India is seeing its first major grid-scale battery storage deployments, but efforts to domesticate the upstream supply chain are still at an early stage, writes Dhruv Garg of the Institute for Energy Economics and Financial Analysis (IEEFA).
The West Asia crisis has once again highlighted the vulnerability of India’s oil and gas supply chains. While India is considering various options to reduce its reliance on imported oil and gas, transport electrification through the adoption of battery electric vehicles (BEVs) is emerging as one of the most strategic pathways to this.
However, the BEV supply chain, especially upstream, remains majorly import-dependent. This foreign reliance in battery manufacturing also affects India’s grid-based battery energy storage system (BESS) projects.
As the country electrifies its roads and grid, nearly every battery cell powering that shift is imported, mostly from China. The ambition to reduce crude oil import dependence risks being quietly replaced by an equivalent dependence on foreign battery cells.
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The demand is real and growing fast
According to a report from trade association India Energy Storage Alliance (IESA), India’s advanced chemistry cell (ACC) battery demand stood at 28 gigawatt-hours (GWh) in 2025, split roughly between EVs (~60%) and stationary/grid storage (~40%).
A projection by the Institute for Energy Economics and Financial Analysis (IEEFA) and JMK Research puts this scaling at a 36.5% compound annual growth rate (CAGR) to ~272GWh by FY2030. IESA forecasts demand of over 700GWh by the mid-2040s.
India will need an enormous volume of battery cells. The question is: who makes them?
The answer, right now, is China. Despite ~60GWh of installed domestic capacity to manufacture battery packs, India’s cell manufacturing reached only ~1GWh by the end of 2025.
India’s battery manufacturing story so far has been largely importing cells and assembling them into battery packs. Notably, 75% of lithium-ion batteries used in BEVs in India come predominantly from China, and the import bill has risen eightfold from US$384 million (~INR 3,571 crore) in 2019 to over US$3 billion (~INR27,900 crore) by FY2025.
At current cell prices of ~US$85/kWh (INR7,905/kWh), meeting the 272GWh demand by FY2030 without domestic cell output implies an annual battery import bill exceeding US$23 billion (INR2.1 lakh crore). India’s crude oil import bill is ~US$130–140 billion (INR12.09–13.02 lakh crore) per year. That parallel underscores India’s current trajectory.
Gaps in the ACC PLI scheme
To reduce India’s cell-import dependence, the government launched the ACC Production Linked Incentive (PLI) scheme in October 2021 with an outlay of INR18,100 crore, targeting 50GWh of domestic cell manufacturing by 2025.
Four years later, only 1.4GWh has been commissioned (entirely by Ola Electric) against the 50GWh target, a 2.8% achievement rate. Investment has reached INR2,878 crore, 25.6% of the expected target; 1,118 jobs (0.12%) created against a target of 1.03 million; and, as of February 2026, zero incentives have been disbursed to any beneficiary.
The scheme design had some shortcomings — domestic value addition (DVA) thresholds of 25% in Year 1 and 60% in Year 5 were structurally impossible without an early-stage upstream supply chain ecosystem. The two-year installation window was too aggressive for players building from scratch, and the minimum 5GWh bid size (owing to the minimum INR225 crore/GWh net worth requirement) excluded smaller players.
Most critically, the scoring framework rewarded aggressive DVA promises over demonstrated capability, and the three winners (Ola, Reliance, and Rajesh Exports) were all first-time battery manufacturers. Ola has since cut its ambition to 5GWh from a 20GWh commitment; Rajesh Exports has not progressed beyond land acquisition.
Parallel ecosystem outside of PLI scope
The scheme’s oversubscription (~2x in round 1 and ~7x in round 2) demonstrated genuine industry appetite. But the experienced players who lost the bid and the new entrants who studied its design chose a different path.
Amara Raja and Exide were the only two bidders across both auction rounds with actual battery manufacturing experience, and both lost to firms with the aggressive DVA promises mentioned earlier. Building outside PLI gave Amara Raja and Exide the freedom to initially import cells from China, assemble packs, and progressively build domestic cell capacity on commercially viable timelines, without penalty clauses for missed milestones.
The result is a parallel ecosystem that now totals approximately ~76GWh of initial-phase non-PLI capacity and ~112GWh in future additions, led by Agratas/Tata (20GWh, Gujarat), Amara Raja (16GWh, Telangana), Waaree (20GWh, Andhra Pradesh), and Adani (20GWh, Gujarat). But this pipeline is predominantly pack assembly in the near term; cell import dependency will remain in place until these facilities build true cell-manufacturing capability.
Trading one import dependency for another
A forecast by the credit rating agency CareEdge indicates that lithium-ion battery import dependence may fall to 20% by FY2027, premised on these gigafactories coming online, but these factories may still import cells.
India is, in effect, at least five to 10 years away from a robust domestic cell manufacturing ecosystem. The geopolitical exposure mirrors the current oil imports problem: A single dominant supplier, now China rather than West Asia, would control not just the product but the entire value chain. It has already begun imposing export curbs on critical minerals and cell manufacturing equipment.
India lacks critical minerals upstream capacity
India’s push to scale up battery cell manufacturing highlights its reliance on imported refined critical minerals, given the country’s limited domestic processing and refining capacity.
China refines ~74% of global lithium, 35% of nickel (with Indonesia refining another ~40%), and 80% of cobalt, and holds 98% of lithium iron phosphate (LFP) cathode active material production.
India’s domestic cobalt refining stands at only ~2,060 tonnes/year, while its lithium refining capacity is effectively zero. In 2025, India imported 18,200 tonnes of lithium compounds worth US$1.2 billion, 68% from China, and 24% from Chile.
Furthermore, India’s 5.9 million-tonne lithium reserve in Jammu and Kashmir failed to attract a single qualified auction bid. The National Critical Mineral Mission (NCMM, 2025) targets 1,200 exploration projects by the Geological Survey of India (GSI) and 100+ mineral block auctions by 2030-2031, but auctions for several blocks so far failed to attract enough serious players for want of better exploration data, clearer reserve estimates, and a more flexible auction design. In addition, mines for critical minerals can take over a decade to move from discovery to production.
What genuine indigenisation requires
India built a globally competitive solar manufacturing sector through a sequenced combination of PLI, import protection with a basic customs duty (BCD), and the Approved List of Model and Manufacturers (ALMM), which provided both supply and demand support. The battery sector needs the same architecture, applied from upstream down, not downstream up.
- Minerals first: A dedicated scheme for critical mineral (lithium, cobalt, nickel) refining, domestically in India, alongside strategic long-term raw minerals offtake partnerships with mineral-rich countries such as Australia and Chile. NCMM auctions must be streamlined to attract more bidders.
- Components next: A separate PLI for cell components (cathode active materials, anodes, electrolytes) where domestic production is currently near-zero.
- Cell manufacturing with realistic conditions: Redesign PLI DVA requirements to start at 10–15% and ramp up over seven to eight years; reduce minimum bid size to 1–2GWh to attract smaller but innovative players; and introduce gradual BCD plus anti-dumping duties on imported cells, analogous to the ALMM framework for solar modules.
With this sequenced approach, India can strengthen its battery supply chain and turn existing vulnerabilities into a strategic advantage, creating resilient supply chains, fostering innovation, and securing a cleaner, more self‑reliant future.
About the Author
Dhruv Garg is an energy finance analyst for South Asia at the Institute for Energy Economics and Financial Analysis (IEEFA), which examines issues related to energy markets, trends, and policies. IEEFA’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. Dhruv Garg focuses on renewable energy, storage technologies, and the role of finance in accelerating the energy transition.
