Government Mandates 20% Local Content for VGF-Funded Battery Storage Projects

In a fresh push to promote domestic manufacturing, the Ministry of Power has made it mandatory for battery energy storage system (BESS) projects supported under the viability gap funding (VGF) scheme to source at least 20% of their total project cost locally. The new clause applies to all future procurements and requires states and implementing agencies to comply with the local content norms, strengthening the government’s broader “Make in India” initiative.

The ministry has also reiterated that Energy Management System (EMS) application software used in such projects must be indigenously developed, following an amendment to the VGF guidelines issued in August. While BESS is not yet listed under the DPIIT’s public procurement order for mandatory purchase from Class I local suppliers, procuring entities may seek undertakings from bidders in cases where tenders were issued earlier without local content requirements.

The policy update comes as the Centre prepares to roll out the second tranche of VGF support for developing 30 GWh of battery storage capacity across the country. Of this, 25 GWh has been allocated to 15 states, while NTPC will develop the remaining 5 GWh. Renewable energy agencies have also been directed to ensure strict quality standards, including a complete ban on the use of refurbished battery cells in VGF-supported projects.

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