Pushes India To Lift Solar Import Restrictions

U.S. government officials and companies are pushing India to remove its restrictions on imports of solar technology, regulations they say threaten to cut American firms out of a promising market as India embarks on a major rollout of solar power.

On a recent trip here, U.S. President Barack Obama noted the potential for the U.S. and India to deepen collaboration in alternative energy. India's solar program, which aims to spend tens of billions of dollars to subsidize the generation of 20,000 megawatts of power by 2022--one of the most ambitious solar projects in the world--was expected to jump-start that collaboration.

Instead, the initiative has spawned what is fast becoming a trade dispute. India announced Tuesday it has selected 30 companies to receive government subsidies for generating solar power. But those firms are barred for the next several months from importing certain types of solar panels, which convert sunlight into electricity, and will face a complete import ban starting in April.

U.S. firms such as First Solar Inc. and SunPower Corp. are among the world's largest suppliers of solar panels, along with Chinese companies such as Suntech Power Holdings Co. and European firms like German's Q-Cells SE. Senior U.S. government officials have raised concerns about the trade restrictions with their Indian counterparts and have urged India to relax them, people familiar with the discussions say. Top Indian officials say they have no plans to relax the current restrictions or hold off on the upcoming full ban.

A spokesman for the office of the U.S. Trade Representative said that "limiting access to high-quality solar equipment that is available outside India is likely to only frustrate" India's plans to boost solar power production and "discourage further investors from developing solar projects in India."

Gauri Singh, an official in charge of the program in India's Ministry of New and Renewable Energy, said India plans to spend $20 billion in the first few years of the program, and it is natural that it wants the benefits to accrue at home. "You don't put in that kind of money unless you can say it's going to bring manufacturing into the country and jobs into the country," Ms. Singh said.

She added that under the policy, foreign companies are allowed to set up manufacturing facilities in India through joint ventures.

Some U.S. and Indian solar-power developers say they believe the rules are aimed at protecting two Indian companies, Moser Baer India Ltd. and Tata BP Solar India Ltd., a joint venture of Tata Power Co. and BP Solar International Inc., which, they argue, don't produce a wide enough range of highly efficient solar panels for power generators.

Bryan Ashley, co-chairman of a task force that represents U.S. solar companies, and chief marketing officer of Suniva Inc., a Norcross, Ga., photovoltaic-cell maker, said the import restrictions will cut off Indian solar companies from advanced technologies. "This has been pushed by some in the Indian industry to give themselves a monopoly," he said.

Sindoor Mittal, who is running solar projects for Welspun Energy Ltd., an Indian firm that is planning to build plants with 500 megawatts of capacity in coming years and that was selected to receive government subsidies, said some advanced technologies, such as so-called thin-film solar cells, aren't available in India.

"India is nowhere in the list of global manufacturing leaders" in solar technology, she said.

China, which aims to generate 20% of its power from renewable sources by 2020, initially had similar local manufacturing requirements in its wind power sector. They were eventually repealed following loud complaints from Western firms, but by that time China had developed a thriving domestic wind power industry. China has also thrown its weight behind the creation of a domestic solar power industry, offering Chinese companies cheap credit through state-owned banks to launch solar projects. China also recently announced subsidies for solar-equipment purchases and solar power generation.

Rahul Khullar, secretary of India's Ministry of Commerce and Industry, accuses the U.S. of a double standard. He said American firms didn't lash out at China with the same intensity that they are now criticizing India and that many U.S. firms agreed to set up local manufacturing facilities in China. "When China says there must be local content requirements, then it's not an issue," he said. "When India says it is a requirement, then it becomes an issue."

Some people in the solar industry say the Indian import restrictions are already distorting the market for solar panels. "The local guys are already jacking up pricing," said Inderpreet Wadhwa, founder of Azure Power, which also will receive subsidies and plans to have 100 megawatts of solar power generation capacity by 2013.

K. Subramanya, chief executive of Tata BP Solar, said the company hasn't raised its prices. He said the import restrictions are justified because one goal of the solar program is "to create a whole new solar ecosystem generating employment, entrepreneurship and technical innovations." He said Indian firms already make highly efficient products.

Moser Baer didn't respond to a request for comment.

Even critics of the trade restrictions laud India for setting up the program to increase its now negligible production of solar power. The goal is to help the country move away from its reliance on coal, which fuels more than half India's 167,000 megawatts of electricity output. Like China, India has said it will invest in cleaner energy but doesn't want to accept a cap on carbon emissions.

Besides their concerns about the import restrictions, solar companies must also assuage fears of lenders and investors who worry their solar power plants won't be economically sustainable. The Indian government initially planned to purchase solar power from generating companies for a subsidized rate of about 40 cents per unit--a price many entrepreneurs say would be enough to make a healthy profit.

But when about 400 companies expressed interest in getting the subsidized rate, the government held an auction to select firms based on which offered the lowest prices. The rates quoted by the 30 winning bidders announced Tuesday aren't public, but people involved in the auction say the highest price was 28 cents per unit.