To avoid issues with the US at the WTO, the compulsory sourcing norm will only apply to power supplied to government agencies.
The mandatory norms, however, will be imposed only on that part of the 750-MW solar power production (earmarked for the second phase) targeted for supply to Government agencies. The remaining projects will not attract any sourcing restrictions , an official from the Ministry of New and Renewable Energy told Business Line.
The MNRE plans to come out with two separate tenders in the second phase —one with compulsory sourcing condition for equipment and one without.
“We have made an estimate of the power that is supplied to government agencies. Based on that, we will divide the power generation in the second phase into two parts,” the official said.
This has been done to avoid further trouble at the World Trade Organisation (WTO) where the US has already lodged a case against India for imposing the local sourcing mandate during the first phase of the Solar Mission. While the WTO rules do not permit mandatory local sourcing on the ground that it discriminates against foreign producers, Government agencies are exempt from these rules.
It is important for India to continue with some bit of local sourcing to encourage domestic manufacturers of solar modules and cells, who have been operating below capacity.
“Of the 750 MW of power production in the second phase, we plan to mandate local sourcing on only a part of it that we believe would be supplied to Government agencies for their internal use. The other part will not be subjected to any sourcing norms,” the official said.
The US filed a complaint with the Dispute Settlement Body of the WTO in February this year against the domestic content requirement in the Solar Mission which mandates that solar photovoltaic modules based on crystalline technology has to be sourced locally.
The US move is aimed at stopping India from extending these norms to solar thin films, which were chiefly supplied by US companies to India in the first phase, as it was exempt from local sourcing norms and was cheaper than modules.
“Not including thin-film in the local sourcing norms was an oversight which led to power producers choosing cheap imported thin films over modules. We want to correct this in the second phase,” the official said.
But the US should not have much to complain about this time round, as its companies would be free to supply solar cells, modules and thin films as part of the non-reserved project category.
Source: Hindu Business Line
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