The United States Department of Commerce announced a preliminary countervailing duty (CVD) of 126 percent on solar cell imports from India on February 24, 2026, following a complaint filed by the Alliance for American Solar Manufacturing and Trade, a coalition of leading American solar manufacturers. The duties were simultaneously imposed on Indonesia and Laos. Indian firms specifically named in the preliminary determination include Adani Group entities — Mundra Solar Energy Pvt. Ltd. and Mundra Solar PV Ltd. — as well as Premier Energies, Waaree Energies, and Waaree Solar Americas.
The timing of this action is significant. It arrives in the aftermath of a US-India trade framework agreement that sought to reduce tariffs on Indian exports, and follows the US Supreme Court’s invalidation of the Trump administration’s broad use of emergency powers for tariff imposition. It also coincides with a growing global trade war in the clean energy sector, where American, European, Chinese, and Indian manufacturers are all competing aggressively for market share in solar panel and component production.
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For UPSC aspirants, this topic offers a rich analytical intersection of international trade law (WTO agreements on subsidies), India’s renewable energy industrial policy, the geopolitics of clean energy transition, and the challenge of reconciling economic nationalism with global climate commitments.
Table of Contents
Background and Context of India’s Solar Manufacturing Sector
Five Important Key Points
- India’s solar cell exports to the United States grew from 232 megawatts worth in 2022 to 2,297 megawatts in 2024, representing a nearly tenfold increase in volume over two years, which directly triggered the American industry’s complaint about import surges.
- In financial year 2023-24, India exported solar photovoltaic products worth approximately 1.94 billion US dollars to the United States, making it the single largest export destination for Indian solar components and therefore the most consequential market for Indian solar manufacturers.
- The preliminary CVD rate of 125.87 percent for Adani Group entities was calculated based on the US Department of Commerce’s assessment of subsidies received through various Indian government schemes, including production-linked incentive schemes, concessional power tariffs, and land allocation benefits.
- The final determination in the CVD investigation is scheduled for July 6, 2026, and a concurrent anti-dumping duty investigation is also underway, meaning the eventual duty burden on Indian solar exports could be significantly higher than the preliminary rates.
- Existing tariffs of up to 40 percent on solar cell exports to the United States were already in place before these new CVD measures, meaning that the combined duty burden would make most Indian solar exports to the US economically unviable.
WTO Framework and Subsidies Agreement
The countervailing duty action is grounded in the WTO Agreement on Subsidies and Countervailing Measures (ASCM), which permits member countries to impose countervailing duties to offset the trade-distorting effects of subsidies provided by exporting country governments. Under the ASCM, a subsidy is actionable if it is specific to an enterprise or industry and if it causes adverse effects to the interests of other WTO members.
India’s Production Linked Incentive Scheme for solar manufacturing, the Approved List of Models and Manufacturers mechanism, and various state-level incentives for renewable energy manufacturing have all been cited as potentially actionable subsidies under the ASCM. India has consistently argued at the WTO that its industrial policy measures are designed to promote renewable energy as part of its Paris Agreement commitments — a defence that has some legitimacy under the WTO’s provisions on developing country flexibilities but has not been universally accepted in dispute settlement proceedings.
India could challenge the preliminary CVD determination through the administrative review process before the US Department of Commerce, and ultimately through WTO dispute settlement. India has used WTO dispute resolution successfully in the past — the US Solar Panels case involving domestic content requirements was resolved in India’s favour in 2016 — establishing a precedent for trade litigation in this sector.
India’s Renewable Energy Industrial Policy and PLI Scheme
The Production Linked Incentive scheme for solar photovoltaic manufacturing, approved by the government with an outlay of approximately 24,000 crore rupees, was specifically designed to build domestic manufacturing capacity across the solar value chain — from polysilicon and wafers to cells, modules, and integrated supply chains. The scheme was motivated partly by India’s dependence on Chinese solar imports and the recognition that energy security in a renewable-powered future requires domestic manufacturing capability.
The PLI scheme has succeeded in attracting significant private investment — companies like Adani, Waaree, Premier Energies, and Reliance have announced multi-gigawatt manufacturing capacity expansions. However, this very success has now attracted trade action from the United States, creating a structural dilemma: the same industrial policy that was designed to reduce dependence on Chinese imports and build export competitiveness has now become the basis for American trade action.
Geopolitical Dimensions: Clean Energy Trade Wars
The solar sector CVD action must be understood within the broader context of clean energy trade tensions that have emerged globally as countries compete to dominate the industries of the energy transition. The United States Inflation Reduction Act of 2022 committed 369 billion dollars to clean energy incentives, explicitly designed to build American manufacturing capacity in solar, wind, batteries, and electric vehicles. This was followed by the European Union’s Net Zero Industry Act and various Asian countries’ own industrial policies.
The result is a situation where every major economy is simultaneously subsidising its own clean energy manufacturers and complaining about other countries subsidising theirs — a structural tension that the WTO’s subsidy rules were not designed to resolve, having been written primarily for a fossil-fuel era economy.
For India, the strategic implication is significant. The US market has been one of the most important outlets for the excess manufacturing capacity that PLI-funded expansions will create. If US CVD action effectively closes that market, Indian manufacturers will be forced to redirect exports toward Europe, Latin America, Africa, and South-East Asia — markets that are growing but may not absorb the same volumes at comparable margins.
Impact on India’s Climate Commitments and Domestic Energy Transition
India has committed at COP26 and subsequent climate conferences to achieving 500 gigawatts of renewable energy capacity by 2030, with solar power forming the backbone of this target. Meeting this target requires both domestic installation of solar projects and a viable export-oriented manufacturing sector that can achieve the scale economies necessary to drive down module costs.
CVD actions by the United States create a secondary risk: if Indian solar manufacturers face reduced export revenues, their financial capacity to invest in further capacity expansion may be constrained, potentially slowing the pace of India’s own domestic solar deployment. This creates a direct link between US trade policy and India’s ability to meet its nationally determined contributions under the Paris Agreement — a linkage that India can and should articulate forcefully in trade and climate diplomacy forums.
Way Forward
India should immediately file a formal response to the US Department of Commerce’s preliminary CVD determination, providing comprehensive documentation of the non-actionable nature of its renewable energy subsidies under ASCM provisions applicable to developing countries. Simultaneously, India should engage the US at the trade ministerial level to negotiate a negotiated settlement that avoids a protracted WTO dispute while protecting Indian manufacturers’ market access. India should also accelerate diversification of solar export markets through the India-ASEAN FTA framework, bilateral agreements with emerging African solar markets, and preferential trade arrangements with the Caribbean Community. The government should consider establishing a trade defence fund, specifically to support Indian manufacturers in navigating anti-dumping and CVD actions in major markets.
Relevance for UPSC and SSC Examinations
This topic is relevant for UPSC GS-III under Indian economy, infrastructure, energy, environment, and growth; government budgeting; and India’s bilateral trade and trade policy. It is also relevant for GS-II under India’s foreign policy and bilateral relations. For SSC examinations, it covers economy, government schemes, international trade, and environment.
Key terms: Countervailing Duty, WTO Agreement on Subsidies and Countervailing Measures, Production Linked Incentive scheme, Paris Agreement, Nationally Determined Contributions, US Inflation Reduction Act, Approved List of Models and Manufacturers, COP26.