With the goal of establishing India as a global leader in solar energy, the Ministry of New and Renewable Energy (hereinafter referred to as “MNRE”) launched The Jawaharlal Nehru National Solar Mission (hereinafter referred to as “JNNSM”) in 2010 with the goal of achieving the set target of grid-connected solar power capacity of 20,000 MW by 2022 in three (3) phases (first phase upto 2012-13, second phase from 2013 to 2017 and the third phase from 2017 to 2022).

Domestic content requirement (DCR) was introduced in the Jawaharlal Nehru National Solar Mission at the beginning of 2010 in an effort to establish a healthy and robust indigenous manufacturing base and to raise India’s reputation as a solar hub. It is about using locally made solar modules and cells for solar projects in India established under the JNNSM.

It is important to note that India is a member of the World Trade Organization (WTO) and will be bound by its agreements, which include the General Agreement on Tariffs and Trade (GATT), the Agreement on Trade Related Investment Measures (TRIMS), and the Agreement on Subsidies and Countervailing Measures (ASCM).

What exactly is this mission?

  • The Jawaharlal Nehru National Solar Mission (the “JNNSM”), which India launched in 2010, aims to generate 100,000 MW of grid-connected solar power capacity by 2022.
  • The standard method includes the government engaging into long-term power purchase agreements (“PPAs”) with solar power developers (“SPDs”) in which the government commits to purchase solar electricity generated by a certain SPD.
  • SPDs participating in stages I and II were subject to a required domestic content requirement pib (known as a “DCR”).

Why did the United States complain against India in the World Trade Organization?

  • National treatment is a core GATT/WTO concept that forbids discrimination between imported and domestically produced commodities in terms of internal taxes or other government regulation.
  • Domestic content requirement pib breaches the WTO’s National Treatment principle. This principle forbids discrimination in internal taxes or other government regulation between imported and domestically produced commodities.

Is there any way to get around this Principle?

  • Yes, public procurement is available.
  • The World Trade Organization accepts the idea of public procurement. “Government agencies frequently acquire products and services using public funds and for public purposes to perform their responsibilities and, in certain cases, to achieve additional domestic policy goals, such as the promotion of specific local industrial sectors or social groups,” it says. These kind of transactions are commonly referred to as government/public procurement.”

So, why did India lose?

The United States claimed that public procurement is electricity, while India has placed limits on solar cells.

Is the situation exaggerated?

  • Yes, the United States lodged a complaint against DCR during Phase II of this mission.
  • In essence, the entire battle at WTO was over 1,075 MW, or 37% of the overall solar objective in the second phase.

The DCR has sparked less attention.

  • According to current DCR bidding, 225 MW of DCR projects were offered under NSM Phase-II Batch-4, with just 25 MW auctioned.
  • With inexpensive Chinese modules entering the market, Chinese manufacturers seized the majority of the worldwide market at the expense of other producers, particularly Indians; developers no longer needed to acquire pricey local panels.
  • It is believed that Indian non DCR modules generally cost 10-15% more than Chinese modules. Auctions are becoming increasingly competitive, and it appears that these projects would be viable only if Chinese panel costs continued to decline every quarter.