If news reports are to be believed, the coming years may well lead to an all-out “trade war” between the East and West. Though the battle lines are drawn, the motivations, interests and intent of the potential “warriors” will seal the fate.

While the scope of the “warfare” is hard to predict, solar cells are likely to be at the heart of it.

Solar cells are facing numerous trade remedy measures across various jurisdictions. And India is no exception.

In India, the Directorate General of Anti-dumping & Allied Duties (DGAD) initiated the first investigation into alleged dumping of solar cells in India back in 2012. The said investigation was initiated based on a complaint filed by Solar Manufacturers Association, which alleged that manufacturers from China, Taiwan, Malaysia and the USA were dumping solar cells in India.

Upon investigation, the DGAD found that solar cells were subject to dumping in India from the subject countries. It also found that such dumping was causing injury to the domestic industry in India especially in view of India’s energy requirements and the disparity between the global manufacturing capacity for solar cells and that of Indian manufacturers. Consequently, in 2014, the DGAD recommended to the Government of India that anti-dumping duties be imposed on the import of solar cells from the subject countries.

However, the Government of India chose not to accept the recommendations of the DGAD, reportedly because the domestic solar equipment manufacturing capacity was insufficient to meet the government’s ambitious targets for power generation from green energy sources. Additionally, as per reports, the increase in the cost of solar power production and the effect on various pending projects also played on the Government’s mind.

Around the same time, India’s ambitious solar power projects became a subject of dispute at the World Trade Organization (WTO). India faced allegations initiated by USA before Dispute Settlement Body for violation of its international trade obligations for imposing domestic content requirements (DCR) under the Jawaharlal Nehru National Solar Mission (NSM) for solar cells and solar modules (DS 456). Both the Panel and the Appellate Body ruled against India. Thus, India had to undertake the phasing out of DCR in solar projects by December 2017.

With such entrenched roots, solar cells were bound to re-surface in India’s trade policy. And they did.

In 2017, the DGAD initiated another investigation into the dumping of solar cells based on a complaint filed by the Indian Solar Manufacturers Association. This time the target of the investigation were China, Taiwan and Malaysia.

The investigation led to great anxiety within the Indian industry, especially among the solar power producers. An association of such power producers also approached the Delhi High Court [1] hoping to receive a clarification as to whether an imposition of anti-dumping duty would be covered within the ambit of “change in law” so that they could shift the higher costs of power production (on account of solar cells) onto the purchasers. But to no avail.

The DGAD heard relevant parties in December 2017 and continued its investigation well into 2018 when it examined the written submissions and rejoinders of relevant parties.

However, before the DGAD could circulate the disclosure statement (prior to issuing final findings recommending duty to the Government of India), the complainant (Indian Solar Manufacturers Association), withdrew its application.

The stated reason for the withdrawal was that post-initiation of the investigation, the extent of dumping and injury had ‘aggravated sharply’. The DGAD did not find merit in the stated reasons for the withdrawal and noted that injury is bound to undergo some change during the course of investigation.

Despite not being convinced with the reasons for withdrawal, the DGAD was constrained to end the said anti-dumping investigation, as the Anti-Dumping rules do not grant DGAD any discretion to continue an investigation once the domestic industry files a written request seeking its termination.

However, this is unlikely to be the end of the matter. Significantly, as per reports, the India Solar Manufacturers Association has vowed to file a fresh complaint with the DGAD bringing to light the increased dumping and further injury being caused to the domestic industry in India.

Additionally, the issue is complicated further by the fact that the USA has challenged India’s compliance with the undertaking given by it before the WTO.

Notably, the Director General of Safeguards in India has also initiated an investigation (at the behest of the Indian domestic industry) seeking to impose a safeguard duty on the import of solar cells[2].

As the above facts foretell, the multi-pronged trade dispute regarding solar cells (both within India and overseas) is likely to be a long story and the termination order by DGAD is more likely to be a comma than a full stop.

* The author was assisted by Anu Monga, Director – Competition Practice

[1] W.P.(C) 10362/2017

[2] Stayed due to interim orders from High Court of Madras which was continuing until order dated 9 March 2018.