How India’s Buy-Local Rules Jeopardize Their National Solar Program

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India wants to become a solar-powered super country. They have plans to improve their solar capacity 30-fold by 2020. One of the biggest plans is to promote the use of domestic solar panels and make them affordable for consumers. However, India’s buy-local rules could jeopardize their ability to do so because of World Trade Organization (WTO) complaints from the U.S.

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India’s National Solar Program

India’s mission to deploy a national solar program started in January 2010. The country has relied too heavily on coal for energy and wanted to transition their energy reliance to renewable sources — a worthy cause that the U.S. supports. India has already grown their solar capacity by more than 2,000 megawatts and is transitioning to Phase II of the program where an additional 3,000 megawatts will be added.

India has a $306 million budget for their solar program and is looking through bids to fulfill their Phase II solar manufacturing needs. They want half of their capacity to be built in India, and the other half can be sourced from anywhere else in the world. This was the same way that Phase I was implemented.

The WTO Complaint Against India

The U.S. filed a complaint against India on February 10, 2015 with the WTO. They claimed that India is unfairly boosting the development of their solar manufacturing industry because of their “buy-local” rules. This is not the first complaint that the U.S. has filed against India. Last year, there was a complaint about India’s buy-local rules for Phase I of their solar program.

India’s goal to rely on more renewable energy sounds like something that the U.S. should be supporting, but according to their WTO complaint, the “buy local” portion of  India’s solar program is not fair. It compromises all U.S. imports of solar products. According to Article III:4 of the General Agreement on Tariffs and Trade, the buy-local rule is not allowed in countries that belong to the WTO.

India Moves Forward with Buy-Local Rule Anyway

Despite the WTO complaint, India has decided to move forward with their buy-local rule for Phase II of their solar program. Under this rule, 50 percent of their 3,000 MW bidding process would be up for grabs by local suppliers in India. Last year, the U.S. decided not to move forward with any lawsuit over India’s buy local rules during Phase I of their solar program. India is hoping for the same outcome during Phase II. They see no problem in supporting their local economy first before opening up the bid process to the rest of the world. However, India could face fines and delays that could jeopardize what they are trying to accomplish with their solar program.

India argues that the U.S. has no claim because the bidding process is not being completed by government procurement, but rather it is state run. However, the U.S. claims that a bid process of this scale for a government “mission” needs to abide by the WTO rules. If the U.S. wants to maintain friendly relationships with India, they must strongly consider whether to push the argument.

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