Union Budget Increases VGF Support for BESS, Hikes PM Surya Ghar Allocations

Union Finance Minister Nirmala Sitharaman on Saturday presented the Union Budget for 2026–27. While the budget speech did not explicitly spell out detailed spending plans for India’s solar sector, the accompanying budget documents indicated a stronger thrust towards the Centre’s flagship solar and energy storage schemes.

As per the figures shared by the government, it has increased the budgetary allocations for the Ministry of New and Renewable Energy (MNRE)'s from Rs 25,301.22 crore to 32,914.67 crore, an increase of around 30 percent. 

In her budget speech beforethe Parliament, the finance minister highlighted measures aimed at reducing cost pressures in domestic clean energy manufacturing, particularly solar glass and battery storage.

“I propose to extend the basic customs duty exemption given to capital goods used for manufacturing lithium-ion cells for batteries, to those used for manufacturing lithium-ion cells for battery energy storage systems as well,” Sitharaman said.

She further added, “I propose to exempt basic customs duty on the import of sodium antimonate for use in the manufacture of solar glass.” The minister also laid emphasis on the support for rare earth matters, critical miners besides easing out taxations for biogas projects. 

Budgetary Allocations for Key Clean Energy Schemes

More granular details on government support for solar energy and Battery Energy Storage Systems (BESS) emerged from the budget documents, which showed enhanced allocations for key programmes such as the PM Surya Ghar scheme, stagnant allocation for PM-KUSUM but special thrust on the battery energy storage projects. 

As per the documents, the Union government had allocated ₹7,818 crore for the PM Surya Ghar scheme in 2024–25, which was increased to ₹17,000 crore in 2025–26. For 2026–27, the allocation has been further raised to ₹22,000 crore, reflecting a 29 percent increase over the previous year.

In contrast, allocations for the PM-KUSUM scheme remained unchanged at ₹5,000 crore.

Key Support for BESS Projects

At a time when India is witnessing a surge in BESS tenders and growing developer interest, the budget has also significantly enhanced support for the segment. The documents indicate a sharp increase in viability gap funding (VGF) support for BESS projects—from ₹100 crore to ₹1,000 crore—representing a nine-fold rise in allocation.

The move signals the government’s intent to accelerate large-scale energy storage deployment as renewable capacity additions continue to rise across the country.