The Hindu:- Published on 26 FEB 2026
Why It Is in the News
The decision by the US Department of Commerce to impose a 126% preliminary countervailing duty (CVD) on certain Indian solar products has triggered major concern within India’s renewable energy and export sectors. The move follows the withdrawal of two subsidiaries of the Adani Group; Mundra Solar Energy and Mundra Solar PV; from an ongoing anti-subsidy investigation. This development is significant because:
- The United States is the largest export destination for Indian solar photovoltaic (PV) modules.
- The duty is exceptionally high and could severely restrict Indian access to the US solar market.
- The case reflects broader geopolitical and economic tensions involving renewable energy supply chains and dependence on China.
- It comes at a time when both India and the US publicly advocate clean energy transition and climate cooperation.
Background of the Investigation
The countervailing duty investigation was initiated after a petition filed by the Alliance for American Solar Manufacturing and Trade, a coalition of US-based solar manufacturers. The coalition alleged that Indian producers were benefiting from unfair subsidies provided by the Government of India, thereby harming American domestic manufacturers.
The investigation formally began in August 2025. Under US trade law, when allegations of subsidized imports arise, the Department of Commerce examines whether:
- A foreign government provides financial assistance or subsidies.
- These subsidies are specific to certain companies or industries.
- The subsidies cause material injury to domestic industries.
Mundra Solar Energy and Mundra Solar PV were identified as “mandatory respondents,” meaning their data and responses were central to calculating the subsidy margin. However, the companies reportedly failed to provide complete responses and later withdrew from the proceedings.
As a result, the Department of Commerce invoked the doctrine of “Adverse Facts Available” (AFA); a stringent mechanism used when companies do not cooperate. Under AFA, authorities can rely on the best information available, often leading to significantly higher duty rates. This led to the imposition of a steep preliminary tariff of approximately 125.9–126%.
What Is a Countervailing Duty (CVD)?
A countervailing duty is a tariff imposed to offset subsidies provided by a foreign government to its exporters. The aim is to ensure fair competition and prevent artificially low-priced imports from injuring domestic industries. In this case, the US authorities examined several Indian export-linked schemes, including:
- Advance Authorisation Program
- Duty Free Import Authorisation (DFIA)
- Duty Drawback Scheme
- RoDTEP (Remission of Duties and Taxes on Exported Products)
- Export Promotion Capital Goods (EPCG) Scheme
The US investigation found that these schemes were contingent on export performance. Under World Trade Organization (WTO) norms and US trade laws, export-contingent subsidies are particularly vulnerable to challenge.
Focus on Transnational Subsidies and Chinese Inputs
A crucial dimension of the case is the allegation of “transnational subsidies.” The Department of Commerce reportedly examined whether key raw materials and intermediate inputs were sourced at below-market rates across borders.
The report noted that India’s solar manufacturing ecosystem is heavily dependent on imports from China. Critical inputs such as: are often sourced from Chinese suppliers.
- Polysilicon
- Silicon wafers
- Silver paste
- Solar glass
- Aluminium frames
- Junction boxes
The US authorities expressed concern that Chinese investments in Indian production facilities follow patterns seen in countries such as Cambodia, Malaysia, Thailand, and Vietnam; nations that have previously been targeted in US trade investigations involving solar products.
This reflects a broader US strategy to reduce reliance on China-dominated clean energy supply chains and to prevent indirect routing of Chinese-origin benefits through third countries.
Impact on Indian Solar Industry
The implications for India’s solar manufacturing sector are significant.
1. Export Disruption
- Solar imports from India into the US were valued at $792.6 million in 2024.
- Over 90% of India’s solar PV module exports were destined for the US market.
- Export volumes reached around 3 GW in the last calendar year.
A 126% tariff would make Indian modules significantly more expensive in the US market, potentially rendering them uncompetitive compared to domestic US producers or suppliers from other countries.
2. Pressure on Domestic Market
If exports decline sharply, Indian manufacturers may redirect supply to the domestic market. This could:
- Lead to oversupply conditions.
- Intensify price competition.
- Compress profit margins for original equipment manufacturers (OEMs).
Analysts warn that such pricing pressures could strain balance sheets, particularly for mid-sized manufacturers.
3. Investment Uncertainty
The case may deter fresh investments in India’s solar manufacturing capacity, especially projects aimed primarily at export markets. Investors could reassess risk exposure in light of evolving trade policies.
Implications for India–US Trade Relations
India and the United States have expanded strategic cooperation in recent years, particularly in defense, technology, and energy transition. Clean energy collaboration has been a prominent pillar of bilateral engagement. However, this dispute reveals underlying tensions:
- The US is aggressively protecting its domestic manufacturing under industrial policies such as the Inflation Reduction Act (IRA).
- India is promoting export-oriented manufacturing under initiatives such as Production-Linked Incentive (PLI) schemes.
- Both countries seek to reduce dependence on China, yet global solar supply chains remain deeply intertwined with Chinese production.
The tariff action may complicate trade diplomacy, especially if India decides to challenge the measure at the WTO or pursue bilateral consultations.
Legal and Procedural Aspects
It is important to note that the 126% duty is a preliminary determination. The investigation process typically includes:
- Preliminary findings.
- Further verification of data.
- Opportunity for stakeholder comments.
- Final determination.
The final duty rate could be revised upward or downward. Additionally, US International Trade Commission (ITC) findings regarding injury to domestic industry are also relevant. If the final determination confirms the duties, they may remain in place for several years unless reviewed or challenged.
Broader Global Context
The solar industry has been at the center of multiple trade disputes globally. Key trends include:
- Rising protectionism in clean energy sectors.
- Increasing scrutiny of supply chains linked to China.
- Growing use of anti-dumping and countervailing duty measures.
- Industrial policy competition among major economies.
Ironically, while climate change demands rapid scaling of renewable energy, trade barriers can slow deployment by raising costs. The tension between environmental goals and trade protectionism remains unresolved.
Strategic Questions for India
The episode raises important policy questions for India:
- Should export-linked incentive schemes be redesigned to reduce vulnerability to trade disputes?
- Can India develop deeper domestic supply chains for polysilicon and wafers to reduce reliance on Chinese imports?
- Should Indian companies diversify export markets beyond the US?
- How can India balance domestic manufacturing growth with compliance under global trade norms?
These questions are central to India’s ambition to become a global renewable energy manufacturing hub.
Conclusion
The 126% preliminary tariff imposed by the US Department of Commerce represents a major development in India–US solar trade. Triggered by the withdrawal of Adani Group subsidiaries from the investigation process, the decision reflects strict enforcement of US trade remedy laws and concerns about subsidy-linked exports. Beyond the immediate commercial impact, the case highlights deeper structural issues:
- Global dependence on China-centric supply chains.
- Rising trade protectionism in clean energy industries.
- The challenge of aligning industrial policy with international trade rules.
Whether the final determination sustains or modifies the tariff, the episode underscores that renewable energy; once seen purely as a climate imperative; is now equally a terrain of geopolitical and economic contestation.
For India, the path forward may require recalibrating export strategies, strengthening domestic value chains, and navigating complex trade diplomacy with key partners such as the United States.
