The Union Cabinet approved a Viability Gap Funding (VGF) Scheme on 6th September 2023 to support the development of Battery Energy Storage Systems (BESS) in India. This scheme covers projects approved between 2023 and 2026. The funding is planned to be disbursed in five tranches: 10% upon financial closure, 45% upon achieving the Commercial Operation Date (COD), and 15% per year for the next three years from COD.
Initially, the scheme aimed to support 4,000 MWh of BESS capacity. However, due to a decline in battery prices, the capacity was increased to 13,200 MWh without changing the total budget of ₹3,760 crore. For the financial year 2024-25, a budgetary provision of ₹96 crore was made for 1,000 MWh of BESS, assuming a 10% disbursement at financial closure. But with the reduction in BESS capital costs, the VGF support per MWh was lowered from ₹96 lakh to ₹46 lakh or 30% of the capital cost, whichever is less. As a result, the budget was revised from ₹96 crore to ₹46 crore.
However, during 2024-25, no projects achieved financial closure, and hence, no funds were disbursed under the scheme. The Central Electricity Authority (CEA) is responsible for monitoring the scheme’s progress, while the Ministry of Power is overseeing its implementation to ensure timely completion and efficient use of funds.
According to the National Electricity Plan 2023, India will need 236 GWh of BESS capacity by 2031-32. This scheme is expected to support renewable energy integration and help manage electricity demand effectively, especially during peak hours when solar power is not available.
