The domestic content requirement (DCR) in India’s flagship solar programme is facing mounting pressure after talks to resolve US opposition to the policy broke down and it was separately branded a “failure”.
The DCR policy, which applies to 750MW of PV projects in the initial phase of the second round of the Jawaharlal Nehru National Solar Mission (JNNSM II), has been designed to give a boost to local PV manufacturers.
But the policy has been mired in controversy and prompted the US to seek recourse to the World Trade Organization over claims it prevents US manufacturers from accessing India’s potentially huge solar market.
According to a report in the Hindu Business Line newspaper, formal talks at the WTO last week drew to a close with the two countries failing to reach agreement over the issue.
It is now unclear whether the US will mount a full-scale trade war with India. According to an unnamed Indian government official quoted by Business Line, the US “is certainly trying to intimidate us so that the domestic sourcing clause is not included in the second batch of projects in the second phase of the mission”.
According to the source, it seems likely the US will not show its hand until details of the second batch of JNNSM II projects are made public. This will not happen until after India’s general election, which has just got underway.
The US first lodged a complaint with the WTO last year then filed a second one earlier this year after it emerged that, although constrained to just 750MW of the 1500MW first batch of JNNSM II, the DCR had been expanded to include thin-film PV.
India has argued that as the power from DCR projects is bought by a government-owned agency, they fall under government procurement rules, not those of the WTO.
Meanwhile, earlier this week, in the latest issue of its monthly India Solar Compass report, consultancy Bridge to India’s said the DCR had been a “failure”. The organisation claimed the policy had cost “in excess” of INR10 million/MW (US$160,000) without local manufacturers gaining “anything meaningful for the long term”.
Its comments come following a warning at the end of last month by industry body the National Solar Energy Federation of India (NSEFI) that the DCR policy had made solar projects unviable.
NSEFI said manufacturers had raised the price of locally manufactured PV cells by US$0.06-0.08 per watt, making it impossible for developers to execute projects using domestically sourced components.