WTO ruling aside, India’s DCR was a badly designed policy tool

By Jasmeet Khurana, associate director, consulting, Bridge to India
Share on facebook
Share on twitter
Share on linkedin
Share on reddit
Share on email
India's DCR policed, aimed at stimulating domestic PV manufacturing, has been challenged by the WTO. Image: Tata Power Solar.

On 24th February 2016, the World Trade Organization (WTO) ruled against India – declaring Domestic Content Requirement (DCR) as an illegal policy for India’s solar allocations.

India has used DCR as a policy mechanism to support and promote domestic manufacturing. The government hoped that, in time, it would help create a domestic manufacturing base for 4-5GW of production capacity a year. However, it has only served to provide indirect subsidies to help some companies who might have otherwise perished in the global supply glut of 2012-13.

400MW of projects were completed under DCR category in 2015. Another 2GW of DCR capacity is in the pipeline for projects expected to be commissioned over 2016 and 2017. The DCR policy has allowed existing cell manufacturers such as IndoSolar, Tata Power Solar and Websol Energy to charge prices that were 10-15% higher than global prices.

DCR has been applicable only to central government allocations. As such allocations are coming to an end as announced by the Government of India – most of new capacity development is likely to come under state government or bilateral projects – DCR could not have been a long term support mechanism for the domestic manufacturers.

With the WTO ruling coming in, the existing pipeline of projects will provide a sufficient demand to sustain existing local manufacturers for the next couple of years. But that’s it. It would not have helped turn India into a thriving manufacturing hub for solar equipment. The country has essentially helped existing manufacturers survive and now we can just hope that they do upgrade, expand and become globally competitive.

While several large companies have been looking at setting up cell and module manufacturing capacity in India, DCR could not have been their primary driver to make that decision. Even if it was, they could not have set up their facilities quick enough to cater to a bulk of the DCR orders.

The Indian government has said that it is reviewing the WTO judgement and reserves a right to appeal. We believe that instead of continuing to fight over the WTO ruling, India should start working on fixing the fundamental issues that plague domestic manufacturing. Making cells and modules at a competitive price depends on scale, access to cheap capital, vertical integration with access to cheap and reliable energy and a level playing field against other Asian manufacturers (current tax and duty structure does not provide that).

If the long-term objective is to have a thriving domestic manufacturing industry, patchwork solutions such as DCR will not be able to achieve these objectives.

Read Next

May 24, 2022
South Korean conglomerate Hanwha Group has said it will invest US$3.3 billion in solar and wind technology and intends to create a solar R&D hub in Korea as part of a massive investment strategy focused on several industrial areas.
PV Tech Premium
May 19, 2022
PV Tech speaks to Qcells CEO Justin Lee about the manufacturer's recent solar manufacturing capacity expansion, its use of TOPCon as a 'stepping stone' to future cell technologies and its new clean energy strategy.
May 9, 2022
Indian independent power producer (IPP) Azure Power has appointed Harsh Shah as CEO, effective from 1 July, following the resignation of its previous CEO, Ranjit Gupta, last month.
May 6, 2022
Tata Power Solar has landed what it claims to be India’s largest single solar EPC order of 1GW for roughly INR5500 crore (US$715 million) from Indian state-owned utility SJVN Ltd.
May 4, 2022
Following the launch of its heterojunction module series in April, Carrie Xiao speaks to Risen Energy to get the inside track on the manufacturer’s technology approach and manufacturing plans as it backs HJT to deliver n-type efficiencies on a PERC budget
May 3, 2022
Solar polysilicon, wafer and cell prices have all risen once again in the past week as demand continued to outstrip supply, with COVID-19 lockdowns in China continuing to disrupt the value chain.

Subscribe to Newsletter

Upcoming Events

Solar Media Events
June 14, 2022
Napa, USA
Solar Media Events
October 4, 2022
New York, USA