Cabinet Approves Rs 14,500 Crore VGF Scheme for 92 GWh of Grid-Scale Energy Storage
On 4 November 2026, the Union Cabinet approved a Viability Gap Funding (VGF) scheme of Rs 14,500 crore for grid-scale energy storage (storing electricity on a large scale for the power grid).
The scheme aims to build 92 GWh (gigawatt-hours) of storage between FY 2026-27 and FY 2030-31: 60 GWh from pumped storage projects (PSP), 30 GWh from battery energy storage systems (BESS) and 2 GWh from newer, emerging technologies.
The total investment expected from the scheme is about Rs 97,600 crore. The government grant covers only a part of it; developers bring the rest.
Projects will be given out through tariff-based competitive bidding: the developer who offers the lowest price for the storage service wins. Public and private power distribution companies are eligible for VGF support for BESS and PSP.
Battery projects must meet a minimum 40% Domestic Content Requirement (DCR), which means at least 40% of the value must be made in India.
The goal is to store extra solar and wind power when it is plentiful and supply it at peak times (such as summer evenings), so that power supply can be available 24x7. On the same day, the Cabinet also approved a Rs 2,814 crore scheme to support processing of critical minerals like lithium and nickel.
Viability Gap Funding (VGF): How the Government Makes Infrastructure Projects Bankable
Viability Gap Funding is a one-time grant from the government to a project that is useful for the country but cannot earn enough money by itself to attract investors. The "viability gap" is the shortfall between the cost of the project and what it can earn. The government fills this gap, usually as a capital grant given in stages, so that the project becomes worth doing for a developer.
Storage plants cost a lot to build, and the price they can charge is not yet enough to recover that cost quickly. The Rs 14,500 crore VGF fills that gap so developers can quote lower tariffs. It is expected to pull in about Rs 97,600 crore of total investment.
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 releases it 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, and they can respond to the grid within seconds.
BESS is one of the three pillars of the new scheme. With 30 GWh planned, batteries will help balance the grid in the evening when solar output falls. The domestic content rule is meant to grow Indian battery manufacturing too.
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 electricity is needed, the water flows back down through turbines to make power. It works like a giant rechargeable battery made of water, and it can store power for longer hours than most batteries.
Pumped storage is the biggest part of the new scheme because it can store power for many hours and lasts for decades. VGF support helps with its very high upfront cost and long building time.
- Cabinet approval: 4 November 2026
- VGF outlay: Rs 14,500 crore
- Total storage target: 92 GWh = 60 GWh pumped storage + 30 GWh BESS + 2 GWh emerging technologies
- Scheme period: FY 2026-27 to FY 2030-31
- Total expected investment: about Rs 97,600 crore
- Allocation: tariff-based competitive bidding
- BESS Domestic Content Requirement: minimum 40%
- Earlier BESS VGF schemes: September 2023 (about Rs 9,400 crore outlay, 4,000 MWh) and June 2025 (Rs 5,400 crore, 30 GWh, Rs 18 lakh per MWh)
- Same-day approval: Rs 2,814 crore scheme for lithium and nickel processing