The primary government subsidy for Battery Energy Storage Systems (BESS) in India is the ₹9,400-Crore Viability Gap Funding (VGF) scheme, which provides financial grants covering up to 40% of the capital expenditure for 4,000 MWh of storage projects.
For commercial and industrial enterprises, fiscal benefits include 40% Accelerated Depreciation under Section 32 of the Income Tax Act, 25-year waivers on Inter-State Transmission System (ISTS) charges, and state-level renewable open access exemptions.
The ₹9,400-Crore Viability Gap Funding (VGF) Scheme
To accelerate the integration of variable solar and wind power, the Union Cabinet approved the Viability Gap Funding (VGF) Scheme for Development of BESS. The scheme provides up to 40% of capital costs as direct financial grants through competitive bidding:
- Target Capacity: 4,000 MWh of BESS projects commissioned across India by 2030–31.
- Beneficiary Distribution: At least 85% of total funded BESS capacity is reserved for state distribution companies (DISCOMs) to stabilize local grid networks.
- Target Levelized Cost: The grant brings the levelized cost of battery storage down to ₹5.50–₹6.60 per unit, making clean stored power immediately competitive with coal and gas peaking plants.
Energy Storage Obligations (ESO) for DISCOMs
Following the success of Renewable Purchase Obligations (RPO), the Ministry of Power established trajectory mandates for Energy Storage Obligations (ESO) under the Electricity Act:
| Financial Year | Mandatory Storage Percentage | Projected Energy Storage Deployment |
|---|---|---|
| 2024 – 2025 | 1.50% | Initial pilot grid-scale storage tenders |
| 2026 – 2027 | 2.50% | C&I behind-the-meter and substation storage scale-up |
| 2028 – 2029 | 3.50% | Multi-GWh utility and solar-park integration |
| 2029 – 2030 | 4.00% | Building toward the CEA National Electricity Plan requirement of 47.24 GW / 236 GWh of BESS by 2031–32 |
PLI Scheme for Advanced Chemistry Cells (ACC)
The Government of India has committed ₹18,100 Crores under the Production Linked Incentive (PLI) Scheme for Advanced Chemistry Cell (ACC) Battery Storage. The program incentivizes domestic setting up of Giga-scale cell manufacturing facilities:
- Mandates a minimum 50 GWh cumulative capacity with 60% domestic value addition within five years.
- Eliminates foreign exchange volatility and customs shipping delays for Indian BESS pack integrators like CLN Energy.
- Accelerates domestic adoption of advanced LFP (Lithium Iron Phosphate) chemistries with zero reliance on expensive cobalt imports.
Corporate Tax Benefits & Customs Duty Exemptions
For commercial facilities, industrial factories, and private data centers investing in captive BESS, the central government provides powerful fiscal incentives:
- 40% Accelerated Depreciation: Commercial entities in India can claim 40% depreciation on the capital value of battery storage equipment in Year 1 under Section 32 of the Income Tax Act, shielding substantial operating profits from corporate tax.
- ISTS Transmission Charge Waiver: Complete 25-year waiver of Inter-State Transmission System (ISTS) charges for electricity generated from co-located solar/wind power and delivered to BESS projects commissioned before June 2025.
- Customs Duty Rationalization: Concessional customs duties on capital goods imported for lithium-ion battery manufacturing and packaging equipment.
To explore how these fiscal policies translate into project numbers for your business, consult our foundational BESS cost guide or our national energy storage outlook.
Planning a Subsidized or VGF-Compliant Storage Project?
Download our utility BESS specifications or consult with a CLN project development engineer on tender requirements and grant eligibility.
Frequently asked questions
What is the Viability Gap Funding (VGF) scheme for BESS in India?
Approved by the Union Cabinet with an outlay of ₹9,400 Crores (including ₹3,760 Crores in direct budgetary support), the BESS Viability Gap Funding (VGF) scheme provides capital grants covering up to 40% of the total project capital expenditure for 4,000 MWh of battery storage projects across India. It is designed to lower the levelized cost of battery storage to ₹5.50–₹6.60/kWh for state utilities.
Are private commercial and industrial factories eligible for BESS subsidies?
While the central VGF scheme primarily targets utility-scale and DISCOM-linked public tenders, commercial enterprises and private factories benefit directly from other fiscal incentives, including 40% Accelerated Depreciation under Section 32 of the Income Tax Act, exemptions on Inter-State Transmission System (ISTS) charges, and state-level green open access waivers.
What is the Energy Storage Obligation (ESO) mandated by the Ministry of Power?
The Ministry of Power has mandated Energy Storage Obligations (ESO) requiring all electricity distribution companies (DISCOMs) and designated open-access consumers to procure a defined percentage of their total electricity consumption from energy storage systems, rising progressively to 4.0% by 2029–2030.
How does the Production Linked Incentive (PLI) scheme impact BESS pricing?
The ₹18,100-Crore National Programme on Advanced Chemistry Cell (ACC) Battery Storage provides financial incentives for setting up 50 GWh of domestic cell manufacturing capacity in India. As domestic gigafactories scale, local cell production is expected to reduce logistics costs, import duties, and forex exposure, lowering domestic BESS system pricing by 15% to 25% over the next three years.
Can rooftop solar subsidies (PM Surya Ghar) be used for battery storage?
The PM Surya Ghar: Muft Bijli Yojana provides direct subsidies for residential grid-tied rooftop solar panels up to 3 kW (up to ₹78,000). While the central subsidy currently applies to the solar PV component, homeowners frequently pair this with compact residential LiFePO₄ storage (such as the CLN Home Series) to ensure full power continuity during grid cuts.