The Union Cabinet has approved ₹17,314 crore in support for critical mineral processing and grid-scale energy storage on November 4, 2026. Simultaneously, the Ministry of Heavy Industries is reviewing a proposed 50% capital spending subsidy to help local battery component manufacturers compete with cheaper Chinese imports. This dual approach aims to build a robust domestic supply chain and reduce reliance on foreign technology.
The Indian government has launched a significant effort to strengthen the domestic battery supply chain. On November 4, 2026, the Union Cabinet formally approved two major financial packages. First, a ₹2,814 crore capital spending scheme was sanctioned to support the local processing of critical minerals, specifically lithium and nickel. Second, a ₹14,500 crore viability gap funding program was cleared to support 92 GWh of grid-scale energy storage systems. These measures are designed to provide immediate support to the evolving battery and energy storage sector.
Beyond these approved funds, the Ministry of Heavy Industries is currently reviewing a separate, broader proposal. This plan involves a potential 50% capital spending subsidy aimed at encouraging the local manufacturing of essential battery components, such as cathode and anode materials, separators, and electrolytes. This evaluation comes at a time when domestic manufacturers face an estimated 18% to 61% cost disadvantage compared to imported components from China.
Strategic Shift to Reduce Import Reliance
The government's strategy is to bridge the gap in manufacturing capability where foreign players, particularly from China and South Korea, currently dominate. With the domestic demand for raw materials expected to surge by 2030, officials are concerned about being exposed to global supply chain volatility and aggressive pricing. By localizing the production of high-value parts, the government aims to insulate the Advanced Chemistry Cell sector from such external pressures. The 50% subsidy, if implemented, would target firms producing key inputs for both electric vehicles and stationary energy storage solutions.
Investor Monitorables and Execution Risks
While the financial support is a positive step, investors should maintain a realistic view regarding execution. Past experience with various Production Linked Incentive schemes has shown that capacity deployment can be slower than initially expected. Success for companies in this space will depend not just on government subsidies, but on their ability to secure reliable raw material supplies and navigate complex technology requirements.
Market participants should also monitor how the government addresses the competitive landscape. Chinese suppliers currently hold a massive market share, in some cases exceeding 99% for LFP cathode materials. This high concentration makes it difficult for new domestic entrants to compete on price alone without sustained government support or rapid technological scaling. The progress of the newly approved schemes and the specific guidelines for the 50% component subsidy will be the next key updates for the sector.