ONE of the key issues that US President Barack Obama is expected to take up with Indian Prime Minister Narendra Modi during his current visit is the long-standing dispute between the countries on the question of American supplies of equipment for solar power plants.

The US is annoyed with India for discouraging its producers of solar power equipment — including photo-voltaic cells and modules used in solar plants — from supplying to power producers here by imposing restrictions on imports.

Last year the US complained to the World Trade Organisation (WTO) about India’s domestic content requirement (DCR) under its Jawaharlal Nehru National Solar Mission, claiming that it violated WTO norms relating to national treatment principle and the agreement on trade-related investment measures.

Consultations were held in the US between the two countries in 2013 and 2014 under the WTO’s dispute settlement mechanism, but the talks failed. The world trade body last year set up a dispute settlement panel to examine the US complaint against India.

Though ties between the US and India have improved significantly after the BJP-led National Democratic Alliance (NDA) government came to power last May, they have remained tetchy over the solar power equipment issue.

In fact, with the Modi government aggressively pushing its ‘Make in India’ programme — especially at the ongoing World Economic Forum meet in Davos, Switzerland — the American solar power industry fears that it would lose out on billions of dollars in business in India.

The Indian solar industry lobby is also fiercely opposed to the government making any concessions to the Americans. The Indian Solar Power Producers Association wants the government to insist that all modules be procured from domestic manufacturers.

The industry accuses the US of dumping outdated technology on India and says the US government subsidises its industry, ensuring they are able to export cheap products.

While the earlier solar power mission — formulated by the United Progressive Alliance government — envisaged that India’s solar power capacity would go up to 20,000MW by 2020, Modi has set up a much more ambitious target of 100,000MW of solar energy by 2022. The Prime Minister also wants American — and other international — companies to bring in investments worth more than $100bn into the renewable energy sector in India over the next seven years to meet the target.

But he wants US manufacturers to ‘make in India,’ to generate employment and boost India’s manufacturing base.

John Kerry, the US Secretary of State, is also believed to have raised the issue of Indian restrictions on American exporters of solar power equipment when he participated at the Vibrant Gujarat summit earlier this month. India is keen that the two countries sign a cooperation agreement on renewable energy during Obama’s current visit, but the US wants changes in India’s laws relating to sourcing of equipment from the US companies.

RENEWABLE energy accounts for a negligible share of India’s current installed power generation capacity of 255,000MW. India’s wind energy capacity is a little more than 20,000MW and solar energy is a mere 3,000MW.

While the government is pushing aggressively with its programme to boost solar energy capacity to 100,000MW by 2020, it also wants wind energy capacities to expand to 60,000MW in just seven years. Another $50bn would be needed for building the infrastructure for transmission and distribution of renewable energy.

Finance minister Arun Jaitley, who will be presenting his maiden, full-fledged budget next month, is expected to announce a slew of incentives for the renewable energy sector, including possible tax holidays and concessional duties for procuring equipment. Last year, in his interim budget, Jaitley more than doubled the allocation to the ministry of new and renewable energy.

Just days before the Obama visit, Modi also presided over the reconstituted Prime Minister’s Council on Climate Change, where he reiterated India’s demand — made at the Lima climate change talks last year — for a shift from ‘carbon credit’ to ‘green credit.’ India wants a change in global climate change talks, where the emphasis is usually on emission cuts; Modi wants the focus to shift to climate adaptation, including using green energy (such as solar and wind) and improving efficiencies.

Modi wants cooperation between emerging economies, especially those that have an abundance of sunlight, in pressuring the developed world at climate change talks. At the Vibrant Gujarat summit, which saw world leaders including Ban Ki-moon, the UN Secretary-General, and Kerry among others attending the high-profile event, the UN chief was taken to a solar energy showpiece of the state government.

The UN chief inaugurated a ‘canal-top’ solar energy plant in the state and gushed about the project. “I saw more than glittering panels,” he said. “I saw the future of India and the future of our world. I saw India’s bright creativity, ingenuity and cutting-edge technology.”

The canal-top solar project has multiple advantages: besides generating about 10MW of power, it will be built atop a 3.6km-long irrigation canal (with almost 35,000 solar panels mounted on steel scaffolding), saving investments in land and the complexities of land acquisition.

One of the major problems that discourage international businesses from investing in the country relates to the acquisition of land. The new land acquisition act that was introduced by the UPA government last year has made it virtually impossible for infrastructure projects to get substantial land. Renewable energy projects — both solar and wind — require vast tracts of land.

The canal-top project also prevents evaporation of water. The ministry of new and renewable energy now plans to raise the solar energy capacity — from electricity generated from solar photo-voltaic panels mounted on canals in other parts of the country — to 100MW in two years.

The Indian government is also considering offshore wind projects to be put up in the sea to avoid complex land acquisition procedures.

Published in Dawn, Economic & Business, January 26th , 2015

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