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

July 22, 2021
REC Silicon said it is continuing to work towards a restart of operations at its Moses Lake polysilicon production facility in the US, with the company buoyed by recent policy initiatives unveiled by US President Joe Biden.
July 20, 2021
It is “unhealthy” for China to dominate solar manufacturing and production bases outside of the country are necessary to reduce the risk of supply chain disruptions, an Indian government official has said.
July 20, 2021
Vikram Solar has completed a new 1.3GW solar module manufacturing facility in Tamil Nadu, India, taking its total manufacturing output to 2.5GW.
July 13, 2021
Solar PV capacity in Asia Pacific could triple to 1,500GW by 2030, with China driving deployment and Indonesia set to be the region’s fastest-growing market, according to Wood Mackenzie.
PV Tech Premium
July 1, 2021
Reporting its Q1 2021 results last week, JinkoSolar provided a snapshot of the pressures solar module manufacturers have faced in the opening exchanges of the year by way of spiralling material and freight costs. Liam Stoker analyses how the company has responded, laying the groundwork for a return to normality towards the end of the year.
PV Tech Premium
June 30, 2021
Jolywood is expecting to face stiff competition from other module manufacturers in the n-type solar field, predicting a major manufacturing ramp and investment over the next two years.

Subscribe to Newsletter

Upcoming Events

Solar Media Events, Upcoming Webinars
July 29, 2021
Upcoming Webinars
August 19, 2021
At 9am (PT) | 6pm (CEST)
Solar Media Events
August 25, 2021
Solar Media Events, Upcoming Webinars
October 6, 2021