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On July 1, Delhi’s newly notified Electric Vehicle Policy 2026-2030 came into force, with staged mandates to electrify two-wheelers, three-wheelers and goods carriers over the next four years. Buried in its infrastructure chapter is a single, non-binding sentence asking power distribution companies to explore battery storage systems at electric bus depots.
That sentence deserves more attention than its length suggests. Four years after the government launched a Rs 18,100 crore scheme to build domestic battery cell factories, no beneficiary has received an incentive payment, and barely 3 per cent of the promised 50 gigawatt-hour (GWh) manufacturing capacity is running. The missing ingredient, increasingly, looks like demand — and battery energy storage systems (BESS), at the scale India’s grid planners project the country will need, could be one of the more realistic ways to supply it. Combined with recycling-driven import substitution, that demand could also do something subsidies alone have not: bring down the cost of batteries, and with them, the upfront price of electric vehicles (EVs) across every segment.
The Advanced Chemistry Cell Production-Linked Incentive (PLI) scheme, launched in 2021 with an Rs 18,100 crore outlay, aimed to build 50 GWh of cell manufacturing capacity by 2025 and cut a cell-import dependence the Union Ministry of Mines puts at nearly 70 per cent, sourced mainly from mainland China and Hong Kong. In FY20 alone, India imported an estimated 450 million lithium-ion battery units at a cost of roughly US$865 million, according to the R&D Roadmap on Tropical EV Battery, a 2024 report built by the Department of Science and Technology (DST) with the Centre for Science and Environment (CSE) among its lead authors.
Ten companies bid for the 50 GWh on offer, including Exide and Amara Raja — the only two with prior battery manufacturing experience. Both lost out to bidders promising steeper domestic value addition: Reliance New Energy, Ola Electric and Rajesh Exports, after an initial award to Hyundai fell through. Four years on, only 1.4 GWh — 2.8 per cent of the target — has been commissioned, all by Ola Electric, which has not met the scheme’s domestic value addition thresholds (25 per cent in year one, rising to 60 per cent by year five) needed to claim any incentive; incentives are payable quarterly only after a beneficiary clears that threshold and begins qualifying sales. Reaching the 60 per cent threshold across the scheme was meant to substitute around Rs 20,000 crore of imports annually, per the DST roadmap’s estimate — a saving that remains entirely theoretical. As of February 2026, no incentive payment has reached any beneficiary, and the Union Budget 2026-27 cut the scheme’s allocation by 44.5 per cent — an acknowledgment that disbursement is not materialising at the pace envisaged.
Shut out of the PLI, Exide and Amara Raja built capacity outside it instead — importing cells to assemble packs domestically for now, while localising cell production on their own timelines, much as the DST roadmap described the industry in 2024: pack assembly established at scale, cell production still confined to research and pilot facilities. Together with Tata’s Agratas, Waaree and Adani, the non-PLI pipeline now totals roughly 76 GWh of initial capacity and 112 GWh planned — larger than the PLI scheme itself, though still weighted toward assembly rather than cells. Firms holding allocated PLI capacity, the scheme’s own evaluators note, have been reluctant to scale up amid limited demand visibility; Ola Electric has scaled back its expansion plans considerably. Utilisation depends on the market waiting for what a factory makes, and for most of the past four years that market has meant largely one thing — EVs, mostly two-wheelers.
The reasons are structural. The DST roadmap is candid that most cell-manufacturing equipment is imported, and manufacturers import nearly all component parts — foils, separators, active materials, casings — a “component manufacturing vacuum” alongside the raw-material one. Recycling can only supply a fraction of what a scaled-up industry needs: even efficient recycling would cut new mining demand for lithium, cobalt, nickel and manganese by just 3 per cent by 2030, rising to 28 per cent by 2050, per modelling cited in the roadmap; CSE’s own estimate puts India’s cumulative recyclable EV battery material at around 245,554 tonnes by 2037 — useful, but partial.
One potential tailwind is not yet realised. Lithium Iron Phosphate (LFP)’s other components — iron oxide, phosphate, graphite — avoid the scarce nickel and cobalt NMC depends on, and their raw ores exist domestically. LFP cathode chemistry has become increasingly popular in India because of its thermal tolerance and durability features. But raw material availability is not the same as battery-grade cathode material (CAM) production: as of 2024, China alone made virtually all the world’s LFP CAM. India’s first domestic LFP cathode plant — an 8 GWh Altmin facility in Telangana, developed with the government’s ARCI research centre — is not expected to begin operations until Q4 2026, meeting roughly a tenth of India’s LFP demand. Until such plants scale up, the domestic-material advantage is a structural possibility, not a present reality.
Delhi’s own mandates suggest how large vehicle-driven demand could get. From January 2027, only electric three-wheelers and light goods carriers can be newly registered in the capital; from April 2028, the same applies to two-wheelers. Delhi’s fleet is dominated by two-wheelers — over 1.04 crore (10.4 million) of them, with roughly 5.7 lakh (0.57 million) new ones added annually. At an assumed 2.5 kWh per battery, the mandate alone would generate close to 1.4 GWh of annual cell demand once fully in force; add roughly 25,000 new three-wheelers a year at 4 kWh each, and Delhi’s mobility mandate alone could plausibly pull in 1.5-1.7 GWh annually — comparable to the entire 1.4 GWh of cell capacity India has commissioned nationally to date.
The storage clause adds a smaller stream on top. Delhi has begun upgrading charging infrastructure at eight bus depots as it works toward expanding its electric bus fleet from around 4,500 today to 14,000 by 2028-29. A handful of 1-2 MWh storage units at these depots would add up to perhaps 10-20 MWh of stationary demand — modest, but an early signal of a market that could grow substantially.
Delhi’s numbers are small next to what India’s grid planners project nationally. The Central Electricity Authority’s National Electricity Plan estimates the country will need roughly 74 GW/411 GWh of total energy storage by 2031-32, of which about 236 GWh is expected to come from batteries. As of September 2025, India had installed barely half a gigawatt-hour of BESS capacity nationwide — meaning nearly the entire target still has to be built within six years.
Several companies chasing EV battery demand are positioning for this too. Amara Raja is building a separate 5 GWh BESS integration facility at Divitipally (expandable to 10 GWh). Waaree, Tata Power’s renewable arm and JSW Energy have each set out lithium-ion storage plans or targets running into the tens of GWh. Much of this is independent of any state’s EV policy — but a policy that builds storage into its own remit, rather than treating it as an afterthought, is better placed to connect that demand to a market it can shape directly. Tamil Nadu’s electricity utility, which has cleared battery storage procurement exceeding 1,000 MWh, shows what a more developed version looks like. Delhi’s current provision, by comparison, is an early, exploratory step.
This demand story matters beyond manufacturing statistics because of what it could do to the price of a battery, and with it, an EV. Battery costs follow a well-documented learning curve: BloombergNEF estimates a historical learning rate of around 18 per cent — for every doubling of cumulative global production, average pack prices have fallen by roughly that much. That is how a pack costing over $1,100/kWh in 2010 fell to a record $108/kWh in 2025, with cells (roughly 80 per cent of pack cost) falling even faster. Stationary storage, the application with the largest, most standardised order volumes, saw the steepest price decline of any segment last year — 45 per cent, to $70/kWh.
Indian manufacturers are nowhere near that curve. An industry that has commissioned 1.4 GWh against a 50 GWh target has not generated the volume needed to compress costs the way the global market has. Combining EV mandate demand with BESS demand — a 236 GWh national requirement growing from almost nothing — is one of the more realistic routes to the volumes at which the learning curve can start to work domestically, rather than depending on imported cells that have already benefited from someone else’s scale.
The second lever works on cost rather than volume: recycling and domestic material substitution. Every tonne of cobalt, nickel or lithium recovered from spent batteries is a tonne that does not have to be imported at prices set by a handful of volatile, concentrated sources. The DST roadmap’s Rs 20,000 crore-a-year import-substitution estimate captures the manufacturing side of that saving; recycling adds a material-side saving worth an estimated 245,554 tonnes by 2037. LFP’s cost advantage would add to this too, once domestic cathode-material capacity — still pre-commercial today — actually comes online.
Together, these are the two ingredients needed to bring cell costs down structurally rather than through incentive-dependent discounting: assured volume, and cheaper, more secure inputs. Lower cell costs would flow through to lower pack costs, and from there to lower upfront prices across every segment currently propped up by purchase incentives — two-wheelers, three-wheelers, goods carriers, eventually cars — precisely where the price gap with petrol and diesel vehicles remains the biggest obstacle to adoption once subsidies taper off. It would also speak to the deeper problem behind the PLI scheme’s stalled payouts: manufacturers are short not just of demand but of a credible path to profitability without permanent subsidy. Demand at BESS scale, paired with a functioning recycling stream, is one of the few visible routes to that path — though a path, not a guarantee: global battery costs are also shaped by competitive dynamics and raw material cycles outside any Indian policy’s control.
The contrast with Delhi’s treatment of vehicles is instructive: purchase incentives specify rupee-per-kWh rates to the last thousand rupees, and mandates carry firm calendar dates; storage gets one sentence asking distribution companies to explore deployment, with no capacity target, funding line or timeline. That is a shared opportunity, not a Delhi-specific gap. Most states are rewriting their EV policies just as grid-side storage becomes central to stability of tariffs. Building that requirement into policy now, rather than reacting once grid strain is visible, would let states shape a domestic order book ahead of need — and, if the cost logic above holds, make EVs more affordable rather than only more subsidised.
For states now revising their EV policies, this is a natural moment to build a defined BESS provision into the framework — a capacity target, a funding line, and coordination between the transport department, the power regulator and distribution utilities. Delhi’s clause offers a workable starting template; deepening it would give manufacturers a buyer they can plan around, at a scale that could let them compete on cost rather than survive on incentive.
