The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a Viability Gap Funding (VGF) Scheme for the development of grid-scale Energy Storage Systems (ESS), with total financial support of ₹14,500 crore. The scheme will cover the period from FY 2026-27 to FY 2030-31 and support the development of 92 GWh of yet-to-be-commissioned energy storage capacity across India. The proposed capacity is equivalent to 170% of the country’s present grid-scale energy storage capacity.
The initiative is aimed at strengthening India’s power sector infrastructure, facilitating large-scale integration of renewable energy and ensuring a reliable, affordable and round-the-clock electricity supply. It will also support the development of domestic battery energy storage manufacturing, reduce dependence on imported components and strengthen the country’s long-term energy security. The scheme will contribute towards meeting India’s estimated grid-scale energy storage requirement of 411 GWh by 2031-32.
Under the scheme, 60 GWh of capacity will be developed through Hydro Pumped Storage Plants (PSP), while 30 GWh will come from Battery Energy Storage Systems (BESS). Another 2 GWh will be developed through alternative energy storage technologies. The projects involve a total estimated investment of ₹97,600 crore. The VGF support is expected to improve their financial viability and accelerate the deployment of large-scale energy storage infrastructure.
The allocation of energy storage capacity will be carried out through a tariff-based competitive bidding process. Public and private sector electricity distribution companies will be eligible for VGF support for BESS and Hydro PSP projects. Projects based on alternative energy storage technologies will be implemented by both public and private sector entities.
The scheme also aims to strengthen India’s domestic energy storage manufacturing ecosystem through demand-side financial support. To promote indigenous manufacturing and reduce dependence on imported components, BESS projects will have to meet a minimum Domestic Content Requirement (DCR) of 40%. This requirement is expected to encourage domestic manufacturing, create opportunities for Indian industries and complement existing supply-side incentives for battery manufacturing.
The deployment of grid-scale energy storage systems is expected to facilitate greater utilisation of renewable energy and address variations in renewable power generation. It will also help reduce dependence on conventional power generation for balancing the electricity grid and supporting round-the-clock power supply. The initiative is intended to strengthen grid stability, improve renewable energy integration, encourage domestic manufacturing and enhance India’s energy security, while advancing the vision of Atmanirbhar Bharat and Viksit Bharat.
