Govt Mandates 20% Local content Procurement Norm For VGF-backed BESS projects

Ministry of Power (MoP) has recently amended guidelines to mandate the use of a minimum 20% local content of the total project cost in Battery Energy Storage System (BESS) procurements under the Viability Gap Funding (VGF) scheme. This announcement comes at a time when BESS is not currently included in the notified list under public procurement norms.

The regulation also set guideline for tenders that have already been issued without a specific mention of local content. In this case, the regulation requires states to obtain an undertaking from bidders to meet the 20% local content requirement and proceed with the award of contracts accordingly.

Procurement Preference To Local Content For BESS Projects

The move follows requests from several states seeking exemptions from the Public Procurement (Preference to Make in India) Order for implementing BESS capacity under the VGF scheme, supported through the Power System Development Fund (PSDF). The latest notification aims to enable procurement preference linked to local content for BESS projects implemented under the VGF scheme.

To address this gap, the Ministry of Power (MoP) has added a new clause under the VGF guidelines to extend public procurement provisions under the Make in India scheme to BESS implementation. In addition, the Department for Promotion of Industry and Internal Trade (DPIIT) has notified that certain power sector items with adequate domestic manufacturing capacity and competition may be procured exclusively from Class-I local suppliers, although BESS has not yet been included in the notified list.

What Does it Mean For Erstwhile BESS Tenders

For previously issued tenders without having a local content provisions, and previously issued tenders without specific local content provisions may require states to seek formal undertakings from bidders. Thereby, mandating the procurer to comply with the revised local content norms and proceed with contract awards.

The Ministry of Power had already amended the VGF guidelines in August to mandate that Energy Management System (EMS) application software used in BESS projects be developed indigenously. The minimum local content requirement under the revised guidelines includes such domestically developed EMS software.

Further, under amendments to the VGF guidelines issued on June 4, 2025, the ministry mandated indigenous development of EMS application software for all BESS capacity implemented under the scheme.