02 Jun, 2021
Implications of the HS code for the Indian solar sector
1 mins read | CEF Explains
Clear distinction of HS code for solar cells and solar modules is needed to track the exact quantum of solar modules imported and assembled in India

Context

The Harmonized Commodity Description and Coding System, generally referred to as the "Harmonized System" or simply "HS", is a multipurpose international product nomenclature developed by the World Customs Organization (WCO) to classify traded commodities.

It comprises 5,000 commodity groups, each identified by a six-digit code. Countries are allowed to add codes as a suffix to the first six digits to further classify various commodities/products with more precision. India uses an 8-digit classification.

HS ensures smooth international trade operations by supporting processes such as but not restricted to:

  • Price monitoring
  • Applicable tariffs
  • Rules of origin

But among all this categorisation and demarcation, some gaps remain for the renewable energy sector. For instance, until recently, India had the same HS code for solar cells whether or not they were assembled as modules/panels – 85414011. In the Union Budget 2020, the Ministry of Finance segregated the HS codes1 as following:

  • 85414011 - Solar cells (not assembled)
  • 85414012 - Solar cells (assembled in modules or made up into panels)

However, despite segregation in the Union Budget 2020, the Ministry of Commerce's website presents data only under one HS code.

Relevance & Impact

Figure 1: Export and import of solar cells and modules from all countries

Source: Ministry of Commerce and Industry2

The graph above shows that India imported solar cells and modules valued at close to $62.6 million between April 2020 and February 2021. Since solar cells and solar modules both have the same HS code, it is difficult to differentiate between imports of solar cells and solar modules. Additionally, the ministry shares information in quantity and value (INR and USD) for every commodity. Hence, one cannot quantify the import in kW or MW.

Availability of segregated data in appropriate units (kW and value) can have a significant impact on the sector. The government can use it to frame better policies and the industry can use it to make informed business decisions.

Who should care

  • Ministry of New and Renewable Energy
  • Ministry of Commerce and Industry
  • Ministry of Finance
  • Solar cell and module manufacturers 

References

  • [1]Ministry of New and Renewable Energy. 2020 “Basic Customs Duty (BCD) on import of solar photovoltaic cells and modules” https://mnre.gov.in/img/documents/uploads/file_f-1582100906706.pdf. Accessed February 12, 2020.
  • [2]Ministry of Commerce and Industry. 2020 “Export Import Data Bank” https://tradestat.commerce.gov.in/eidb/default.asp

Disclaimer

CEF Analysis” is a product of the CEEW Centre for Energy Finance, explaining real-time market developments based on publicly available data and engagements with market participants. By their very nature, these pieces are not peer-reviewed. CEEW-CEF and CEEW assume no legal responsibility or financial liability for the omissions, errors, and inaccuracies in the analysis.
Filled under: Policy & Regulation , Solar Energy
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