India to Dispute U.S. Solar WTO Complaint as Ties Fray

India will dispute a U.S. complaint at the World Trade Organization that it unlawfully restricts imports of solar equipment, saying American panel makers such as First Solar Inc. (FSLR) have access to most of its market.

“We will give a reply,” Tarun Kapoor, joint secretary at the Ministry of New and Renewable Energy, said in a phone interview. “Most solar projects in India are allowed to import. We have sufficient quantities open for competition.”

India required about 10 percent of new photovoltaic projects permitted in the past year to use domestically made solar cells and modules. The rule violates international trade law and raises the cost of solar energy, U.S. Trade Representative Michael Froman said yesterday in a statement.

It was the second complaint in a year lodged by the U.S. against what it called India’s “unfair barrier to U.S. exports” of solar components. The action deepens a global solar trade spat spanning three continents that has prompted the European Union to curb imports of Chinese panels, China to impose tariffs on U.S. polysilicon, and U.S. to levy duties on Chinese cells.

The latest dispute also threatens to further strain India-U.S. ties frayed by the arrest of an Indian diplomat on visa-fraud charges involving her babysitter that triggered protests in the South Asian nation. A phone call and e-mail seeking comment from spokesmen at the U.S. Embassy in Delhi didn’t receive a response.

“WTO-Compliant”

“Our current policy is WTO-compliant,” Commerce Secretary Rajeev Kher told reporters at a press conference in New Delhi. He said India would participate in consultations if the U.S. initiates them.

More than half of India’s 2,180 megawatts of solar capacity was built under programs run by state governments, with no import restrictions. The 950 megawatts built under a central government program faced some local content requirements. Developers including the Mahindra Group, were able to import equipment from Tempe, Arizona-based First Solar thanks to a loophole for thin-film technology. First Solar is the world’s biggest maker of thin-film modules.

As of August, First Solar ranked as India’s top panel supplier with 22 percent of the market, more than triple the share of the next biggest, Canadian Solar Inc., according to Bridge to India Energy Pvt., a New Delhi-based solar consultant. India isn’t a major market for any other U.S. solar cell or module maker, said Tobias Engelmeier, Bridge to India’s founder.

‘Stable Policy’

“The U.S. complaint only helps one single American company,” said Engelmeier.

First Solar said that restricting imports “slows down overall industry growth due to increased costs,” in an e-mailed response to questions. “India’s long-term interests will be better served by creating a stable policy environment that supports the broader growth of the industry value chain.”

The U.S. may be positioning itself for bigger stakes ahead, said Ashish Sethia, India head for Bloomberg New Energy Finance.

“India has plans to develop some of the biggest solar projects in the world,” including a proposed 4-gigawatt park by a group of state-owned companies, Sethia said. In other countries, solar manufacturers tend to chase scattered orders for smaller, rooftop installations whereas India is focusing on larger, utility-scale projects. “That makes it all the more important for manufacturers to guard their interests in these large but relatively fewer projects,” Sethia said.

February Auction

By the end of this month, India plans to award 750 megawatts of solar capacity in its first national auction since 2011. Half of that capacity will be required to use domestically made cells and modules. This time, there’s no exemption for thin-film imports.

Forcing projects to buy local equipment raises costs and may compromise quality, said Rahul Gupta, director at Rays Power Experts Pvt., a solar plant contractor. The rules will also limit access to U.S. trade finance, which helped lower borrowing costs for projects buying First Solar panels.

“First Solar got a huge market share because the low cost of finance was very important,” Gupta said. In India, clean energy projects without preferential finance face interest rates of about 13 percent.

Anti-Dumping Case

The U.S. filed a similar complaint last February for solar projects awarded in earlier government auctions. India defended its position in a response to the WTO, and the U.S. didn’t pursue the case, Kapoor said.

India is separately investigating claims from its domestic solar manufacturers including Indosolar Ltd. (ISLR) that competitors from the U.S., China, Malaysia, Europe and Japan dumped solar cells, or sold them below cost. Any decision to impose import duties would be made independently of the WTO case, Kapoor said.

Low-cost finance from the U.S. Export-Import Bank to support First Solar sales to India has “skewed the penetration of thin-film in India,” said H.Rahul Gupta, managing director of Indosolar Ltd., in an e-mail.

To contact the reporter on this story: Natalie Obiko Pearson in New Delhi at npearson7@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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