India has received objection from WTO members over another of its decision regarding its solar power policy.

European Union was joined by Japan to criticize India’s decision to impose interim a safeguard duty on imported solar cells. The Indian government, which is still investigating whether to impose a safeguard duty on imported solar cells, had issued an order to impose a preliminary 70% safeguards duty. 

An EPC contractor challenged the order in a court and was awarded a stay for few weeks. That stay has now expired and legal proceedings will likely move forward soon. The government department investigating the matter has yet to produce a final report or order.

The 70% interim duty is not only being opposed by the WTO but the Indian government was also cautioned against such a move by its own Parliament. A committee in the Indian Parliament had warned the government not to impose such a high duty on solar imports as it may lead to a rise in tariffs and a slowdown in capacity addition. There are no signs that the government has heeded that advice.

On the WTO front it is surprising that the proposal to impose a safeguards duty was opposed by the EU and Japan. Neither of these countries have any major solar equipment exports to India. They are, however, a major source of funding to solar projects.

Earlier this year, while announcing a major debt funding agreement with an Indian bank, the President of the European Bank for Reconstruction and Development had also urged Indian not to impose such duties.

China, which supplies nearly 90% of the solar modules and cells used in India, warned the Indian government against levying any anti-dumping duties on solar equipment. The Indian government had recently prematurely ended an anti-dumping investigation at the request of the Indian Solar Manufacturers Association, but a fresh investigation is expected may be launched soon.

Earlier, India lost a major battle at the WTO when in September 2016 it was forced to terminate the Domestic Content Requirement (DCR) program. The program mandated project developers to use Indian-made solar modules. India’s Ministry for New & Renewable Energy was forced to issue a directive to all states not to auction any projects under the DCR program after India lost a legal challenge to objections raised by the United States.

Image courtesy Vikram Solar