India Approves ₹14,500 Crore for 92 GWh of Energy Storage, With Pumped Hydro Taking the Lead

A storage push worth nearly ₹1 lakh crore

India's Union Cabinet has approved ₹14,500 crore, about $1.5 billion, in subsidies to help develop 92 gigawatt-hours of electricity storage, with nearly two thirds of the planned capacity coming from pumped hydro projects. The programme is expected to support projects requiring a total investment of ₹97,600 crore.

The Cabinet, chaired by Prime Minister Narendra Modi, approved the scheme on November 4, 2026. Support will run from the financial year 2026-27 through 2030-31 and cover storage capacity that has yet to enter service. Battery projects receiving support must meet a minimum domestic content requirement of 40%.

The decision tackles a practical problem in India's electricity transition: solar panels and wind turbines can generate large amounts of power when demand is relatively low, while households and businesses still need electricity after sunset or when the wind drops. Storage moves electricity from when it is generated to when it is needed.

The government says the programme will improve grid stability, increase the use of renewable electricity and reduce reliance on conventional generation to maintain supplies throughout the day and night. For electricity distribution companies, the challenge will be securing storage that is affordable to build, charge and operate.

The financial support equals about 14.9% of the projected investment, calculated from ₹14,500 crore divided by ₹97,600 crore. Most of the money required will therefore have to come from other financing. The government's grant is intended to close part of the gap between the cost of building storage and the revenue a project can earn.

What the 92 GWh will contain

The scheme divides support among three types of storage, with pumped hydro receiving the largest allocation:

• 60 GWh from hydro pumped storage plants, about 65% of the total.
• 30 GWh from battery energy storage systems, about 33%.
• 2 GWh from alternative storage technologies, about 2%.

Pumped storage uses electricity to move water into a higher reservoir. When power is needed, the water flows downhill through turbines to generate electricity. Batteries store energy chemically and release it as electricity when required.

A gigawatt-hour measures an amount of energy. A gigawatt measures the rate at which electricity is supplied. For example, a store containing 1 GWh could theoretically deliver 1 GW for one hour, before allowing for losses and operating limits. The 92 GWh figure describes energy storage capacity, rather than how much power every project can deliver at once.

The emphasis on hydro expands the government's approach beyond earlier subsidy programmes focused on batteries. Pumped storage is particularly useful for moving substantial amounts of electricity between different parts of the day, while batteries can respond quickly to changes in supply and demand.

Anujesh Dwivedi, a partner at Deloitte India, identified the range of technologies as a central feature of the approval:

The focus on pumped hydro, in addition to BESS and alternative technologies is the key highlight of the new VGF Scheme,

How large is the programme?

The Cabinet says the additional 92 GWh is equivalent to 170% of India's present storage capacity serving the electricity grid. In other words, the planned addition is about 1.7 times the existing base, a substantial expansion if the projects are completed.

India's estimated storage requirement is 411 GWh by 2031-32. The new programme alone would provide about 22.4% of that amount, calculated as 92 divided by 411. Existing facilities and projects developed through other programmes will also contribute toward meeting the requirement.

The Central Electricity Authority has also projected requirements of 235 GWh by 2029-30 and 888 GWh by 2035-36. The National Electricity Plan 2023 put the requirement at 2,380 GWh in 2047. Those figures show why storage development extends well beyond the five financial years covered by this subsidy.

India's target of 500 GW of electricity generation capacity from non-fossil sources by 2030 adds urgency. More solar and wind generation increases the value of facilities that can absorb electricity during abundant production and return it during periods of higher demand.

How the subsidy and bidding will work

Viability Gap Funding, or VGF, is a government contribution intended to make a useful infrastructure project financially workable. It reduces part of the investment burden so that a developer can offer a service at a price buyers are more likely to accept.

Capacity under the new scheme will be allocated through competitive bidding based on tariffs. Developers will compete on the price they offer for storage services, subject to the requirements of each tender. Public and private electricity distribution companies will be eligible for support for battery and pumped hydro projects. Public and private entities will implement projects using alternative technologies.

Distribution companies, often called discoms, buy electricity and deliver it to consumers. Storage gives them another way to manage the gap between what they buy and what their customers need at a particular hour. Its value depends partly on whether they can obtain inexpensive electricity for charging and discharge it when demand and prices justify the cost.

The detailed framework for the latest scheme is awaited, including the final support rates, payment conditions, performance requirements and tender dates. Those rules will shape how much developers must borrow and how the benefits reach electricity buyers.

Under an earlier arrangement, 20% of eligible subsidy was released at financial closure, the point when a project's financing agreements are completed. Charith Konda, lead energy specialist at the Institute for Energy Economics and Financial Analysis, said substantial borrowing was still needed at that stage. The timing of a grant can therefore matter alongside its size.

From the first battery grants to the new approval

The latest decision follows several stages of government support. A proposal circulating earlier in 2026 envisaged a larger battery allocation than the Cabinet ultimately approved: 50 GWh rather than 30 GWh.

• September 2023: The Cabinet approved support for 4,000 MWh, equivalent to 4 GWh, of battery storage, with grants covering up to 40% of capital cost.
• May 30, 2026: A proposal under consultation envisaged about ₹15,000 crore of support for 112 GWh, comprising 50 GWh of batteries, 60 GWh of pumped storage and 2 GWh of other technologies.
• November 4, 2026: The Cabinet approved ₹14,500 crore for 92 GWh, retaining the hydro and alternative technology allocations while reducing the battery component.
• 2030-31: The final financial year covered by the newly approved programme.

The September 2023 battery scheme had an initial project outlay of ₹9,400 crore, including ₹3,760 crore in government budget support. It aimed to bring the cost of storage to ₹5.50-₹6.60 per kilowatt-hour by 2030-31 and required at least 85% of supported capacity to be available to distribution companies.

Subsequent battery funding rounds were described as supporting 13.2 GWh and 30 GWh, with the first fully tendered and the second still underway by May 2026. Those figures total 43.2 GWh, while the earlier programme's aggregate capacity has also been put at 43.8 GWh, alongside funding of ₹9,160 crore.

The approved programme adds a large hydro component to that battery funding history. Its planned 92 GWh is 23 times the 4 GWh covered by the original September 2023 approval.

What the 40% domestic content rule changes

Battery projects seeking support will have to meet a minimum domestic content requirement of 40%. The government wants public spending on storage deployment to create demand for Indian manufacturing and reduce dependence on imported components.

The approach connects two parts of industrial policy. Existing manufacturing incentives support companies producing batteries, while the new storage grants support projects buying and installing them. Together, the policies aim to give domestic producers a larger market.

Nomura expects the requirement to encourage manufacturing and assembly of battery storage systems in India. Debmalya Sen, president of the India Energy Storage Alliance, said fresh subsidies could also cushion tariff increases associated with domestic value requirements and rising battery costs.

Sen gave a more optimistic assessment of battery project economics than some other specialists:

BESS is already commercially viable,

Sen cited tariffs without VGF of around ₹3 lakh per megawatt per month. That is a payment for having storage capacity available. Buyers must also consider the electricity used to charge the batteries and how often they will use the service.

Why a cheap storage bid can still be costly

Konda put standalone storage capacity tariffs at about ₹2.6 per unit of electricity. Charging and discharging costs add roughly ₹2.5-₹3 per unit, bringing the delivered cost to approximately ₹5.5-₹6 per unit. A unit in electricity billing means one kilowatt-hour.

That delivered range is close to tariffs of ₹5.25-₹6 per unit for renewable power contracted to provide a more dependable supply. Distribution companies must therefore compare the full cost of different ways to obtain electricity when they need it, including charging costs and scheduling responsibilities.

Konda argued that the main constraints extend beyond access to funding:

Finance or capital is not the real bottleneck in accelerating energy storage deployment in India,

He pointed to aggressive bidding, import dependence and price uncertainty. A developer offering a very low tariff must still complete construction, repay borrowing and maintain equipment over the contract period.

Alekhya Datta, director of the Electricity and Renewables Division at TERI, cited an assessment that nearly 75% of standalone battery capacity allocated in 2025 for systems delivering power for two hours faced risks to financial viability. He said project economics depend on charging prices, usage, discharge duration, financing costs and battery performance over its life.

Datta described the limits of financial assistance:

However, subsidy alone cannot ensure commercial viability or affordable tariffs for DISCOMs,

Performance will determine the value of public money

Distribution companies will need to use contracted storage effectively to obtain the expected savings and supply benefits. A facility that is ready to operate but rarely charged or discharged can still create payment obligations for its buyer.

Konda said earlier subsidy payments depended on battery availability rather than actual usage or value delivered to the grid. He identified the buyer's ability to manage storage as a central commercial issue:

The real question is whether DISCOMs can utilise the contracted storage capacity efficiently and profitably,

Datta called for procurement rules that account for availability, usage, charging and discharging efficiency, repeated operation and battery degradation. Efficiency measures how much electricity comes back out compared with what went in. Degradation is the gradual reduction in a battery's ability to store energy as it ages and is used.

Battery contracts also need to account for adding or replacing equipment as performance declines. These costs affect whether the tariff agreed at the start remains workable throughout the service period.

Datta proposed a closer connection between financial assistance and results:

Greater consideration should also be given to linking VGF support to operational performance,

Which hydro projects could benefit?

Nomura identified 11 pumped storage projects under construction with a combined generating capacity of 15,870 MW. Developers include state electricity companies alongside Greenko, Tata Power, JSW Energy, Adani businesses and Torrent Power.

The construction pipeline includes Greenko's Gandhisagar project of 1,920 MW, expected in December 2026; Tamil Nadu's Kundah project of 500 MW and Adani's Chitravathi project of 500 MW, both expected in February 2027; and Greenko's Saundatti project of 1,600 MW, expected in December 2027.

Later expected completions include JSW Energy's Bhavali project of 1,500 MW in December 2028, Tata Power's Bhivpuri project of 1,000 MW in February 2029 and Torrent Power's Karjat project of 3,000 MW in December 2029. Karnataka Power Corporation's Sharavathy project of 2,000 MW is scheduled for May 2032, beyond the scheme's funding period.

Those schedules show how construction timing will affect the rollout. Projects still being built form a potential pool for support, while awards will depend on eligibility and competitive bidding. Their MW ratings describe generating power; their contribution to the scheme's GWh target will depend on how much energy they can store and release.

The programme's practical outcome will come from combining completed infrastructure with effective operation: storing renewable electricity when it is plentiful and delivering it when consumers need it. The ₹14,500 crore commitment helps finance that expansion, while tender design, construction and daily scheduling will determine the service electricity buyers receive.

Key Points

• The Cabinet approved ₹14,500 crore in support for 92 GWh of storage over 2026-27 to 2030-31.
• The allocation comprises 60 GWh of pumped hydro, 30 GWh of batteries and 2 GWh of alternative technologies.
• Total project investment is estimated at ₹97,600 crore, with government funding equal to about 15%.
• Battery projects must meet a minimum domestic content requirement of 40%.
• The planned capacity equals about 22% of India's estimated 411 GWh storage requirement for 2031-32.
• Competitive bidding will allocate capacity, with detailed implementation rules still awaited.
• Charging costs, effective usage, construction and equipment performance will shape the cost to electricity buyers.