The Government's 5 Key Initiatives to Support BESS Storage In India

Stationary battery, or grid scale BESS systems have seen an unprecedented drop in prices in the past 5 years, with the drop since 2022 especially forcing a rethink across the world on integrating the speed at which these systems can be used. For not only have price dropped, efficiencies, safety and modularity and mobility has also improved tremendously for these systems today. From barely 15 GWh of storage capacity added globally in 2020, we are now looking at adding almost 250 GWh in 2025. 

A lot of this has been driven by the the adoption of LFP technology in a big way by the leadign Chinese firms, powered by the kind of innovation and scale China had demonstrated earlier for solar. So much so that today, even as large LFP based storage systems are mushrooming everywhere, Sodium Ion based batteries are also on the horizon, to make a likely impact well before 2030. In India, from an initial hope on PSP (Pumped Hydro Storage), the government has pivoted quickly to BESS based systems for immediate needs, as PSP takes time. We look at the key initiatives that the government has taken that have backed the country's BESS ecosystem to come good . A lot of the moves are inspired by the relative success of the country in solar and wind manufacturing, while some are new for the sector.

 

1. Direct Fund based support: By far the most visible backing through direct funding remains the Viability Gap Funding (VGF) Scheme, launched in September 2023. The VGF scheme started off by offering up to 40 percent of the capital cost as budgetary supportto make BESS projects financially viable, a huge support at that time when BESS bids were regularly hitting Rs 8 and over per unit. With a high focus on using BESS for grid stability, the scheme reserves a minimum 85 percent of project capacity for DISCOMs.

   Wirh an original aim of enabling 4,000 MWh of BESS capacity by 2030-31 backed by an allocation of Rs 9400 crores, the VGF scheme was quick to recognise the drop in prices that enabled an expansion of the program to cover 13.2 GWh of new BESS capacity within the original budgetary budget. The VGF disbursement occurs in five installments aligned with project implementation stages: 10 percent at financial closure, 45 percent upon commissioning, and 15 percent annually for three years post-commissioning. Significant disbursements under this scheme will start coming in from 2026.  While the scheme sought to bring down the Levelized Cost of Storage (LCoS) to under Rs 6/Kwh, we are already seeing bids at much lower amounts .
   A recent additional push has come from  Power System Development Fund (PSDF) launched in June this year, that allocated ₹5,400 crores to support 30 GWh of BESS capacityat a subsidized rate of ₹18 lakhs per MWh. Focused on state-level energy storage requirements besides state owned NTPC, with 25 GWh allocated to 15 states and 5 GWh to central energy PSUs. 

2. Support Through Tax & Duty Relief: 
   
   Passing on the benefits of ISTS (Inter State Transmission System) charges to energy storage along with other  renewable energy projects,was a key measure. The waiver was renewed in June 2025 to cover co-located BESS projects commissioned by June 30, 2028. The removal of customs duties in the Budget this year on key battery minerals including Cobalt and Lithium  has gone further to support the BESS manufacturing ecosystem being nurtured in the country.

3. Manufacturing Incentives:  Coming to manufacturing incentives, the key has obviously been the PLI (Production Linked Scheme) for battery manufacturing, following the government template across sectors. The scheme, with an Rs 18,100 crore outlay has had mixed results so far, with most of the winners behind schedule on their manufacturing targets. Meant to support 50 GWh of ACC (Advanced Cell Chemistry) manufacturing capacity four companies made the cut initially selected in March 2022- Reliance New Energy Solar Limited, Ola Electric Mobility Private Limited, Hyundai Global Motors Company Limited, and Rajesh Exports Limited—to establish facilities within two years, with incentives disbursed over five years on battery sales. In September 2024, Reliance Industries was additionally awarded 10 GWh of ACC capacity under the scheme's re-bidding process. Incredibly, for such a key scheme meant to strengthen the manufacturing eco-system, a complete front firm with no connection the actual Hyundai Motors was allowed to be picked, besides Rajesh Exports, which had also not covered itself with glory since winning. 
    
4. Regulatory measures- Regulatory measures have included the recent CERC proposal on a comprehensive framework for Integrated Energy Storage Systems (IESS),that acknowledges storage as aregulated assetwithin generating stations and transmission networks. From operational benchmarks like 85 percent round-trip efficiency, 90 percent availability, 5 percent auxiliary consumption, and 12-year depreciation for battery assets, to opening the doors for supplementary tariff options through fixed storage charges and more, the regulations have removed much uncertainty around BESS economics and viability.The CERC allows transmission licensees to install grid-side systems for reliability enhancement and transmission deferral, with revenues from storage services reducing annual transmission charges, making storage a vital cog that contributes to revenues and profits, rather than being just a cost. So muich so that today a solar+storage combination is comfortably compting with even thermal power on costs, and risks crowding out wind energy too.
   
   
    
5. Demand Generation:   On the demand side, India has set a clear pathway to adding storage capacity, that provides both developers and manufacturers a clear sight of future demand from the utility sector. Add to that rising demand from the C&I segment and in due course, the rooftop segment, and investing for larger storage capacities is no longer the risk it was even in 2023.  The clear and strong pipeline of tenders, the push to mandate storage across all reneweable projects and now thermal projects as well to smoothen energy flow, and an Energy Storage Obligation (ESO) mandate for states has ensured that demand side issues are covered adequately for players to make a move. Add to that the real possibility that as domestic manufacturing scales up, an ALMM type regime will come in for storage as well , probably by 2027-28 or 2028-29, and it's a clear push for energy storage while balancing out national priorities on costs and industry maturity.

Going ahead, much needs to be done still, be it shifting storage to a lower GST slab, to creating supply lines for raw materials at competitive rates for domestic industry. Ancillary services revenue for large batteries will also need to be allowed gradually, to ensure that large, starn alone batteries have a case for themselves.