VGF Scheme Expands to Support 30 GWh of New Standalone BESS Development in India
In a major policy push to support grid-scale energy storage, the Ministry of Power has approved an expanded Viability Gap Funding (VGF) scheme for 30 GWh of Battery Energy Storage Systems (BESS) on June 10, 2025. This builds upon the previous 2023 scheme that had supported 13.2 GWh, reflecting growing policy momentum to accelerate energy storage infrastructure.
Of the newly announced 30 GWh Battery Energy Storage System (BESS) capacity, 25 GWh has been allocated across 15 Indian states, while 5 GWh is designated for NTPC. The INR 5,400 crore scheme is projected to mobilize investments worth approximately INR 33,000 crore, supporting India’s near-term BESS targets through 2028. Among the states, Rajasthan, Gujarat, and Maharashtra received the highest allocations at 4,000 MWh each, followed by Karnataka and Andhra Pradesh with 1,500 MWh each.
Figure 1: BESS capacity allocation split under VGF tranche-II
Source: MoP, JMK Research
Under the original VGF scheme notified in September 2023, a budgetary provision of INR 3,760 crore was made for 4 GWh of BESS, later scaled to 13.2 GWh as battery costs declined. Initially estimated at INR 96 lakh/MWh, the VGF outlay was revised to INR 46 lakh/MWh or 30% of capital cost, whichever is lower, on account of falling battery prices. The latest 2025 scheme further reduces this to INR 18 lakh/MWh, indicating greater cost efficiency and improved commercial viability of storage solutions.
Table 1: Comparison of VGF BESS Scheme 2023 vs 2025
Source: MoP, JMK Research
A comparative analysis of the 2023 and 2025 VGF schemes highlights significant enhancements designed to improve project viability and execution efficiency. Key updates under the 2025 tranche include:
- Reduced commissioning timeline and extended contract period: The commissioning period has been shortened to 18 months (from 24 months previously), while the contract duration has been extended to 12-15 years. These changes aim to accelerate project deployment while ensuring long-term operational viability of battery storage assets.
- Revised VGF disbursement structure: The updated scheme front-loads financial support, with 70% of the Viability Gap Funding released by the Commercial Operation Date (COD). This adjustment enhances cash flow during the early project stages, improving bankability and drawing greater interest from investors and developers alike.
- Mandated minimum storage duration: The scheme introduces a minimum storage requirement of 2 hours with a preferred 1.5 cycles per day which was earlier absent in VGF BESS Scheme Tranche-I.
The primary objective of the scheme is to enable reliable integration of renewable energy into the grid. As per Central Electricity Authority (CEA) projections, India needs 37 GWh of BESS capacity by 2027 and 236 GWh by 2031–32. With declining battery costs and evolving policy frameworks, the enhanced VGF scheme provides a critical financial anchor to accelerate deployment of standalone BESS and support India’s clean energy transition.