SYLLABUS

GS-2: India and its Neighborhood- Relations. Important International institutions, agencies and fora - their Structure, Mandate.

GS-3: Infrastructure: Energy.

Context: China has filed a formal complaint at the World Trade Organization (WTO) against India, alleging that New Delhi’s subsidies for electric vehicles (EVs) and batteries provide an unfair competitive advantage to domestic industries.

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• The Chinese Ministry of Commerce announced that it has lodged a complaint with the WTO claiming that India’s EV and battery subsidies violate multilateral trade rules.

• The ministry stated that these measures undermine China’s legitimate interests and give an unfair competitive edge to India’s domestic manufacturers.

• China has requested consultations with India, which is the first step in the WTO’s dispute settlement process.

• India now has 30 days to engage in consultations with China to resolve the issue before a dispute panel may be requested.

• The complaint comes at a time when India is preparing to launch the National Critical Mineral Stockpile (NCMS) programme to secure access to rare earth elements crucial for EV battery production and green technologies.

• The Indian Ministry of Commerce has stated that it will review China’s submissions in detail before issuing a formal response.

• China has also filed similar trade complaints against Turkey, Canada, and the European Union over EV-related incentives.

India’s EV Subsidy Framework

• The FAME India Scheme (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles), launched in 2015, provides direct purchase incentives to promote adoption of electric two-, three-, and four-wheelers and the creation of charging infrastructure.

• Under FAME Phase-I (2015–2019), over 2.55 lakh EVs were supported along with development of key charging infrastructure to encourage early adoption.

• The Government of India provides several incentives under the Faster Adoption and Manufacturing of (Hybrid and) Electric Vehicles (FAME-II) scheme to promote electric mobility.

• Subsidies include ₹15,000 per kWh for two-wheelers (up to 40% of the vehicle cost), ₹10,000 per kWh for three- and four-wheelers, and ₹20,000 per kWh for e-buses.

• The National Electric Mobility Mission Plan (NEMMP) 2020 aims to accelerate EV production and adoption through fiscal incentives and policy support for manufacturers and consumers.

• India introduced the Scheme for Manufacturing of Electric Cars (SMEC) in 2024, which allows concessional import duties for companies establishing new EV manufacturing plants in India.

• These initiatives aim to promote domestic production, reduce import dependency, and support India’s clean energy transition.

Global and Trade Context

• China currently accounts for nearly two-thirds of global EV sales but faces challenges such as declining domestic profits and growing trade restrictions abroad.

• The European Union recently imposed a 27% tariff on Chinese EV imports to curb their dominance in the European market.

• China’s WTO complaint against India is seen as an effort to safeguard its EV export interests and prevent the spread of similar protectionist measures in emerging markets.

• India’s growing EV and battery production capacity, combined with mineral security initiatives like the NCMS, could reduce its dependence on Chinese imports in the long term.

World Trade Organisation (WTO) 

• It was formed under the Marrakesh Agreement signed on 15th April 1994 by 123 countries after the Uruguay Round negotiations (1986-94) of the General Agreement on Tariffs and Trade (GATT), leading to the formation of the WTO in 1995. 

• The WTO is the only global international organisation dealing with the rules of trade between nations. 

• At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. 

• The goal is to ensure that trade flows as smoothly, predictably and freely as possible.

UPSC Mains Practice Question

China has recently filed a complaint at the World Trade Organisation (WTO) alleging that India’s electric vehicle (EV) subsidies distort global trade. In this context, discuss the significance of India’s EV subsidy framework for domestic manufacturing and clean energy transition. Also, examine the implications of such trade disputes on India’s industrial and trade policy.

Source:
SAUR ENERGY
LIVE MINT
THE HINDU
THE NEW INDIAN EXPRESS
THE WTO