By Manoj Kumar and Rajesh Kumar Singh
NEW DELHI (Reuters) - India has dropped plans to impose an anti-dumping duty on solar panel imports, a move that is likely to help mend frayed commercial ties with the United States before Prime Minister Narendra Modi meets President Barack Obama this month.
Days before Modi took office in May, a quasi-judicial body ordered the imposition of the duty on panels imported from the United States, China, Taiwan and Malaysia to protect domestic solar manufacturers.
The order issued had set duties of between 11 and 81 U.S. cents per watt following a investigation which started in 2011. The ruling had to be published by the Finance Ministry within a stipulated time frame to take effect.
"There was no notification. We allowed it to lapse," Nirmala Sitharaman, the trade and junior minister for finance, said, without elaborating.
India and the United States set great store by the economic potential of their ties, but their relationship has been fraught in recent years over trade policies and patents.
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The move over solar panels comes two days after the Modi administration said it was trying to speed up clearances for all pending patent applications and working on an intellectual property rights (IPR) policy - seen by analysts as another step towards smooth things over with Washington.
Dropping the duty removes one sticking point ahead of Modi's meeting Obama in Washington on Sept. 29-30, but it will upset Indian manufacturers who say rivals benefit from subsidies and sell their products at artificially low prices.
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Modi is an advocate of solar energy and India aims to raise its solar power capacity to 20,000 MW by 2022 from 1,700 MW.
India imported solar products worth nearly 60 billion rupees ($984 million) last year, according to an industry estimate, whereas domestic manufacturers' sales amounted to less than 2 percent of that figure.
The U.S.-India relationship hit its lowest ebb in a decade after a junior Indian diplomat, Devyani Khobragade, was arrested and strip-searched in New York in December. The U.S. ambassador to India resigned after the incident and has yet to be replaced.
Nonetheless, Washington sees its relationship with India as critical, partly to counterbalance China's rising power. Obama has called it "one of the defining partnerships of the 21st century".
His administration aims to increase bilateral trade to $500 billion a year from about $100 billion currently.
However, New Delhi is furious about a threat of trade sanctions made by the U.S. Trade Representative's (USTR) office over India's protection of IPR, preference for domestic producers and non-trade barriers.
In a report this year, the USTR said India's limits on the approval of pharmaceutical patents, a convoluted process for patent challenges and its plan to open a series of patented drugs to generic manufacturers created "serious challenges" for some innovators.
Sitharaman said on Monday the new IPR policy would be in place within next six months to safeguard India's interests and provide clarity on existing laws. She did not give more details.
The government will also set up a think-tank to advise it on global intellectual property issues, she added.
($1 = 60.9875 Indian rupee)
(Writing by Rajesh Kumar Singh; Editing by Frank Jack Daniel and Alison Williams)