The Union Cabinet has approved a ₹14,500 crore Viability Gap Funding scheme to support the development of 92 GWh of new grid-scale energy storage capacity between 2026-27 and 2030-31, in a move aimed at expanding India’s power-storage infrastructure and strengthening domestic battery manufacturing.
The government said the programme would support storage projects that have not yet been commissioned. The planned capacity is equivalent to 170% of the country’s present grid-scale energy storage capacity, and is intended to contribute towards the required national capacity of 411 GWh by 2031-32. The total investment expected from the projects covered by the scheme is estimated at ₹97,600 crore.
Three technologies in the plan
The scheme divides the proposed capacity across three broad forms of storage. Hydro pumped storage plants will account for the largest share, while battery-based systems will form the second major component. The remaining capacity will come from other storage technologies.
| Storage segment | Planned capacity |
|---|---|
| Hydro pumped storage plants | 60 GWh |
| Battery energy storage systems | 30 GWh |
| Alternative storage technologies | 2 GWh |
| Total | 92 GWh |
Viability Gap Funding is intended to improve the financial viability of projects that may otherwise be difficult to develop on commercial terms. The government said the support would help speed up the installation of large storage assets. For electricity users, the practical significance is that the scheme is designed to create more infrastructure for storing power at grid scale, although the release did not provide a timeline for individual projects or specify how the eventual impact on tariffs would be measured.
“The VGF support will help improve the financial viability of these projects and accelerate the deployment of large-scale energy storage infrastructure in the country.”
Competitive bidding and eligibility
Capacity will be allocated through a tariff-based competitive bidding process. Public and private-sector electricity distribution companies will be eligible for funding support for both battery energy storage system and hydro pumped storage projects. Projects using alternative storage technologies will also be implemented by entities from the public and private sectors.
- Public and private distribution companies can seek support for BESS and hydro pumped storage projects.
- Alternative technology projects can be undertaken by public- and private-sector entities.
- Allocation will take place through tariff-based competitive bidding.
- Battery storage projects must meet a 40% minimum domestic content requirement.
The bidding model places the focus on the tariff at which storage capacity can be developed and made available. It also opens the programme to more than one category of project developer, rather than restricting implementation to government-owned entities. However, the source announcement did not disclose the bidding schedule, project-wise allocation or the terms governing disbursement of the funding.
Domestic manufacturing requirement
Battery energy storage projects supported under the programme will have to meet a minimum Domestic Content Requirement of 40%. The government said this condition is intended to encourage manufacturing within India and create opportunities for Indian industry. It is also expected to complement existing supply-side incentives for battery manufacturing.
For businesses, the policy therefore combines demand creation with a sourcing condition. The proposed storage capacity can generate orders for project developers and equipment suppliers, while the domestic-content rule seeks to ensure that a portion of the value created remains within the Indian manufacturing ecosystem. The announcement did not identify the companies that may participate or provide a project-wise estimate of manufacturing demand.
The Cabinet decision covers the period from 2026-27 to 2030-31. Its stated objective is to bridge the financial gap facing large storage projects, add 92 GWh of capacity and help India move towards the 411 GWh requirement projected for 2031-32. The scale of the proposed investment means that implementation, competitive pricing and compliance with the domestic-content condition will be important in determining how quickly the planned capacity is commissioned.
