Cabinet Clears Rs 14, 500 Crore Energy Storage Scheme: How It Will Ensure Round-The-Clock Power Supply

 

 

New Delhi: The central government on Wednesday gave its nod to two major schemes to build a robust ecosystem for energy storage and critical mineral processing in the country. During a Union Cabinet meeting, it approved a Rs 14, 500 crore Viability Gap Funding (VGF) scheme for the development of 92 GWh Grid-Scale Energy Storage Systems. The Prime Minister-Narendra Modi-led Cabinet also approved the Capex Support Scheme to promote Critical Mineral Processing with an outlay of Rs 2, 814 crore for Lithium and Nickel processing.

The Union Cabinet approved the VGF scheme for development for the period FY 2026-27 to FY 2030-31 with the objective extending beyond merely increasing electricity storage capacity.

The aim to develop domestic processing capabilities for essential minerals such as lithium and nickel is also expected to strengthen the electric vehicle (EV), battery manufacturing, and renewable energy sectors.

 

The VGF scheme will promote three types of technologies

30 GWh through Battery Energy Storage Systems (BESS)

60 GWh through Pumped Storage Projects (PSP)

2 GWh through emerging storage technologies

The scheme includes a 'Domestic Content Requirement' (DCR) of 40% for battery storage systems, emphasising the use of locally manufactured components to boost domestic production.

“The scheme marks a significant step towards strengthening India's power sector infrastructure, facilitating large-scale integration of renewable energy and ensuring reliable, affordable and round-the-clock power supply. It will also provide an impetus to domestic manufacturing of battery energy storage systems, reduce import dependence and enhance the country's long-term energy security, ” an official release stated.

The scheme would ensure the storage of surplus electricity generated from solar and wind energy sources. The stored electricity could be utilised during the peak summer season or when renewable energy generation declines. This will help ensure the availability of electricity 24x7.

 

The scheme would help develop 60 GWh of Hydro Pumped Storage Plant (PSP) capacity, 30 GWh of Battery Energy Storage System (BESS) capacity and 2 GWh of capacity through alternative energy storage technologies, with a total estimated investment of Rs 97, 600 crore.

The VGF support will help speed up the deployment of large-scale energy storage infrastructure in the country.

The allocation of energy storage capacity will be carried out through a tariff-based competitive bidding process. Public and private sector power distribution companies will be eligible for Viability Gap Funding (VGF) support for Battery Energy Storage System (BESS) and Hydro Pumped Storage Projects (PSP). Projects based on other energy storage technologies will be implemented by both public and private sector entities.

 

The scheme also aims to strengthen India's domestic energy storage manufacturing ecosystem by providing demand-side financial support and reducing reliance on imported components.

As part of this push towards ‘Aatmanirbhar Bharat’, BESS projects will be required to meet a minimum Domestic Content Requirement (DCR) of 40%. The move is expected to boost domestic manufacturing, create new opportunities for Indian industry and complement existing government incentives for battery manufacturing.

Scheme To Cut Dependence On Other Countries For Critical Minerals: PM Modi

Prime Minister Narendra Modi on Wednesday said the Capex Support Scheme to promote Critical Mineral Processing will boost domestic critical mineral processing and reduce India's dependence on foreign supply chains.

"Do you feel India should depend on other countries for processing the critical minerals that power our future? I certainly don't! " Modi asked in a post on X.

 

The Prime Minister said Lithium, nickel, and cobalt are essential for EVs, batteries, electronics and defence, yet India remains heavily dependent on imports of refined materials. "To address this, the Cabinet has approved a scheme to change this, " he said.

Modi said the key highlights of the scheme are new critical mineral processing plants, capital subsidy to boost investment, greater domestic value addition and stronger supply chains.

"The principle is clear.India must have capabilities to build technologies of the future, " he said. Processing of critical minerals remains geographically concentrated in a few global locations, an official statement said. This exposes supply chains to geopolitical disruptions, price volatility, and potential supply restrictions, posing severe threats to supply chain resilience and economic security, it said.