Govt plans additional Rs 5,400 crore VGF to create 30 GWh battery storage

Centre also extends ISTS charges waiver for BESS and storage projects till June 2028, plans 1,100 kV UHV lines and revises RoW compensation linked to land value

The Centre is set to come up with an additional viability gap funding (VGF) package of ₹5,400 crore for setting up 30 GWh battery energy storage capacity (BESS) to ensure renewable energy capacity round-the-clock, Union minister for power Manohar Lal Khattar said on Tuesday.

 

This will be in addition to the already existing incentive worth ₹3,700 crore under which 13.2 GWh of BESS is currently being implemented. It will attract investments worth ₹33,000 crore.

 

The minister, at a press briefing, also announced an extension of the 100 per cent waiver of inter-state transmission (ISTS) charges for BESS and storage projects until June 30, 2028.

   

The exemption will be applicable to pumped storage projects awarded and battery storage systems commissioned before the deadline.

 

Pumped storage plants (PSPs) are hydroelectric power generation systems that use two water reservoirs at different elevations. They act like giant batteries for electricity storage. When the demand increases, the stored water is released to the lower reservoir, passing through turbines to generate electricity.

 

“The extension will support the development of storage needed to meet the country’s requirements,” Khattar said.

 

With an investment of ₹53,000 crore, the government will roll out the Ultra High Voltage Alternating Current (UHVAC) transmission system to strengthen grid infrastructure. 

 

Nine lines of 1100 kV have been identified for high voltage transmission and will be developed by 2034.

 

Testing facilities for these lines and associated equipment are being developed by the Central Power Research Institute.

 

Khattar also said that the compensation structure under the Right of Way (RoW) rules has been revised to encourage infrastructure rollout.

 

Compensation for the tower area has jumped from 85 per cent to 200 per cent of the land value, and for the RoW corridor, from 15 per cent to 30 per cent, directly linking land value to market rates.

 

Haryana and Delhi have already adopted the new guidelines issued on March 21, 2025.

 

As far as VGF is concerned, it will be provided from the Power System Development Fund (PSDF).

 

The scheme is targeted at 15 states which will receive allocations of 25 GWh and NTPC will get 5 GWh. Khattar said the first round of tender for the new VGF will be floated in three months.

 

“India is targeting 393 Gw of renewable energy capacity (293 Gw solar and 100 Gw wind) by 2030, but renewable energy is highly intermittent. And, it needs energy storage solutions to ensure round-the-clock power supply and grid stability. Therefore, BESS is essential, especially to meet peak demand during non-solar hours,” he added.

 

The Central Electricity Authority (CEA) estimated that India will need 37 GWh of BESS capacity by 2027, and 236 GWh by 2031-32. With the new VGF announcement, India is poised to achieve a BESS capacity of 43.2 GW by FY28.