This February, a World Trade Organisation dispute panel adjudged the National Solar Mission’s "domestic content requirement," or DCR measures—agreements to purchase solar electricity from power companies on the condition that certain shares of the cells and panels they use be of Indian provenance—to be illegal. In its ruling, the panel cited provisions in the General Agreement on Trade and Tariffs, or GATT, to which India is signatory, prohibiting member countries from giving preference to domestic products over imported ones.

This leaves the Indian government in a difficult position. Currently, indigenous solar modules are roughly a third more expensive than imported ones of comparable quality—and without DCRs power companies will naturally opt for these cheaper alternatives. Looking solely at the NSM’s targets for generation capacity, this is not a problem, as power companies can continue to increase capacity using only imported modules. But for domestic solar-technology manufacturers it could mean a massive decline, which in turn could rob India of many of the spin-off benefits—factory jobs, industrial investment, technological advancement, and potential future exports—that the burgeoning solar-power sector can offer. It is in the country’s interest to continue supporting the development of domestic solar technology, yet it cannot simply ignore the WTO ruling. Fortunately, there are ways to continue nurturing this sector within the confines of India’s WTO obligations. The article talks about this solution.