China moves WTO against India over solar cells, modules and tech incentives

China filed a formal WTO dispute consultation request against India in December 2025, challenging India's tariff structure and domestic-preference policies f...

What Happened

China filed a formal WTO dispute consultation request against India in December 2025, challenging India's tariff structure and domestic-preference policies for solar cells, solar photovoltaic (PV) modules, and information technology goods.
The specific measures challenged include: India's customs duty (Basic Customs Duty, or BCD) on solar cells and modules, and the eligibility and incentive conditions under India's Production Linked Incentive (PLI) scheme for high-efficiency solar PV modules — particularly the local value addition (LVA) requirements.
China contends these measures are inconsistent with the WTO's General Agreement on Tariffs and Trade (GATT) 1994, the Agreement on Subsidies and Countervailing Measures (SCM Agreement), and the Agreement on Trade-Related Investment Measures (TRIMs Agreement).
The WTO subsequently agreed to establish a formal expert dispute panel to examine both the solar and automotive incentive complaints China has lodged against India.
India's Approved List of Models and Manufacturers (ALMM) List-II — which mandates that solar cells used in India must come from approved (predominantly domestic) manufacturers — is scheduled for mandatory enforcement from July 1, 2026.
The dispute is seen in the context of India's broader strategic shift toward domestic solar manufacturing to reduce dependence on Chinese PV components, which historically have dominated the Indian solar supply chain.

Static Topic Bridges

WTO Dispute Settlement Mechanism

The WTO's dispute settlement system is governed by the Dispute Settlement Understanding (DSU), agreed upon in 1994 as part of the Uruguay Round. It is the principal multilateral mechanism for resolving trade disagreements between member nations.

Disputes proceed in stages: (1) Consultations (60 days), (2) Panel establishment and proceedings (~12–18 months), (3) Appellate Body review (currently non-functional due to US blocking new appointments), and (4) Implementation and retaliation authorisation if needed.
The Appellate Body's paralysis since 2019 (caused by the US refusing to approve new members) has led to disputes stalling at the panel stage, reducing enforcement effectiveness.
The Agreement on Trade-Related Investment Measures (TRIMs) prohibits domestic-content requirements (DCRs) — requirements that investors use local goods or achieve local sourcing ratios — as inconsistent with GATT's national treatment principle.
The SCM Agreement regulates subsidies; "prohibited subsidies" include those explicitly tied to export performance or use of domestic over imported goods.

Connection to this news: India's PLI scheme conditions — which reward higher Local Value Addition — are precisely the type of measure TRIMs prohibits, making China's legal challenge technically substantive even if politically motivated.

India's Production Linked Incentive (PLI) Scheme for Solar PV

The PLI scheme for high-efficiency solar PV modules was launched in 2021 under the Ministry of New and Renewable Energy, with a total outlay of ₹24,000 crore (approximately USD 2.9 billion) across two tranches.

PLI-I (₹4,500 crore): Allocated in 2021; targets 10 GW of integrated solar PV manufacturing capacity.
PLI-II (₹19,500 crore): Announced in 2022; targets an additional 40 GW integrated capacity.
Incentives range from 4% to 7% of module sales value for five years, with higher LVA earning higher incentive rates — the "LVA tiers" are the primary element China has challenged.
Integrated manufacturing covers the full supply chain: polysilicon → ingots/wafers → cells → modules.
India's solar cell manufacturing capacity remains far below module assembly capacity; ALMM List-II mandating domestic cells is intended to close this gap.

Connection to this news: The PLI scheme is central to India's goal of manufacturing 500 GW of renewable energy capacity by 2030; the WTO challenge directly threatens the legal basis of its most ambitious industrial policy tool in the clean energy sector.

India's Solar Tariff Architecture: BCD and ALMM

India currently imposes a 40% Basic Customs Duty (BCD) on imported solar modules and a 25% BCD on solar cells (introduced in 2022 to replace a lower Safeguard Duty), alongside a mandate to source from the ALMM.

The BCD replaced the 25% Safeguard Duty that had itself been imposed in 2018 following an injury determination for domestic manufacturers.
ALMM (Approved List of Models and Manufacturers): A registry of approved module and cell suppliers; procurement under government-funded projects must source from ALMM-listed entities only.
ALMM List-I (modules) has been in effect; List-II (cells) was repeatedly postponed and is now set for July 1, 2026 enforcement.
WTO rules under GATT Article III (National Treatment) prohibit treating imported goods less favourably than "like" domestic goods once they have cleared customs — the core of China's legal claim.

Connection to this news: India faces a structural dilemma: the BCD and ALMM are essential to building domestic manufacturing scale, but they may be legally indefensible under WTO commitments India has already made.

India-China Solar Supply Chain Interdependence

Despite the strategic intent to reduce dependence, India's solar sector remains heavily reliant on Chinese upstream inputs. China dominates global production of polysilicon, wafers, and solar cells — the upstream components in the PV value chain.

China accounted for approximately 80–85% of global solar cell production capacity as of 2024.
India imports approximately 80–90% of its solar cells from China, even as module assembly has been indigenised.
Indian solar project costs rose 15–20% after the BCD was imposed in 2022, as domestic alternatives were not yet price-competitive.
The global solar industry depends on a China-centric supply chain that took 15+ years and state-backed scaling to build; replicating it outside China within a few years involves structural cost disadvantages.

Connection to this news: China's WTO challenge exposes a tension at the heart of India's green energy transition — the country needs cheap Chinese components to achieve affordable solar targets, yet strategic autonomy demands reducing that dependence.

Key Facts & Data

China's WTO consultation request filed: December 2025 (circulated December 23, 2025)
WTO agreements invoked: GATT 1994, SCM Agreement, TRIMs Agreement
India's BCD on solar modules: 40%; on solar cells: 25%
PLI scheme outlay (solar PV): ₹24,000 crore (~USD 2.9 billion), two tranches
PLI incentive rates: 4%–7% of module sales value for 5 years
ALMM List-II (cells) mandatory from: July 1, 2026
India's renewable energy target: 500 GW by 2030
China's share of global solar cell production: ~80–85%