Cabinet
Indian Cabinet approves Rs 14,500 crore scheme to boost India's energy storage
The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the Viability Gap Funding (VGF) Scheme for the Development of Grid-Scale Energy Storage Systems, with a total financial outlay of Rs. 14,500 crore for the period from FY 2026-27 to FY 2030-31.
The scheme aims to support the development of 92 GWh of additional grid-scale energy storage capacity across the country.
It will facilitate the creation of new capacities equivalent to 170% of India's existing grid-scale energy storage capacity and help meet the country's projected requirement of 411 GWh of grid-scale energy storage capacity by 2031-32.
The initiative marks a significant step towards strengthening India's power sector infrastructure, facilitating the large-scale integration of renewable energy and ensuring a reliable, affordable and round-the-clock power supply.
It is also expected to boost domestic manufacturing of battery energy storage systems, reduce import dependence and enhance India's long-term energy security.
The scheme envisages the development of 60 GWh of Hydro Pumped Storage Plant (PSP) capacity, 30 GWh of Battery Energy Storage System (BESS) capacity and 2 GWh through alternative energy storage technologies, with a total estimated investment of Rs. 97,600 crore.
The VGF support is expected to improve the financial viability of these projects and accelerate the deployment of large-scale energy storage infrastructure across the country.
Energy storage capacity will be allocated 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, while projects based on alternative energy storage technologies will be implemented by both public and private sector entities.
A key objective of the scheme is to strengthen India's domestic energy storage manufacturing ecosystem through demand-side financial support and reduce dependence on imported components.
To promote indigenous manufacturing, BESS projects will be subject to a minimum Domestic Content Requirement (DCR) of 40%.
This requirement is expected to encourage domestic manufacturing, create new opportunities for Indian industry and complement existing supply-side incentives for battery manufacturing.
The scheme represents an important intervention towards building a flexible, resilient and future-ready electricity system.
By accelerating the deployment of grid-scale energy storage, the initiative will facilitate greater utilisation of renewable energy, address fluctuations in renewable energy generation and reduce dependence on conventional power generation for balancing supply and demand.
Overall, the scheme is expected to strengthen grid stability, improve renewable energy integration, promote domestic manufacturing and enhance India's energy security, while advancing the vision of Atmanirbhar Bharat and Viksit Bharat.
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