Why in the News
On 4 November 2026, the Union Cabinet approved two separate schemes for mineral processing and grid-scale energy storage. The first scheme provides Rs 2,814 crore of capital support for domestic processing of lithium and nickel. The second is a Rs 14,500 crore Viability Gap Funding scheme that aims to support 92 GWh of energy storage capacity. The period of both is financial years 2026-27 to 2030-31. The approval should not be read as proof that plants have been built or capacity has become operational.
Reason for the update: The initial version of this article was based on proposals available before the meeting. Details are now given as per the Cabinet's official approval. The mineral scheme and the storage scheme are separate; the support rate of one cannot be applied to the other.
Difference Between Mining and Processing
Mining: extracting ore from the earth. Processing: preparing usable, higher-purity material from ore or an intermediate product. Having a mineral reserve available and making a battery-grade chemical are not the same capability. Processing needs technology, capital, reliable raw material and environmental management.
Critical minerals: minerals that are important for the economy and strategic sectors, and disruption in whose supply can create serious risk. If processing is concentrated in a few global centres, importing countries can be affected by price volatility, export restrictions and geopolitical disruption.
What the Lithium-Nickel Scheme Offers
| Aspect | Approved provision |
|---|---|
| Total outlay | Rs 2,814 crore |
| Support | 30% capital grant on eligible investment |
| Lithium | Two plants, each with a minimum capacity of 30,000 tonnes; maximum Rs 500 crore per beneficiary |
| Nickel | Two plants, each with a minimum capacity of 50,000 tonnes; maximum Rs 900 crore per beneficiary |
| Products | High-purity compounds from ores/intermediate products; cobalt is also expected as a by-product in nickel production |
This scheme does not give a general subsidy to every mining project of every critical mineral. The specific focus of the official approval is processing of lithium and nickel. Its benefit can reach the supply chains of sectors such as electric mobility, battery energy storage, electronics, defence and special steels.
How Beneficiaries Will Be Chosen
First stage: Technical eligibility will be checked. Only eligible applicants will take part in the financial bid. Second stage: For each mineral, two beneficiaries will be chosen on the basis of the lowest capital support sought. This has been called the minimum cost criterion. Incentives will be given in three instalments linked to specified achievements.
This attempts to tie government support to progress in construction and operation. Still, a low bid is not success by itself. Suitable technology, timely raw material, product quality and financial capacity will determine the actual outcome.
Separate Approval for Grid-Scale Storage
Energy storage: storing energy when electricity is available and returning it when needed. Solar and wind output varies with time and weather. Storage helps match this variation with demand, but it does not by itself create new primary energy and it also has technical losses.
- Pumped storage: Support to 60 GWh of capacity. Surplus electricity is used to move water to a height; when needed, it is flowed down to generate electricity.
- Battery Energy Storage System (BESS): Support to 30 GWh of capacity. Energy is kept in batteries and supplied to the grid as required.
- Other technologies: 2 GWh of capacity of alternative energy storage technologies.
GWh: a quantity of energy, while GW is a rate of power. Calling 92 GWh "92 GW of generation capacity" would be wrong. The scheme's total financial support is Rs 14,500 crore; the estimated investment in the related projects is stated as Rs 97,600 crore. The two amounts are different concepts.
VGF and the Domestic Content Condition
Viability Gap Funding (VGF): government support to improve the financial viability of a useful project. Storage capacity will be allocated through tariff-based competitive bidding. For BESS and pumped storage, public and private distribution companies will be eligible; alternative-technology projects will be implemented by public/private entities.
Domestic content requirement: A minimum 40% DCR will apply to BESS projects. Its purpose is to provide demand to manufacturing within the country and reduce import dependence. This condition is separate from the 30% grant rate for mineral processing.
Understand Capex, VGF and PLI Separately
Capex support: bears a part of the eligible investment for creating a long-term asset such as a plant. VGF: reduces the gap in a project's financial viability. Production-Linked Incentive (PLI): ties incentives to achievements such as specified production/sales. The new storage scheme provides support on the demand side and can complement the supply-side incentives for battery manufacturing. Do not treat these three terms as the name of one scheme.
How to Read the Old Figures
The initial version carried an external compilation of 1,835 million units of renewable energy curtailment in July-August and capacity information of 50 GWh/10 GWh for PLI-ACC. These are not targets of the new Cabinet approvals. In this update, only the official order summary given below has been used as the basis for the scope, funding and eligibility of the new schemes. The figures of the old report should not be read by linking them to the approved capacity of the new scheme.
Challenges and Way Forward
- Full supply chain: Along with domestic processing, diversified supply of raw material, technology partnerships and credible product-purchase agreements are needed.
- Environmental safety: Responsible management of water, chemicals, residues and energy use is as important as the grant.
- Testing implementation: Approval, allocation, plant construction and actual production/storage should be measured as separate achievements.
- Consumer benefit: The outcome of lower costs and reliable electricity should also be examined; announced GWh alone is not a sufficient measure of success.
Mains Practice Question
'For energy security, the availability of mineral resources is not enough; domestic capacity for processing and storage is also necessary.' Discuss with reference to the recent Cabinet decisions. (250 words, 15 marks)
Answer Outline
Introduction: Bring out the mineral and power-system dependencies of the energy transition.
Main Body: Explain the mining-processing difference, the lithium-nickel support, the storage structure of VGF and the domestic content condition. Add the limits of technology, raw material, environment and project implementation.
Conclusion: Link government support to measurable outcomes such as capacity becoming operational, quality and reliable affordable electricity.
Prelims Practice Questions
Question 1. Consider the following statements:
Statement 1: The approved critical mineral processing scheme includes processing of lithium and nickel.
Statement 2: It provides for 30% capital support on eligible investment.
Statement 3: Cobalt can be obtained as a by-product in nickel processing.
Which of the statements given above are correct?
(a) Only 1 and 2
(b) Only 2 and 3
(c) Only 1 and 3
(d) 1, 2 and 3
Answer and explanation
Answer: (d) All three statements are correct. The scheme supports domestic processing capacity for high-purity compounds of lithium and nickel.
Question 2. Consider the following pairs:
Pair 1: Pumped storage - 60 GWh
Pair 2: Battery energy storage - 30 GWh
Pair 3: Alternative storage technologies - 2 GWh
How many of the above pairs are correctly matched?
(a) Only one
(b) Only two
(c) All three
(d) None
Answer and explanation
Answer: (c) All three pairs are correct and together make 92 GWh. GWh is a unit of energy, not power.
Sources
- Cabinet: approved scheme for critical mineral processing
- Ministry of Power: VGF scheme for grid-scale energy storage
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PCSMANTRA Editorial Team
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