India Solar Rules Burn U.S. .

NEW DELHI—U.S. Commerce Secretary Gary Locke said he conveyed a "message of great concern" to Indian officials Monday about the country's restrictions on imports of solar-power technology, rules that are making it difficult for U.S. firms to enter one of the world's fastest-growing solar-energy markets.

The complaint highlights how an area targeted for cooperation between the two countries has instead turned into a source of continuing frustration for the U.S.

India is planning to add 20,000 megawatts of solar power to its grid by 2020 as it seeks to step up electricity capacity to meet the demands of a growing economy while developing clean-energy sources. The program will disburse about $20 billion in subsidies to power plant developers in coming years. But an Indian regulation that goes into effect in April will bar those firms from importing any foreign-made solar panels—the technology that converts sunlight into electricity.

Foreign solar-panel makers can only get a piece of the action if they set up local manufacturing plants in India through joint ventures, something few U.S. companies have expressed interest in.

"We're very concerned," Mr. Locke said in an interview with The Wall Street Journal. "We think that's the wrong way to go. We think there are different ways in which you might try to achieve the objective of supporting more manufacturing within India."

He said the U.S. is proposing alternatives like tax incentives or subsidies that would encourage U.S. and other foreign firms to set up solar-panel production facilities in India without shutting out their exports.

Mr. Locke said U.S. officials have been voicing their concerns to Indian officials about the solar policy in recent months, including on President Barack Obama's visit here in November. At that time, the Indian policy allowed some imports of foreign-made panels. Beginning in April, no imports will be allowed, so the issue is becoming more urgent.

U.S. and foreign companies are running into a range of regulatory and market-access hurdles in India. Retailers including Wal-Mart Stores Inc. are still barred from setting up stores because years of debate over relaxing that sector's ban on foreign direct investment haven't yet produced any action. Foreign banks are struggling to expand in India because each new branch they open requires approval by the government. Tech companies including BlackBerry-maker Research in Motion Ltd and Google Inc. have faced stepped-up scrutiny from regulators over their content and services. The government is considering a proposal to make it harder for foreign pharmaceutical firms to buy Indian companies.

Mr. Locke, the first U.S. cabinet minister to visit India since Mr. Obama came here and called for a deepening of the U.S.-India trade relationship, is here to promote exports in sensitive areas such as civil nuclear energy, civil aviation, defense and homeland security. Overall U.S. goods exports to India quadrupled to more than $16.4 billion between 2002 and 2009 and are growing quickly.

But Mr. Locke said India should continue the process of economic liberalization it started in 1991 by reducing tariffs on a range of goods, from pistachios to medical devices, and allowing greater foreign investment in sectors such as retail and infrastructure. "Even though India has made tremendous strides to open up its economy, there is much more work that's left to be done," he said in a speech to a business conference.

Indian Commerce Minister Anand Sharma, addressing the conference alongside Mr. Locke after the two officials met, said making quick policy changes is difficult. "There is a broad-based consensus which is required in a democracy as you evolve new policies," he said.

The solar-energy spat between the U.S. and India is especially important, because the sector has been touted in the past by both sides as a promising area of collaboration. A spokesman for India's Commerce Ministry confirmed Mr. Locke raised the solar-energy issue in talks Monday with Mr. Sharma but declined to comment on whether India has any plans to tweak its policy.

Mr. Locke said India's policy will cut off the country's solar-power plant developers from using state-of-the-art solar-panel technologies. "Governments all around the world in combating climate change and becoming more energy independent really need to embrace the very best technology," he said in the interview. "You certainly don't want to be adopting technology that's obsolete or breaking down or is difficult to operate and maintain a few years from now."

U.S. firms such as First Solar Inc. and SunPower Corp. are among the world's largest suppliers of solar panels, along with Chinese and European firms. India has two major solar-panel producers, Moser Baer India Ltd. and Tata BP Solar India Ltd., a joint venture of Tata Power Co. and BP Solar International Inc. Those firms will get the lion's share of orders from India's national solar program. Spokesmen for the Indian firms had no immediate comment. Tata-BP has said previously that it produces highly efficient solar panels and that the import restrictions will help jumpstart India's solar technology industry.

In an interview last December, Indian Commerce Secretary Rahul Khullar— the top bureaucrat within the Commerce Ministry—said there was little chance that India would reverse its policy, and accused the U.S. of a double standard, saying it hasn't objected as forcefully to similar import restrictions in China's wind power sector.

Mr. Locke said China isn't getting any special treatment. The U.S. has pressed successfully for China to remove barriers that were preventing foreign firms from getting involved in wind projects, he said. "Our position has been consistent," he said.

Source : online.wsj.com