India's solar industry suffered a setback on Friday, when it lost its appeal at the World Trade Organisation in a dispute over solar power.
India failed to overturn a US complaint that New Delhi had discriminated against importers in the Indian solar power sector.
The appellate body of the WTO upheld an earlier ruling that India violated global trade rules by imposing mandatory local content requirements on solar power developers.
The earlier panel said India had favoured domestic products over imported products, in violation of the national treatment provisions under the General Agreement on Tariffs and Trade (GATT) 1994.
In 2013, a settlement panel of WTO ruled in favour of the US terming the requirement a violation of norms for fair trade.
But India argued that the panel had failed to consider that solar cells and modules are indistinguishable from solar power generation and therefore, it is not necessary to consider these two products as inputs for solar power generation.
The solar tariff has fallen below Rs 4 per unit in the latest auctions, probably among the lowest in the world.
The low tariff provides India with a global business opportunity. It can provide cheaper solar energy while giving a push to domestic manufacturers through domestic content requirement.
But with the unfavourable WTO ruling, India will now be expected to bring its laws into compliance with the WTO rules.