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, representing 170% of present-day Grid Scale Energy Storage System capacity and helping meet the required Grid Scale ESS capacity of 411 GWh by 2031-32.
The scheme envisages specific capacity allocations: 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, with total estimated investment of ₹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, create opportunities for Indian industry, reduce import dependence, and complement existing supply-side incentives for battery manufacturing. The VGF support will improve financial viability of these projects and accelerate deployment of large-scale energy storage infrastructure.
The scheme represents a significant infrastructure intervention to strengthen India's power sector by facilitating large-scale renewable energy integration, ensuring reliable and affordable round-the-clock power supply, addressing renewable energy variability, and reducing dependence on conventional generation for balancing power supply. It aims to build a flexible, resilient electricity system while enhancing India's long-term energy security and advancing the vision of Atmanirbhar Bharat and Viksit Bharat.