The United States plans to take India to the World Trade Organisation over the subsidies it gives to its solar power industry, an Indian government source said on Monday, a step that could further strain relations between the countries.
Late night (a little after noon on Monday in Washington), US Trade Representative Michael Froman, was quoted as saying that the challenge involves the second phase of India's solar programme.
In Delhi, an Indian official said Washington had already informed New Delhi of the planned action.
The US filed a challenge with the WTO last February over elements of India's national solar programme, which it said discriminates against foreign solar products.
It was not immediately clear how Monday's announcement relates to that action.
The US trade office said last February that India's solar programme appears to discriminate against the use of US solar equipment by requiring solar energy producers to use Indian-manufactured solar cells and modules and by offering subsidies to those developers for using domestic equipment instead of imports.
India hit back at the US accusations in April, asking Washington to justify its own incentives offered to US companies that use local labour and products in renewable energy and water projects.
An Indian trade ministry official accused the US of using the planned WTO action as a "pressure tactic".
"As the US is a big economy, they think they can arm-twist India to get concessions for entering into (India's) expanding market, in manufacturing and retail," the official said.
India has argued its solar policies are legal under WTO government procurement rules that permit countries to exempt projects from non-discrimination obligations.
The trade spat between the two allies follows the recent arrest and strip search of a female Indian diplomat in New York in connection with visa fraud charges.
The arrest sparked fury in India, prompted retaliatory measures against US diplomats there and plunged US-India relations to their lowest point since India tested a nuclear device in 1998.
India is widely perceived by lawmakers and business groups in Washington as a trade offender, with US companies unhappy about imports of everything from shrimp to steel pipes they say threaten US jobs.
There are 14 past or current WTO cases between India and the US, whose bilateral trade measures about $63.7 billion a year.
Washington slapped duties on US imports of some solar energy products from China in 2012 after finding companies were "dumping" the products in the US market at low prices.
US trade officials are considering whether to expand those duties after complaints that Chinese manufacturers have sidestepped the duties by shifting production to Taiwan. A preliminary decision by the US
International Trade Commission regarding the Chinese products is due on Friday.