New
initiative targets Rs 97,600-crore investment, seeks to boost renewable energy
integration and domestic battery manufacturing
THEBUSINESSBYTES BUREAU
NEW DELHI, NOVEMBER 4, 2026
The Union Cabinet on
Wednesday approved a Rs 14,500-crore Viability Gap Funding (VGF) scheme to
facilitate the development of 92 GWh of grid-scale energy storage capacity
across the country, marking a major push towards strengthening India's power
infrastructure and accelerating the transition to clean energy.
The scheme, approved at a
Cabinet meeting chaired by Prime Minister Narendra Modi, will be implemented
over five financial years from 2026-27 to 2030-31 and is expected to attract
total investments of around Rs 97,600 crore.
The proposed capacity
addition will be equivalent to nearly 170 per cent of India's existing
grid-scale energy storage capacity and will help the country move towards its
estimated requirement of 411 GWh by 2031-32.
Under the scheme, 60 GWh
of capacity will be developed through Hydro Pumped Storage Plants (PSP), while
30 GWh will come from Battery Energy Storage Systems (BESS). The remaining 2
GWh will be created through alternative energy storage technologies.
The government expects
the financial assistance to improve the commercial viability of large-scale
storage projects, accelerate their implementation and encourage greater private
sector participation in the emerging energy storage market.
The allocation of storage
capacity will be undertaken through a tariff-based competitive bidding process.
Public and private sector electricity distribution companies will be eligible
for VGF support for battery storage and pumped storage projects, while
alternative energy storage projects can be implemented by both public and
private sector entities.
In a significant push
towards self-reliance, the scheme also mandates a minimum Domestic Content
Requirement (DCR) of 40 per cent for BESS projects. The provision is aimed at
strengthening indigenous manufacturing capabilities, creating fresh
opportunities for domestic industry and reducing dependence on imported
components.
The initiative is expected
to complement existing supply-side incentives for battery manufacturing and
provide a sustained demand boost to India's domestic energy storage ecosystem.
With renewable energy
sources such as solar and wind being intermittent in nature, large-scale
storage infrastructure is increasingly becoming critical for ensuring
uninterrupted electricity supply and maintaining grid stability.
The proposed capacity
addition is expected to facilitate better utilisation of renewable power,
address fluctuations in generation and reduce reliance on conventional power
sources for balancing electricity demand and supply.
The government said the initiative would strengthen grid resilience, improve the integration of renewable energy and support the availability of reliable, affordable and round-the-clock electricity.
The scheme is also expected to enhance India's long-term energy security while advancing the country's broader objectives of Atmanirbhar Bharat and Viksit Bharat.
