Row over the Jawaharlal Nehru Solar Mission

The Jawaharlal Nehru Solar Mission (JNSM) has been criticised by the United States and the European Union for its policy which requires use of local content for the project. The mission will be executed by the Ministry of New and Renewable Energy, to promote the use of solar energy.

Though local content is used as a part of several investment policies, it is not in accordance with the General Agreement on Tariffs and Trade(GATT) and the Agreement on Trade Related Investment Measures (TRIMs) as it does not keep the foreign investors on the same footing as the home investors. Local content requirement is mostly placed by a nation to boost its domestic industry.

The JNSM requires solar mission investors to use Indian manufactured solar modules and source 30% of the inputs from within the country. Such a requirement may have trade-distorting effect and can attract provisions of two key agreements within the structure of the WTO. It is likely to violate Article 2.1 of TRIMs as it falls within the category of a trade related investment measure that extends more favourable treatment to domestic products in comparison to imports by stipulating preferred use of products of domestic origin from any domestic source. (Infringement of National Treatment Principle)

Furthermore, appears to be contradictory with Article III: 4 of GATT (National Treatment) as it creates a 'disincentive' against purchase of imported products.

It can be argued that since the solar power generated by the project will be bought by NTPC, a public sector company; it will fall within the purview of government procurement and since India is not a member of the Government Procurement Agreement, it may not be bound by the multilateral agreement which sets the rules for purchases made by government agencies. However, any purchase by NTPC will not be limited to governmental purposes and will involve commercial resale or use in production of goods for commercial sale, thereby attracting the provision of national treatment, pursuant to Article III:8 (a) of GATT.

During the Uruguay Round of negotiations relating to TRIMs, India was one of the few developing countries which had taken a decision to abolish the local content requirements even before the conclusion of the Uruguay Round. Hence, India may find it tricky to prolong its policy of local content in the Solar Mission should her trading partners contradict and decide to raise a dispute at the WTO.