The Union Cabinet has approved viability gap funding of ₹14,500 crore to help build 92 gigawatt-hours of grid-scale energy storage, mostly pumped hydro and batteries, between 2026–27 and 2030–31. Alongside it, the Cabinet cleared a ₹2,814 crore subsidy for India’s first commercial-scale lithium and nickel processing plants. Together, the two decisions target the weakest links in India’s clean-energy transition: storing solar power for the evening, and supplying the metals that batteries need.
India adds solar capacity faster than almost any country, but solar power has an obvious limit: it stops at sunset, just as household demand peaks. On 4 November the Union Cabinet approved the largest public commitment yet to solving that problem.
According to the government’s statement, the scheme provides viability gap funding (VGF) of ₹14,500 crore for 92 GWh of grid-scale energy storage over five financial years, from 2026–27 to 2030–31. It is expected to attract about ₹97,600 crore of investment. Railways and Information and Broadcasting Minister Ashwini Vaishnaw announced the decision.
What the money buys
The 92 GWh is divided into three parts:
- 60 GWh of pumped hydro storage. Water is pumped uphill to a reservoir when power is cheap and released through turbines when it is needed.
- 30 GWh of battery energy storage systems (BESS), mostly lithium-ion. These must meet a domestic-content requirement of at least 40%.
- 2 GWh of “alternative” technologies, for newer approaches still being proven.
Capacity will be awarded through tariff-based competitive bidding. Public and private distribution companies are eligible for battery and pumped storage, and any public or private entity can bid for the alternative technologies. The government’s statement does not give the support per unit or name the administering ministry.
Viability gap funding is a one-time capital grant that closes the gap between what a project costs and what it can earn. It lets developers bid lower tariffs than they otherwise could, so electricity buyers pay less for stored power.
Why gigawatt-hours matter
Storage has two dimensions, and they are often confused. Power, in gigawatts (GW), is how fast a system can deliver electricity. Energy, in gigawatt-hours (GWh), is how much it can hold. A 1 GW battery that can run for four hours stores 4 GWh. For shifting solar power into the evening, the energy figure matters most.
The government says the new 92 GWh equals about 170% of India’s existing grid-scale storage, and that India will need 411 GWh by 2031–32. Central Electricity Authority Chairperson Ghanshyam Prasad told ANI on 4 November that India has about 5.3 GW of battery storage and 7 GW of pumped hydro installed, with about 10 GW more battery capacity expected within six or seven months.
The scheme builds on two earlier ones: a September 2023 VGF scheme of ₹3,760 crore for 4,000 MWh of batteries, and a June 2025 scheme of ₹5,400 crore for 30 GWh. The new commitment is much larger, and it is the first to put pumped hydro at the centre.
Pumped hydro and batteries do different jobs
Batteries respond within milliseconds, can be built in months and suit two- to four-hour daily cycles. Pumped storage takes years to build and needs suitable terrain, but lasts decades and can store energy for longer. India has significant pumped-storage potential in the Western Ghats and the Eastern Ghats, including in Andhra Pradesh, where several large projects are under development. A grid with a high share of renewables needs both.
The minerals behind the batteries
The second decision addresses supply. The Cabinet approved a ₹2,814 crore capital-expenditure support scheme, also running to 2030–31, for four processing plants:
- Two lithium plants, each with at least 30,000 tonnes of annual capacity and a subsidy capped at ₹500 crore
- Two nickel plants, each with at least 50,000 tonnes, capped at ₹900 crore, with cobalt recovered as a by-product
The subsidy covers 30% of capital costs. Plants will be chosen first on technical qualification and then by least-cost bidding, and money will be released in three tranches tied to milestones.
Processing is the stage that turns mined ore or brine into the battery-grade chemicals that cell makers buy. It is the most concentrated part of the global battery supply chain, dominated by China. Even countries that mine lithium or nickel often ship them to China for refining. Without domestic processing, India’s ambition to make batteries at home would still depend on imported intermediate chemicals.
The scheme complements the National Critical Mineral Mission, approved in January 2025 with ₹16,300 crore of government spending and about ₹18,000 crore expected from public-sector companies. Mines Secretary Keshav Chandra also referred to planned mineral-processing parks in Gujarat, Maharashtra, Odisha and Andhra Pradesh.
What it means for the Telugu states
Andhra Pradesh is likely to be one of the main beneficiaries. Its Eastern Ghats terrain suits pumped storage, and several large pumped-storage projects are already planned or under construction there. The state is also one of the four named by the Mines Secretary for a mineral-processing park. Telangana, with Hyderabad’s growing cluster of data centres and electronics manufacturers, has a different interest: reliable round-the-clock power and a supply of battery materials for local assembly. How storage capacity is shared out between states, and whether distribution companies in the south bid for it, will decide how much of the 92 GWh is built in the region.
The caveats
Neither scheme guarantees results. India’s earlier battery tenders have suffered delays, and several pumped-storage projects face long environmental and land-acquisition timelines. A 40% domestic-content rule may raise costs while local cell manufacturing scales up. For processing, the harder problem is feedstock. India has limited proven lithium reserves, so the new plants will probably depend at first on imported ore and concentrate, or on recycled material. And the $400 billion of renewable “commitments” announced at the Bharat RE summit are pledges, not investments.
