Ministry of Power Approves INR 5,400 Cr VGF to Develop 30 GWh BESS Across 15 States and NTPC
The Ministry of Power has approved the second tranche of its Viability Gap Funding (VGF) scheme, allocating INR 5,400 crore from the Power System Development Fund (PSDF) to support 30 GWh of Battery Energy Storage Systems (BESS) across 15 states and NTPC, as part of India’s push to integrate more renewable energy into the national grid.
June 10, 2025. By Mrinmoy Dey
The scheme offers VGF at INR 18 lakh/MWh and aims to enhance the integration of renewable energy into the grid while supporting a reliable and flexible electricity supply. This initiative comes amid India’s ambitious goal to install 393 GW of renewable energy (293 GW solar and 100 GW wind) by 2030, which will account for nearly half of the country’s total installed generation capacity.
Of the total 30 GWh capacity, 25 GWh has been earmarked for 15 states and 5 GWh for NTPC. Key allocations include 4,000 MWh each to Rajasthan, Gujarat, and Maharashtra; 2,000 MWh each to Karnataka and Andhra Pradesh; and 1,500 MWh to Tamil Nadu, Madhya Pradesh, Telangana, and Uttar Pradesh. Smaller allocations of 500 MWh have been made to Haryana, Kerala, Punjab, Chhattisgarh, Odisha, and Uttarakhand.
The BESS systems will play a crucial role in managing the variability of renewable energy, particularly by storing excess solar power during the day and discharging it during peak evening hours when solar output drops. NTPC’s 5 GWh allocation is expected to optimise the use of its existing thermal generation and transmission infrastructure, enabling smoother grid operations during non-solar hours.
Eligible entities include state utilities, central agencies, or government-authorised entities. Projects will be awarded via Tariff-Based Competitive Bidding (TBCB) on a Build Own Operate (BOO) or Build Own Operate Transfer (BOOT) basis, preferably for 12 to 15 years. Projects should preferably have a 2-hour discharge duration and perform 1.5 charge-discharge cycles per day.
The scheme specifies that projects must be commissioned within 18 months from signing the Battery Energy Storage Purchase Agreement (BESPA) or Power Purchase Agreement (PPA).
While 20 percent of VGF will be disbursed on financial closure with the submission of the bank guarantee, another 50 percent will be disbursed on Commercial Operation Date (COD). The balance 30 percent will be disbursed after completion of one year from COD.
According to the Central Electricity Authority (CEA), India will require 37 GWh of BESS by 2027 and 236 GWh by 2031-32. While 13.2 GWh has already been approved under the first tranche of the VGF scheme, this new allocation significantly boosts the country’s battery storage roadmap.
The Power Ministry has directed all eligible states and NTPC to submit their proposals to CEA within 60 days, detailing implementing agencies, locations, and project sizes for screening and approval.
By incentivizing large-scale battery storage, the government is laying the groundwork for a flexible, resilient, and renewable-powered grid which will be crucial to achieving India’s clean energy ambitions and ensuring 24x7 power supply across the country.
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