India buys most of its battery cells from abroad. That fact sits awkwardly beside a national programme to build 74 GW of storage, and the government’s response has been a steady series of nudges toward making more of the system here. The domestic content requirement is the sharpest of those nudges, because it attaches directly to the money.
What the rule says
In late December 2025, the Ministry of Power issued a directive mandating a minimum of 20% local content in all battery energy storage projects implemented under the viability gap funding (VGF) scheme, which is supported through the Power System Development Fund (PSDF).
The mechanics are straightforward: at least 20% of total project cost must qualify as local content for the project to draw VGF support. If you are not familiar with how that grant works in the first place, start with our VGF scheme explainer — the domestic content rule is a condition attached to it, not a standalone scheme.
The order was addressed to major renewable-energy-rich states and to NTPC.
Why it exists: states asked for the opposite
The origin story is worth knowing, because it explains why the number is 20% and not 50%.
Several states had asked to be exempted from the Public Procurement (Preference to Make in India) Order — usually shortened to PPP-MII — for battery storage procurement. Their argument was practical: domestic cell manufacturing capacity is still ramping, and a hard local content rule risked making tenders unbiddable or expensive.
The Ministry’s answer was a compromise rather than an exemption. Storage would stay inside the Make in India framework, but at a floor low enough to be achievable with today’s supply chain.
Class-I, Class-II, and why both can still bid
This is the part that most directly affects whether you can bid.
Under the Make in India procurement order, suppliers are graded by how much local content they carry:
- Class-I local supplier — at least 50% local content.
- Class-II local supplier — between 20% and 50% local content.
Certain categories of government procurement are reserved for Class-I suppliers only. Battery storage is not one of them. Both Class-I and Class-II suppliers remain eligible bidders, provided the project meets the 20% domestic value-addition requirement for VGF support.
The software clause
One detail sets this apart from ordinary local content rules: energy management system (EMS) software counts toward the qualifying local content.
That is a deliberate signal. Storage value does not sit only in the cells and the steel; a large part of it sits in the control layer that decides when the asset charges, discharges and bids into a market. Counting indigenous software encourages Indian capability in the part of the system with the longest strategic tail. We cover what that control layer actually does in our article on battery management systems.
What this means for you
- If you are a developer or IPP bidding VGF-supported tenders: map your bill of materials against the 20% test before you price. Cells are typically the largest imported line, so the local content usually has to come from enclosures, power conversion, integration, installation and software. Our guide to how to bid a BESS tender in India covers the rest of the submission.
- If you have a live bid on a tender issued before the order: procuring entities may take an undertaking on compliance rather than reissue. Confirm how your specific tender is handling it — do not assume.
- If you are an equipment supplier: this rule, alongside the PLI scheme for cell manufacturing and the customs relief on cell-making machinery, is a consistent policy direction. Indian value addition is becoming a commercial qualification, not just a preference. You can see how we approach that on our manufacturing page.
Domestic content thresholds, supplier classifications and their application to specific schemes change by government notification, and individual tenders may set stricter terms than the policy floor. Treat the figures here as an August 2026 snapshot and verify current provisions in live Ministry of Power orders and the tender documents themselves before bidding. To model a project against your own numbers, try our BESS savings calculator, or get in touch with our team.
Policy snapshot as of August 2026. Domestic content rules, VGF terms and procurement classifications change by government notification; verify current provisions with Ministry of Power and tender documents before financial decisions.