Cabinet Approves ₹14,500 Crore VGF Scheme for 92 GWh of Grid-Scale Energy Storage
The Union Cabinet approved a Viability Gap Funding (VGF) scheme of ₹14,500 crore to build 92 GWh (gigawatt-hours) of grid-scale energy storage across India. VGF is a one-time government grant that makes a useful but loss-making project worth building.
The 92 GWh is split into three parts: 60 GWh of pumped storage hydropower, 30 GWh of battery energy storage systems (BESS) and 2 GWh of other new storage technologies.
The scheme runs from 2026-27 to 2030-31. The projects are expected to bring in a total investment of about ₹97,600 crore.
Projects will be given out through tariff-based competitive bidding (the bidder who offers to store and supply power at the lowest price wins). Public and private power distribution companies (discoms) can get VGF for battery and pumped storage projects. Projects using other storage technologies can be built by public or private companies.
Battery projects must meet a minimum Domestic Content Requirement (DCR) of 40%, meaning at least 40% of the value must be made in India.
The official statement says India will need about 411 GWh of grid-scale storage by 2031-32. The 92 GWh target equals about 170% of the country's existing grid-scale storage.
Viability Gap Funding (VGF): How the Government Makes Infrastructure Projects Bankable
Viability Gap Funding is a one-time grant the government gives to a project that the country needs but that cannot earn enough on its own to attract investors. The "gap" is the difference between what the project costs and what it can earn. The government fills this gap so that private or public companies are willing to build it.
Storage projects are costly and their earnings are still uncertain, so few investors would build them at the scale India needs. The ₹14,500 crore VGF fills part of this gap, which lowers the tariff that discoms pay and makes 92 GWh of storage viable by 2030-31.
Battery Energy Storage Systems (BESS)
A Battery Energy Storage System is a very large set of rechargeable batteries connected to the power grid. It stores electricity when there is too much and gives it back when there is too little. You can think of it as a giant power bank for the whole grid. Most BESS today use lithium-ion batteries, like those in mobile phones and electric cars.
Battery storage makes up one-third of the new target. The domestic content rule links the storage push to India's goal of making its own batteries instead of importing them.
Pumped Storage Hydropower
Pumped storage hydropower stores electricity using water and two reservoirs at different heights. When there is extra electricity, it pumps water up to the upper reservoir. When power is needed, the water flows back down through turbines and makes electricity. It works like a giant rechargeable battery made of water.
Most of the new VGF will go to pumped storage, because it can hold large amounts of solar and wind power and release it during peak demand or when renewable output drops.
- VGF outlay: ₹14,500 crore; period FY 2026-27 to FY 2030-31
- Total storage target: 92 GWh = 60 GWh pumped storage + 30 GWh BESS + 2 GWh other technologies
- Expected total investment: about ₹97,600 crore
- Allocation method: tariff-based competitive bidding
- Domestic Content Requirement for BESS: minimum 40%
- Grid-scale storage needed by 2031-32: about 411 GWh
- 92 GWh = about 170% of India's existing grid-scale storage
- Earlier BESS VGF (September 2023): ₹3,760 crore budget support, 4,000 MWh, up to 40% of capital cost
- Second BESS VGF tranche (June 2025): ₹5,400 crore for 30 GWh
- Companion scheme cleared the same day: ₹2,814 crore for lithium and nickel processing