In another potential blow to India-US ties after the Khobragade affair, US Monday challenged India's domestic content requirements in Phase II of India's National Solar Mission (NSM).
"These domestic content requirements discriminate against US exports by requiring solar power developers to use Indian-manufactured equipment instead of US equipment," said US Trade Representative (USTR) Mike Froman.
Announcing the "trade enforcement action" against India, Froman said it has requested World Trade Organisation (WTO) dispute settlement consultations with India on the issue.
"These unfair requirements are against WTO rules, and we are standing up today for the rights of American workers and businesses," he said. "We also take this action in support of the rapid global deployment of renewable energy."
"These types of 'localisation' measures not only are an unfair barrier to US exports, but also raise the cost of solar energy, hindering deployment of solar energy around the world, including in India," he added.
In October 2013, India's cabinet approved measures governing the implementation of Phase II of the NSM.
For solar projects under Phase II, India is again imposing domestic content requirements, under which solar power developers must use Indian-manufactured solar cells and modules instead of US or other imported equipment, USTR said.
Moreover, the Phase II domestic content requirements have been expanded to cover thin film technology, which was exempt from such requirements under Phase I, USTR said.
As thin film currently comprises the majority of US solar product exports to India, these domestic content requirements are likely to cause even greater harm to US producers than under Phase I, it said.
A request for consultations is the first step in the WTO dispute settlement process, and consultations are intended to help parties find a solution at this stage.
Under WTO rules, if the matter is not resolved through consultations within 60 days of the request, the US states may ask the WTO to establish a dispute settlement panel, USTR said.
The announcement came days after The US Chamber of Commerce Friday asked the USTR to designate India a Priority Foreign Country "in order to strengthen engagement with India to address the rapidly deteriorating intellectual property environment in this market".
In seeking for India the classification given to the worst offenders of intellectual property rights (IPR), the chamber said it was highlighting "India as a country with particular challenges with respect to intellectual property protections".
"Because India has not shown a record of engagement on these issues and the environment has deteriorated significantly since last year, we are now recommending that India be designated a Priority Foreign Country," it said.
The chamber cited what it called "specific policy examples across a range of industry sectors which are affecting the IP community in India and causing concerns throughout the business community".