Govt expands Battery Energy Storage scheme to 13,200 MWh amid falling costs 

The VGF scheme support will be provided for BESS projects approved between 2023 and 2026, with fund disbursement occurring in five stages: 10% upon financial closure, 45% at Commercial Operation Date (COD), and the remaining 45% spread over the next three years in equal installments. 

The Union Cabinet’s Viability Gap Funding (VGF) Scheme for Battery Energy Storage Systems (BESS) has been significantly expanded from 4,000 MWh to 13,200 MWh, while staying within the approved budgetary allocation of ₹3,760 crore. The decision comes as battery prices continue to decline, allowing for a larger capacity under the scheme. 

Under the scheme, VGF support will be provided for BESS projects approved between 2023 and 2026, with fund disbursement occurring in five stages: 10% upon financial closure, 45% at Commercial Operation Date (COD), and the remaining 45% spread over the next three years in equal installments. 

Initially, a budgetary provision of ₹96 crore was allocated for 1,000 MWh of BESS in 2024-25, assuming a disbursement of ₹96 lakh per MWh. However, due to the reduction in BESS costs, the VGF support has been revised to ₹46 lakh per MWh or 30% of the capital cost, whichever is lower. Consequently, the budgetary allocation was reduced to ₹46 crore. 

Despite these allocations, no expenditure was incurred under the scheme in 2024-25 as no projects achieved financial closure. The Central Electricity Authority (CEA) is responsible for monitoring the scheme, while the Ministry of Power oversees its implementation to ensure timely completion and efficient fund utilisation.