Ministry of Power Mandates 20% Local Content for BESS Projects Under VGF Scheme

In a significant move to strengthen India’s domestic energy storage ecosystem, the Ministry of Power (MoP) has issued a new directive mandating a minimum 20% local content in all Battery Energy Storage System (BESS) projects implemented under the Viability Gap Funding (VGF) Scheme, supported through the Power System Development Fund (PSDF).

The order, addressed to major renewable‑energy‑rich States and NTPC, responds to multiple requests from States seeking exemption from the Public Procurement (Preference to Make in India) (PPP‑MII) Order for BESS procurement. After reviewing these requests, the Ministry has clarified the applicability of local content norms and introduced a uniform requirement for all VGF‑supported BESS deployments.

Key Highlights of the Order

1. 20% Minimum Local Content Now Mandatory

States and procuring entities must ensure that at least 20% of the total project cost in BESS procurement qualifies as local content. This includes, inter alia, the indigenously developed Energy Management System (EMS) application software, which has been made mandatory through the VGF Guidelines amendment dated 4 August 2025.

2. BESS Notified as Eligible for Both Class‑I and Class‑II Local Suppliers

While several power sector items are reserved exclusively for Class‑I local suppliers under the PPP‑MII framework, BESS is not yet included in that notified list. Therefore, both Class‑I and Class‑II local suppliers remain eligible to participate in BESS tenders — but must now comply with the 20% domestic value‑addition requirement for VGF‑supported projects.

3. Flexibility for Ongoing Tenders

For tenders already issued without explicit local content clauses, States may obtain undertakings from bidders confirming compliance with the 20% requirement. This ensures continuity of procurement while maintaining alignment with national manufacturing priorities.

Strengthening India’s Energy Storage Ecosystem

The Ministry’s decision marks a strategic step toward building a robust domestic supply chain for advanced energy storage technologies. By mandating indigenous EMS software and a baseline level of local value addition, the order aims to:

• Encourage domestic innovation in BESS software and control systems

• Support emerging Indian manufacturers and integrators

• Reduce import dependence in a critical sector

• Align BESS deployment with the broader “Make in India” vision

For States implementing large‑scale renewable energy integration projects, the directive provides clarity and a uniform framework for procurement under the VGF Scheme.

Implications for Industry and Developers

The 20% local content requirement is expected to catalyse:

• Increased collaboration between global OEMs and Indian technology partners

• Expansion of domestic EMS development capabilities

• New opportunities for Indian component suppliers and system integrators

• Greater transparency and standardisation in BESS procurement

As India accelerates toward its 500 GW non‑fossil capacity target and deepens grid flexibility, BESS will play a pivotal role. This policy intervention ensures that the growth of the sector is accompanied by strong domestic value creation.

RESI welcomes this timely policy direction and views it as a crucial enabler for India’s clean energy transition. The Society continues to support knowledge dissemination, stakeholder engagement, and capacity building across the renewable energy and energy storage sectors.

#BESS, #DCR, #EMS, #India , #MakeInIndia