What the WTO panel did not decide on solar panels

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The recent World Trade Organisation (WTO) panel decision that certain domestic content requirements (DCRs) in the Jawaharlal Nehru National Solar Mission (JNNSM) violate India’s WTO obligations has kicked up a storm on whether the WTO unduly encroaches upon India’s sovereign policy choices, such as pertaining to the environment? One major reason for the debate is that this is the second blow to the country’s regulatory measures at the WTO in less than a year. In June 2015, the WTO decided that India’s ban on import of US poultry violated its WTO obligations.Before we look at the policy issues involved in the solar case, it is necessary to provide a quick background.Under the JNNSM, the government enters into long-term electricity purchase contracts with eligible ‘solar power developers’, assuring them guaranteed prices for a period of 25 years. The government then sells the electricity to distribution companies who, in turn, sell it to consumers. The key stated objective of the programme is “to promote ecologically-sustainable growth while addressing India’s energy security challenge.” Only those solar power developers who source certain types of solar cells and modules domestically are eligible. It was this DCR in the JNNSM, and not the JNNSM itself, that was challenged as WTO-inconsistent by the US, and ruled to be so by the WTO panel.

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