Supply ChainAnalysis

India ties battery storage subsidies to 40% domestic content

The Cabinet cleared ₹14,500 crore of support for 92 GWh of storage, 30 GWh of it batteries with 40% domestic content, and ₹2,814 crore for four mineral plants.

By Procupy News DeskPublished 4 Nov 2026, 8:00 PM IST4 min readSource: businesstoday.in

In 60 words

India's Union Cabinet approved two schemes on 4 November. One is ₹14,500 crore of viability gap funding for 92 GWh of grid-scale storage from FY27 to FY31. The other is ₹2,814 crore of capital support for four lithium and nickel processing plants. Only 30 GWh of the storage is batteries, and those projects must meet a 40% domestic content rule.

Key points

The ₹14,500 crore VGF covers 92 GWh of storage, split into 60 GWh of pumped hydro, 30 GWh of batteries and 2 GWh of alternative technologies¹.
BESS projects backed by the scheme must meet a minimum domestic content requirement of 40%¹.
The ₹2,814 crore mineral scheme offers a 30% capital subsidy for two lithium plants of at least 30 kt and two nickel plants of at least 50 kt².
Indian-made battery components cost 18% to 61% more than imported equivalents, a report launched by the Ministry of Heavy Industries found³.

India's Union Cabinet approved two programmes on 4 November. One is ₹14,500 crore of viability gap funding for grid-scale energy storage. The other is ₹2,814 crore of capital support for critical mineral processing^2, 1. Information and Broadcasting Minister Ashwini Vaishnaw announced both at the Cabinet briefing^2, 4.

The storage scheme runs from FY27 to FY31¹. It is meant to bring 92 GWh of storage that is yet to be commissioned into the grid^1, 4. The mineral scheme runs for five years and is limited to four processing plants². The government says the VGF will help improve the financial viability of the storage projects¹.

Batteries are 30 GWh of the 92 GWh

The target is 60 GWh of pumped hydro storage, 30 GWh of battery energy storage systems (BESS) and 2 GWh of alternative storage technologies¹. Total estimated investment is ₹97,600 crore¹. Batteries are 30 GWh of the total, not 92 GWh¹.

The government says the 92 GWh equals 170% of India's present grid-scale storage capacity¹. Its stated requirement is 411 GWh by FY32¹. Capacity will be allocated through tariff-based competitive bidding¹. Public and private electricity distribution companies are eligible for VGF on BESS and pumped hydro projects¹. Projects using alternative technologies will be implemented by public and private sector entities¹.

The reports do not give a VGF amount per kWh, a split of the ₹14,500 crore across the three technologies, the implementing agency or the first bid dates^1, 4. Anujesh Dwivedi, a partner at Deloitte India, said the focus on pumped hydro alongside batteries and other technologies is "the key highlight of the new VGF Scheme"¹.

A 40% domestic content rule for batteries

BESS projects supported by the scheme will face a minimum domestic content requirement of 40%¹. The government says this will complement existing supply-side incentives for battery manufacturing¹. The rule arrives before the supply chain does. A report launched by the Ministry of Heavy Industries found that Indian capacity covers less than 3% of the cathode, anode and electrolyte volumes projected for 2032³. It found no known domestic output of separators or battery-grade copper foil³.

Indian costs for those five component groups run 18% to 61% above imported equivalents³. Components make up roughly 76% of cell manufacturing costs, the report found³. It pointed to China's near-total dominance of global battery component supply³. The International Energy Agency puts China's share of lithium refining at around 70% and of cobalt refining above 75%⁵.

Neither the government's statement on the scheme nor the NETRA report says whether the 40% test applies to cells, modules or the whole system^1, 3. India's battery demand is projected to rise from about 33 GWh in 2025 to 236 GWh in 2032 and close to 600 GWh by 2037, according to the NETRA report³. Rahul Walawalkar, founder and president of NETRA, said "cell makers take 18 to 24 months to qualify a supplier"³. He added that "decisions taken by March 2027 will decide whether the cell plants coming online by March 2029 can buy qualified materials made in India"³.

Four plants, two minerals, least-cost bids

The mineral scheme gives a 30% capital subsidy on eligible investment². It covers two lithium plants of at least 30 kt each and two nickel plants of at least 50 kt each, where kt means kilotonnes². The plants will turn lithium and nickel ore or intermediate products into high-purity compounds². Cobalt is expected to be recovered as a by-product of nickel². Support is capped at ₹500 crore per lithium beneficiary and ₹900 crore per nickel beneficiary².

Bidders first pass a technical qualification. Qualified applicants then bid on the capex support they need. Two beneficiaries per mineral are picked on the lowest support sought². Money is paid in three tranches tied to milestones². The announcement named no beneficiaries and gave no bid dates².

It also left the units open. The reported statement does not say whether the 30 kt and 50 kt capacities refer to ore or to finished product². Nor does it define what spending counts as eligible investment, or whether local content or offtake conditions apply².

Feedstock is the constraint. India has auctioned 733 mineral blocks, but only 125 were in operation as of August 2026⁶. The gap from award to production exceeds seven years for major and critical mineral blocks, according to concept notes shared with states⁶. The same notes list "limited domestic processing capacity for high purity strategic elements" among the main challenges⁶. India's ₹34,300-crore National Critical Mineral Mission targets 50 overseas mines by 2031⁵.

What to watch

For battery buyers, the first signal is likely to be the storage bid documents, which should define the 40% domestic content test and any per-kWh VGF ceiling. For mineral buyers, the signal is the first lithium and nickel plant tender. It will show which groups can bring ore or intermediate feedstock to India^2, 1.

Two more threads are worth tracking. The government is considering a dedicated scheme for battery component makers, The Economic Times reported³. And Indian companies are already building materials capacity. Himadri Speciality Chemicals plans ₹1,125 crore of lithium iron phosphate investment as part of a ₹1,613 crore programme it expects to complete by the fourth quarter of the next financial year⁷.

What this means for procurement teams

For buyers of batteries and battery materials in India, the 40% domestic content condition is the clause that matters most¹. It applies to BESS projects that take VGF, at a time when Indian component output covers less than 3% of projected 2032 cathode, anode and electrolyte needs, while Indian-made versions of those components cost 18% to 61% more than imports³. Components are also roughly 76% of cell manufacturing costs³.

Suppliers are likely to be asked for domestic content evidence, and the cost of compliance is likely to show up in bid tariffs rather than in a separate line. Buyers can price that now, and ask whether the quoted cells are imported.

On minerals, the four plants are still at scheme stage. Indian mineral projects already take more than seven years from award to production⁶, so import contracts for high-purity lithium and nickel compounds remain the base case for several years. Keep those contracts and their Incoterms intact, and qualify a second supplier rather than assume local offtake will be ready on time.

Practical steps: add a domestic content and origin verification clause to storage purchase orders; compare landed cost of local and imported cells on the same basis, freight and duty included; and put the first mineral plant tender on the sourcing calendar. No bid dates have been published², which leaves time to prepare.

Sources

1.BusinessLine, Govt approves ₹14,500-crore VGF scheme for grid-scale energy storage systems, 4 November 2026. Accessed 4 November 2026.
2.BusinessLine, Cabinet approves scheme to promote processing of critical minerals, 4 November 2026. Accessed 4 November 2026.
3.The Economic Times, Indian battery component makers face up to 61% cost disadvantage against imports: Report, 4 November 2026. Accessed 4 November 2026.
4.The Economic Times, Cabinet approves ₹14,500-crore scheme to add 92 GWh energy storage capacity, 4 November 2026. Accessed 4 November 2026.
5.businesstoday.in, BT Explainer: China’s critical mineral refining edge - What India must do to catch up, 22 October 2026. Accessed 4 November 2026.
6.The Economic Times, Amid supply chain issues, India's strategic mining in critical state, 27 October 2026. Accessed 4 November 2026.
7.The Economic Times, Himadri Speciality Chemicals plans Rs 1,613-cr capacity expansion across key businesses, 22 October 2026. Accessed 4 November 2026.

How this story was made: the Procupy News Desk researched and wrote it with AI tools, working only from the sources listed above. Automated checks confirmed that every number and quote appears in those sources, and a separate AI fact-check compared the story with them before publication. Read our editorial policy. Spotted a mistake? Tell us and we will fix it.