India to vigorously defend incentive schemes at WTO

India has said that its incentive programme for local manufacturing of renewable and automotive technology sectors is fully consistent with its obligations under the World Trade Organisation (WTO) agreements and will defend them vigorously, an official said.

On China’s request the Dispute Settlement Body (DSB) agreed to establish a panel to adjudicate a complaint against the Production Linked Incentive (PLI) scheme for Advanced Chemistry Cell (ACC) Battery Storage, PLI for Automobile and Auto Component Industry and the Scheme to Promote Manufacturing of Electric Passenger Cars in India (EV Passenger Cars Scheme).

The dispute was first brought to WTO by China in October last year saying that these schemes are contingent upon the use of domestic over imported goods or otherwise and discriminate against goods of Chinese origin.

The first step in WTO’s dispute settlement mechanism is bilateral consultations and both sides did enter into discussions on the matter. Despite extensive engagement in good-faith consultations, during which India provided detailed explanations and clarifications, China went ahead with the request for establishment of the panel, officials said.

As consultations failed to deliver a breakthrough, China sought establishment of the panel. The first attempt on January 27 was blocked by India. In the second attempt the DSB conceded on China’s request.

“India is of the view that China’s request for panel establishment reflects an incorrect understanding of both the design and operation of the measures at issue,” officials said.

“India will participate constructively in the panel proceedings and will vigorously defend its measures. India remains confident that the panel will find the measures to be consistent with WTO rules,” they said.

At Tuesday’s meeting India got the backing of the US, which said that the dispute was an attempt to distract from China’s own non-market policies and excess capacity, which harm global supply chains and undermine industrial development in developing countries.

At the meeting of the DSB, countries like Canada, European Union, Japan, Korea, UK, US Russia and Singapore reserved their third-party rights to participate in the proceedings of the DSB.

The Request for Consultation is the first and most crucial stage for dispute resolution at the WTO. If consultations fail, the complaining country can request the establishment of a panel to probe the complaint. After hearing all the sides the panel issues its recommendations that are put before the Dispute Settlement Body (DSB). If the findings of the panel are adopted then countries in the dispute have to abide by the ruling, They also have an option to go before the Appellate body.

The Appellate Body – the final court of appeal – has been non-functional since 2019. This is because the US has blocked appointment of new judges to this body. So even after the disputes are decided by the DSB, the appeals cannot be taken up. This results in all disputes ending in a void.