India, US nearer to solution on solar panel dispute

India and the United States are nearer to a solution for their three-year-old trade dispute over domestic content requirement in India's solar power programme, as the two sides try to keep alive the strong bilateral relations and the international solar alliance.

Reports quoting diplomatic sources said there is mutual understanding on several issues such as government sourcing from local manufacturers, but the US is disputing government imposing domestic content rules on private companies.

India holds that most of the solar projects under dispute are being bid out by government entities and should be accepted as state projects. But the US argues that these projects are actually being set up by private companies that also buy the solar modules and equipment, while the government guarantees power purchase from the plants.

The US trade negotiators say that just because the government buys power a solar plant does not become a state project.

But the two sides are looking at the issue in a mature way and have delayed a World Trade Organisation (WTO) ruling on the dispute.

WTO's dispute settlement panel had last year ruled that India's domestic content requirements under its solar power programme were inconsistent with the international norms (See: WTO rules against India in solar panel dispute with US: report).

Yet, there is some convergence of views on several issues between India and the US, mainly on the principle that governments can have domestic content clause if these are WTO-compliant and limited to state projects.

The two sides are now engaged in last-mile discussion to define the solar projects that can be considered as state projects.

The dispute began in February 2013, when the US moved the WTO against India's domestic content requirement (DCR) component in Phase II of the government's Jawaharlal Nehru National Solar Mission, saying the rules violated three separate agreements reached at WTO, to which India was a signatory.

DCR provides all solar developers who opt for locally made panels and modules a subsidy of up to Rs1 crore for every megawatt installed. This, the US argued, denied global players a level playing field.

In August 2015, a dispute resolution panel set up by WTO ruled against India. India had appealed against the ruling, but in end-January, there were reports that the ministries of commerce and new and renewable energy had agreed to withdraw the DCR option for private companies.

Meanwhile, the news of India agreeing to withhold DCR norms for private solar power plant developers has worried domestic solar power producers and manufacturers of solar panels who benefit from the subsidy.