Daily News Analysis ‘China Takes India to WTO Over “Illegal” Manufacturing Subsidies’ : 30 October

Key Highlights:

• The Dispute: China has filed a complaint at the WTO against India’s Production-Linked Incentive (PLI) schemes for the automobile and Advanced Chemistry Cell (ACC) battery sectors.
• India’s PLI Scheme: The schemes offer financial incentives based on incremental sales to domestic industries, aiming to boost manufacturing and attract global EV producers.
• Core of China’s Complaint: China alleges that the three PLI schemes violate WTO law because they condition financial benefits on meeting a Domestic Value Addition (DVA) requirement (e.g., 50% for ACC batteries).
• WTO Violation: The DVA requirement is considered a prohibited subsidy under WTO rules, specifically:
  • SCM Agreement: It qualifies as an Import Substitution (IS) subsidy, which is a subsidy contingent upon the use of domestic goods over imported goods.
  • TRIMS Agreement: It is also a prohibited trade-related investment measure because it imposes local content requirements.
• Legal Provisions: WTO law strictly prohibits subsidies contingent on export performance (Export Subsidies) or the use of domestic over imported goods (Import Substitution Subsidies).

Production-Linked Incentive (PLI) Scheme – Automobiles & Auto Components:

• Launch Year: 2021

• Budget: ₹25,938 crore

• Focus: Promote advanced automotive technologies (AAT) such as electric vehicles (EVs), hydrogen-powered vehicles, and high-tech auto components.

• Key Objectives:

  • Increase domestic manufacturing value addition

  • Boost India’s EV ecosystem and export competitiveness

  • Reduce dependency on imported components

• Target Beneficiaries: OEMs, auto component manufacturers adopting futuristic technologies

• Tenure: 5 years

Why in the News?

• China’s complaint initiates a formal trade dispute against India’s flagship manufacturing incentive program (PLI schemes).