The Union Cabinet, chaired by Prime Minister Shri Narendra Modi, has approved a Viability Gap Funding (VGF) Scheme for the Development of Grid-Scale Energy Storage Systems, with total financial support of Rs 14,500 crore for the period FY 2026-27 to FY 2030-31. The scheme aims to support the development of 92 GWh of energy storage capacity across the country that is yet to be commissioned, according to a Press Information Bureau (PIB) release dated November 4, 2026.
The scheme envisages 60 GWh of Hydro Pumped Storage Plant (PSP) capacity, 30 GWh of Battery Energy Storage System (BESS) capacity and 2 GWh of capacity based on alternative energy storage technologies, with a total estimated investment of Rs 97,600 crore. The VGF support is intended to improve the financial viability of these projects and accelerate the deployment of large-scale energy storage infrastructure.
The new capacities are equivalent to 170% of the country’s present-day grid-scale energy storage system (ESS) capacity. They will also help meet the required grid-scale ESS capacity of 411 GWh by 2031-32.
Energy storage capacity under the scheme 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 public and private sector entities.
To promote indigenous manufacturing, BESS projects under the scheme will be subject to a minimum Domestic Content Requirement (DCR) of 40%. 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. The requirement is expected to encourage domestic manufacturing, create opportunities for Indian industry and complement existing supply-side incentives for battery manufacturing.
The scheme is positioned as a step towards strengthening India’s power sector infrastructure, enabling large-scale integration of renewable energy and ensuring reliable, affordable and round-the-clock power supply. It is also expected to give an impetus to domestic manufacturing of battery energy storage systems, reduce import dependence and enhance the country’s long-term energy security.
By accelerating the deployment of grid-scale energy storage, the initiative is expected to facilitate greater utilisation of renewable energy, address the variability of renewable energy generation and reduce dependence on conventional generation for balancing round-the-clock power supply. It is also expected to strengthen grid stability, improve renewable energy integration and encourage domestic manufacturing, while advancing the vision of Atmanirbhar Bharat and Viksit Bharat.
