China alleged that 3 Indian PLI schemes related to EV and battery provide financial benefits to companies operating in India contingent on Domestic Value Addition (DVA).
- The 3 specific PLI schemes challenged are:
- scheme to incentivise establishment of Giga-scale manufacturing capabilities of ACC batteries;
- scheme for auto industry, which seeks to buttress the manufacturing of Advanced Automotive Technology (AAT) products;
- scheme to promote EV manufacturing by attracting global EV manufacturers.
- DVA requirements under these PLI schemes incentivise companies to use domestic goods rather than imported goods are a violation of Agreement on Subsidies and Countervailing Measures (“SCM Agreement”) of WTO under prohibited category.
About SCM Agreement of WTO
- Article 1 defines a subsidy as a financial contribution by a government or a public body that confers a benefit.
- The SCM Agreement creates 2 categories of subsidies: Prohibited and Actionable.
- Prohibited: 2 categories of subsidies are prohibited by Article 3.
- First: It consists of subsidies contingent, in law or in fact, whether wholly or as one of several conditions, on export performance (“export subsidies”).
- Second: It consists of subsidies contingent, whether solely or as one of several other conditions, upon the use of domestic over imported goods (“local content subsidies”).
- Actionable: They are subject to challenge, either through multilateral dispute settlement or through countervailing action.
- Prohibited: 2 categories of subsidies are prohibited by Article 3.
About PLI Scheme
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