the U.S. and India agreed that a reasonable period to implement the DSB’s recommendations would be 14 months and set December 14, 2017 as the final date to end the DCR program.

In November 2016, the Central Electricity Authority (CEA) requested utilities to ensure that they follow an advisory that mandated the use of domestic materials and equipment in government projects. Utilities in various states were found flouting the CEA’s advisory guidelines for domestic competitive bidding.

DCR tenders slowed after the WTO ruling and some tenders several tenders were canceled. Following a DCR tender in August, a government official told Mercom, “We can issue DCR tenders up to December 14, 2017 – we are not running afoul of any regulations.”

Initially after the WTO ruling, Indian government officials said DCR projects that were already auctioned or under development would not be affected by the ruling. Later, the interpretation of the ruling was that it is okay to auction DCR projects and continue as before (even though the WTO ruled against it) as long as auctions were held before December 14, 2017.

After the announcement of a 200 MW DCR project in August, an official at SECI had told Mercom, “wherever the government is investing it can mandate DCR category and it will not be in violation of any trade rule.” The SECI official also said that if you see, most DCR tenders are for CPSUs which are government funded units not private parties.

In India, DCR category projects were implemented to provide a set market for local solar component manufacturers. To comply with WTO norms, the Indian government is now planning a 12 GW Central Public Sector Unit (CPSU) DCR program, under which locally manufactured components will be utilized to develop projects for captive consumption by CPSUs. This is expected to comply with WTO norms as these captive projects will not feed power into the grid for sale.  But this notice adds some uncertainty into the mix with the planned 12 GW DCR program until further clarification is issued.

Mercom previously reported that the DCR policy was always at risk of running into conflict with WTO rules, but the government kept pushing it to protect the fledgling solar industry.

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