On August 4, 2025, the Ministry of Power issued a letter to the Principal Secretaries of Energy in multiple states, announcing significant amendments to the operational guidelines of the Viability Gap Funding Scheme for Battery Energy Storage Systems. The BESS VGF Guidelines 2025 aim to promote indigenous software development and ensuring high-quality standards for battery energy storage systems installed throughout the country.
The Ministry’s letter was distributed to Principal Secretaries of Energy in 15 key states: Rajasthan, Gujarat, Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh, Madhya Pradesh, Telangana, Uttar Pradesh, Haryana, Kerala, Punjab, Chhattisgarh, Odisha, and Uttarakhand. These states are expected to play major roles in the rollout of battery energy storage systems under the VGF scheme.
Scheme for development of Battery Energy Storage Systems (BESS)
On 15th March 2024, the Government of India approved implementation of “Scheme for Viability Gap Funding (VGF) for development of Battery Energy Storage Systems (BESS)” for development of 4,000 MWh of BESS capacity. The salient features of the scheme are as under:
- The scheme period shall be three years from 2023-24 to 2025-26. Projects falling under the scheme will receive approval during this period, and the funds will be disbursed up to 2030-31.
- VGF of up to 40% of capital cost for BESS shall be provided by the Central Government. The VGF shall be a non-recurring expenditure and shall be fully funded from central grant.
- The projects are required to be commissioned within a period of 24 months from the date of signing of the agreement.
Recent Developments
In June 2025, the Ministry of Power approved second tranche of ₹5,400 crore ($650 million) viability gap funding (VGF), funded through the Power System Development Fund (PSDF) expected to support the development of 30 GWh of BESS capacity. The programme allocates 25 GWh to 15 states and 5 GWh to state-run utility NTPC, with the latter expected to leverage existing thermal and transmission infrastructure to meet non-solar hour electricity demand.
The scheme offers VGF at ₹ 18 lac/MWh aiming for better integration of renewable energy into the national grid and ensure power reliability by addressing the intermittency of solar and wind sources.
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, the second tranche of VGF aims to significantly boosts the country’s battery storage capacity
What is BESS ?
Battery Energy Storage Systems (BESS) refers to a system that stores electrical energy in batteries for later use. BESS can store surplus energy from the grid or renewable sources (like solar or wind) when supply is high (demand is low) or electricity prices are low and supply back the power when supply is low (peak load times) and prices are high.
What is EMS ?
The Energy Management System (EMS) is the software that controls and optimizes the operation of the BESS. It manages charging and discharging cycles, monitors battery health, and ensures efficient energy storage and delivery.
Key Amendments in BESS VGF Guidelines 2025
1. Requirement for Indigenous EMS Software
A new clause (Clause 3.9) mandates that the Energy Management System (EMS) software used in VGF‑supported BESS projects must be developed domestically in India. The indigenous software mandate applies specifically to the Energy Management System application software, establishing a clear requirement for domestic technological development in this critical component of battery storage infrastructure.
2. Clarified Grid Connectivity & Land Responsibility
Amendment to Clause 3.6 allows BESS projects to connect to either Intra-State (InSTS) or Inter-State (ISTS) Transmission Systems. Importantly, it also clarifies that arranging grid connectivity and land will be guided by provisions in the Request for Selection (RfS) documents. This should help streamline planning and implementation for developers.
3. Prohibition of Refurbished Battery Cells
A new sub‑clause under Guideline 4 makes it mandatory for implementing agencies to ensure battery systems meet high-quality standards and strictly prohibits the use of refurbished battery cells. This safeguards reliability, safety, and long-term performance.
4. Scope & Funding (Background Context)
These changes apply to India’s ambitious VGF program, which is supporting up to 30 GWh of BESS capacity across the country—25 GWh allocated to state projects and 5 GWh to NTPC—with viability gap funding of up to ~₹18 lakh per MWh (approximately ₹1.8 million/MWh). This clause will likely impact bidding processes for BESS projects, as companies will need to demonstrate that their EMS software meets this requirement.
Power Ministry Notifications on VGF Scheme for BESS
Title | Date | View / Download |
|---|---|---|
Operational Guidelines for Scheme for Viability Gap Funding for development of Battery Energy Storage Systems by Ministry of Power | 15/03/2024 | |
Scheme for Viability Gap Funding (VGF) for development of Battery Energy Storage Systems (BESS) for development of 4,000 MWh of BESS capacity. | 09/06/2025 | |
Waiver of Inter-State Transmission Charges for Energy Storage Systems (ESS) | 10/06/2025 | |
MOP letter to Principal Secretaries | 04/08/2025 | Download PDF |
