The Union Cabinet chaired by Prime Minister Narendra Modi has approved a Viability Gap Funding (VGF) Scheme for Development of Grid-Scale Energy Storage Systems with total financial support of ₹14,500 crore for the period FY 2026-27 to FY 2030-31. The scheme aims to support development of 92 GWh of yet-to-be-commissioned energy storage capacity across the country, which represents 170% of India's present-day grid-scale energy storage capacity and will help meet the required grid-scale ESS capacity of 411 GWh by 2031-32.
The scheme allocates specific capacities across different storage technologies: 60 GWh for Hydro Pumped Storage Plant (PSP) capacity, 30 GWh for Battery Energy Storage System (BESS) capacity, and 2 GWh for alternative energy storage technologies. The total estimated investment for these projects is ₹97,600 crore. Energy storage capacity will be allocated through a tariff-based competitive bidding process, with public and private sector electricity distribution companies eligible for VGF support for BESS and Hydro PSP projects, while alternative technology projects will be implemented by both public and private sector entities.
A key feature is the mandatory Domestic Content Requirement (DCR) of 40% for BESS projects, designed to promote indigenous manufacturing, reduce import dependence, create opportunities for Indian industry, and complement existing supply-side incentives for battery manufacturing. The scheme aims to strengthen India's power sector infrastructure, facilitate large-scale renewable energy integration, ensure reliable and affordable round-the-clock power supply, address renewable energy variability, reduce dependence on conventional generation for balancing power, and enhance the country's long-term energy security while advancing the vision of Atmanirbhar Bharat and Viksit Bharat.