Cabinet Approves ₹14,500-Crore VGF Scheme for Grid-Scale Energy Storage Systems

The Union Cabinet has approved a viability gap funding (VGF) scheme dedicated to the development of grid-scale energy storage systems. The scheme entails a total financial support of ₹14,500 crore, allocated from fiscal year 2027 to fiscal year 2031.

Announced following a Cabinet briefing in New Delhi, the initiative aims to support the development of 92 gigawatt-hour (GWh) of yet-to-be-commissioned energy storage capacity across India. This deployment is expected to create new capacities equivalent to 170 percent of the country's present-day grid-scale energy storage system capacity, helping meet a required grid-scale energy storage system capacity of 411 GWh by FY32.

The policy framework is designed to strengthen India’s power sector infrastructure, facilitate large-scale integration of renewable energy, and ensure reliable, affordable, and round-the-clock power supply. It also targets the domestic manufacturing ecosystem for battery energy storage systems, aiming to reduce import dependence and enhance long-term energy security.

Under the approved plan, the development is categorized into three segments: 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. The total estimated investment for these projects stands at ₹97,600 crore. VGF support is intended to improve financial viability and accelerate infrastructure deployment.

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 concerning BESS and hydro PSP projects, while alternative technology projects will be implemented by both public and private entities.

To bolster indigenous manufacturing, BESS projects will operate under a minimum domestic content requirement of 40 percent. This mandate is structured to create opportunities for the Indian industry and complement existing supply-side incentives for battery manufacturing.

By accelerating the deployment of grid-scale energy storage, the initiative seeks to address the variability of renewable energy generation, reduce dependence on conventional generation for balancing round-the-clock power supply, and improve overall grid stability.

"The approval of the ₹14,500-crore VGF scheme is a critical structural step for India's clean energy transition and power infrastructure. By addressing the financial viability of grid-scale storage and integrating a 40 percent domestic content requirement for battery energy storage systems, the policy bridges the gap between renewable energy generation and grid stability. For businesses, startups, and manufacturers operating in the clean-tech and energy sectors, this creates a predictable demand cycle and encourages localized manufacturing under the Atmanirbhar Bharat vision." — Dr. Shishir Gupta, Founder & CEO, StartupLanes