The Union Cabinet has approved a Rs 14,500 crore Viability Gap Funding (VGF) scheme for grid-scale energy storage systems, aimed at supporting 92 GWh of storage capacity that is yet to be commissioned. The energy storage VGF scheme runs from FY 2026-27 to FY 2030-31 and was cleared at a meeting chaired by Prime Minister Narendra Modi, according to a Press Information Bureau release dated November 4, 2026.
The scheme is expected to back an estimated total investment of Rs 97,600 crore. The new capacity equals 170% of the country’s current grid-scale energy storage capacity and would help meet the 411 GWh of grid-scale storage required by 2031-32.
What Does the Energy Storage VGF Scheme Cover?
The 92 GWh target is split across three technologies: 60 GWh of hydro pumped storage plants (PSP), 30 GWh of battery energy storage systems (BESS) and 2 GWh of alternative storage technologies. Capacity will be allocated through tariff-based competitive bidding.
Public and private distribution companies can receive VGF support for BESS and hydro PSP projects. Projects using alternative storage technologies can be implemented by public and private sector entities.
Why Is a 40% Domestic Content Requirement Included?
BESS projects under the scheme must meet a minimum Domestic Content Requirement (DCR) of 40%. The stated aim is to build domestic storage manufacturing and reduce reliance on imported components, complementing existing supply-side battery manufacturing incentives.
The government says the scheme will support large-scale renewable integration, grid stability and round-the-clock power supply, in line with its Atmanirbhar Bharat and Viksit Bharat vision.
Market and Trade Reaction
No market or industry reaction to the approval had been reported in the sources reviewed at the time of writing.
What Happens Next?
Because capacity will be awarded through competitive bidding, the next steps are the issuing of bids and the selection of projects by distribution companies and other implementing entities. Details of bid timelines were not available in the sources reviewed.
Frequently Asked Questions
How much funding has the Cabinet approved for grid-scale energy storage?
The Cabinet approved Rs 14,500 crore in Viability Gap Funding for FY 2026-27 to FY 2030-31.
How much storage capacity will the scheme support?
It targets 92 GWh: 60 GWh of hydro pumped storage, 30 GWh of battery storage and 2 GWh of alternative technologies.
Is there a domestic manufacturing requirement?
Yes. BESS projects must meet a minimum 40% Domestic Content Requirement.
Source: Electrical Mirror, citing a Press Information Bureau release of November 4, 2026; report dated November 5, 2026.
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