WTO ruling continues to haunt solar industry

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New Delhi | March 16, 2018 5:20 AM

The removal of domestic content requirement (DCR) after a World Trade Organization (WTO) ruling, triggered by a petition filed by the US, continues to hound the Indian solar industry. Renewable consultancy firm Bridge to India noted that of 718 MW solar tenders cancelled in Q3FY18, most were engineering, procurement and construction (EPC) tenders with DCR stipulation.

world trade organisation, WTO, WTO ruling, solar power, solar industryThe WTO, in September 2016, went against India’s DCR programme. India had sought a reasonable time period to accommodate ongoing projects which had already commenced under DCR.

The removal of domestic content requirement (DCR) after a World Trade Organization (WTO) ruling, triggered by a petition filed by the US, continues to hound the Indian solar industry. Renewable consultancy firm Bridge to India noted that of 718 MW solar tenders cancelled in Q3FY18, most were engineering, procurement and construction (EPC) tenders with DCR stipulation. It said 70 MW of DCR projects are pending commissioning, but their fate is not clear because of the WTO ruling. Through DCR, the government of India had mandated that a certain portion of solar capacity addition would be reserved for domestically sourced modules. NTPC’s 250 MW project under DCR category, awarded to Azure Power (at `3.14/unit), had to be cancelled because of the WTO ruling. Even as the country is ramping up the solar power capacity to meet the target of having 100 GW of solar capacity by 2022, domestic solar manufacturers are already under a lot of pressure as about 88% of all module requirement in India is met through imports. The current solar module-making capacity in the country is about 8.5 GW.

Vikram Solar, which has a 1 GW solar module manufacturing capacity, believes that DCR was a suitable means to support the domestic industry. “Due to DCR compliance, domestic module manufacturing capacity was 50-60%. After the WTO mandate, it will be difficult for us to survive and it will significantly decline further,” Karunesh Chaturvedi, corporate affairs head, Vikram Solar, told FE. Solar panels worth $42 billion is expected to be imported within 2022. To support the solar manufacturing sector, the government is planning to come out with a scheme that would tie up solar project development with domestic manufacturing. Renewable energy minister RK Singh had said the Centre plans to award development contracts for 20 GW of government-owned projects to companies having equipment manufacturing units in the country. As the scheme would be earmarked solely for government-owned projects, it would be insulated against WTO anti-competition norms.

The feedback of the industry on this proposal is awaited. The WTO, in September 2016, went against India’s DCR programme. India had sought a reasonable time period to accommodate ongoing projects which had already commenced under DCR. However, the US wanted India to scrap all the tenders awarded under the latter’s national solar mission and float them afresh, sources had told FE earlier. India made it clear that it could comply with the WTO ruling only prospectively for the sake of natural justice. The final date of ending the DCR scheme was set as December 2017.

The US had accused that India was not abiding by the WTO mandates – an allegation which was strongly refuted by India. According to an official estimate, about 500 MW of solar projects (with DCR stipulation), which were in the pipeline, had already been affected by the 2016 WTO ruling.

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