India's EV Support Schemes Face WTO Challenge, But Consequences Minimal Due to Dispute Resolution Body Inactivity

India's flagship electric vehicle (EV) and renewable energy (RE) expansion schemes are facing a challenge from China at the World Trade Organisation (WTO). China has alleged that these schemes are discriminatory against Chinese products and violate various multilateral agreements. However, experts believe that the consequences of this challenge will be minimal, as the WTO's dispute settlement body has been non-functional since December 2019. This means that the Chinese challenge, although a formal request for consultations, is unlikely to lead to any tangible outcome.

Key Takeaways:

• The Chinese government has challenged India's Production Linked Incentive (PLI) schemes for auto and auto components, Advance Cell Chemistry (ACC) battery storage, and the scheme to promote manufacturing of electric passenger cars in India at the WTO.
• The Chinese delegation at the WTO had communicated to the Indian side seeking consultations on the schemes to promote EVs and RE on October 15, which was followed by a notification to all members on Monday.
• The request for consultations is the first step in the dispute resolution mechanism of the WTO and gives the parties an opportunity to discuss the matter and find a satisfactory solution without proceeding further.
• Even if the dispute goes to the panel and India gets an adverse ruling, its EV support programs will be safe due to the inactivity of the WTO's appellate body since December 2019.
• India's EV Passenger Cars Scheme was announced in March 2024 to attract global EV manufacturing investment, allowing imports of a limited number of cars at reduced customs duties of 15% provided applicants establish manufacturing facilities in India within three years.
• The PLI ACC Scheme targets the establishment of a cumulative domestic manufacturing capacity of 50 gigawatt-hours for ACC batteries, with an additional 5 GWh reserved for niche, higher-performance ACC technologies.

Sources:

• World Trade Organisation (WTO)

Statistics:

• 15%: The reduced customs duties for importing a limited number of cars under India's EV Passenger Cars Scheme.
• 3 years: The time frame within which applicants must establish manufacturing facilities in India under the EV Passenger Cars Scheme.
• ₹4,150 crore: The minimum investment required under the EV Passenger Cars Scheme.
• 50 GWh: The cumulative domestic manufacturing capacity target for ACC batteries under the PLI ACC Scheme.
• 5 GWh: The reserved capacity for niche, higher-performance ACC technologies under the PLI ACC Scheme.
• 10 GWh: The earmarked capacity for Grid Scale Stationary Storage (GSSS) applications under the PLI ACC Scheme.