The Ministry of Power has made it mandatory for Battery Energy Storage System (BESS) projects supported under the Viability Gap Funding (VGF) Scheme to meet a minimum domestic sourcing requirement of 20 per cent in order to receive funding support.
In a recent notification, the ministry directed states and power procuring entities to ensure that at least one-fifth of the total project cost for BESS installations financed through the Power System Development Fund (PSDF) is sourced locally. The requirement applies not only to equipment and components, but also includes the compulsory use of indigenously developed Energy Management System (EMS) application software.
The ministry clarified that BESS is currently not included in the list of power sector items reserved exclusively for procurement from Class-I local suppliers under the Public Procurement (Preference to Make in India) framework. Therefore, both Class-I and Class-II local suppliers will continue to be eligible to participate in tenders for these projects.
However, an amendment to the VGF guidelines introduced in August 2025 has already made the development and deployment of indigenous EMS software compulsory for all BESS capacity awarded under the scheme.
For tenders that have already been issued by states without specifying local content obligations, the ministry has allowed procurement to proceed, provided bidders submit a formal undertaking confirming compliance with the 20 per cent local content threshold.
The directive follows multiple representations from states seeking exemptions from Make in India-related provisions for BESS projects. The ministry noted that during discussions in the PSDF Techno-Economic Sub-Group (TSEG), beneficiary states were advised to seek formal clarification or exemption directly from the Ministry of Power, which led to the issuance of the present directive.
The move is intended to boost domestic manufacturing, promote homegrown technology, and support India’s clean energy transition as grid-scale energy storage deployment accelerates.
