By Saurav Anand
India’s battery energy storage system (BESS) sector is facing a sharp cost reset, with combined currency movements, higher raw material prices and changes in China’s export policy pushing effective cell costs up by an estimated 25–30 per cent over levels assumed in bids placed in 2023–24.
The pressure comes at a time when India’s storage deployment is expected to accelerate sharply. As per the National Electricity Plan, cumulative energy storage requirements are projected to rise from over 82 GWh in 2026-27 to more than 411 GWh by 2031-32, making cost stability critical for execution.
Between mid-2025 and early 2026, the Chinese yuan weakened by around 3 per cent against the US dollar, while the Indian rupee depreciated by about 9 per cent. Together, these currency moves have added an estimated 11-12 per cent to landed cell prices for Indian buyers. At the same time, raw material costs have rebounded, with electrolyte prices for lithium iron phosphate (LFP) cells almost doubling in six to seven months and lithium carbonate prices rising over 10 per cent from mid-2025 lows.
For a 314Ah LFP cell, where raw materials account for around 65 per cent of total cost, this rebound alone is estimated to add 15–20 per cent to the bill of materials.
China policy adds another layer of cost
Cost pressures are expected to intensify further following China’s decision to cut value-added tax export rebates on battery products from 9 per cent to 6 per cent starting April 1, 2026, and to zero from January 1, 2027.
This translates into an estimated cost increase of around 3 per cent from the second quarter of 2026 and about 6 per cent from 2027 onward, with exporters expected to pass on most of the impact through higher dollar-denominated prices.
“India’s competitive battery energy storage systems bids in 2023-24 reflected a period when global lithium-ion battery prices were falling sharply,” said Ankit Jain, Vice President and Co Group Head – Corporate Ratings at ICRA. “However, momentum of a continuous decline in battery prices is now expected to face some headwinds due to rupee depreciation, expectation of surge in lithium carbonate prices amid a supply squeeze, and China’s announcement of phased removal of rebates for batteries beginning April 2026.”
Battery cell plus pack prices had dropped to around $115 per kWh in 2024 and further to $108 per kWh in 2025, he said, before current pressures emerged.
Fixed tariffs under strain
For Indian projects, the impact is most acute for BESS capacities scheduled for execution after April 2026. EPC contractors and system integrators are locked into fixed-price rupee tariffs but must procure battery cells in dollars, exposing them to currency and policy risks with limited contractual protection.
The Central Electricity Regulatory Commission recently rejected adoption of a previously discovered BESS tariff, citing delays in signing the battery energy supply agreement that led to misalignment with prevailing market prices.
“Indian BESS tenders were bid aggressively in 2023–24 on the assumption that cell prices would keep falling,” said Debmalya Sen, President, India Energy Storage Alliance. “Aggressive pricing inevitably means aggressive forecasts. Considering current metal prices, we’re likely to see a few peaks by 2026, which may slow down progress or result in increased costs.”
Asked who should bear the risk going forward, Sen said, “It would be unfair to place the entire risk burden on any one party. While developers and EPC players are expected to shoulder some risk, it’s important to explore ways to mitigate its impact across the value chain.”
Supply priorities shift away from India
Indian buyers are also facing weaker negotiating leverage as Chinese factories remain overbooked with domestic electric vehicle demand and higher-priced BESS orders from the US, Europe, Australia and the Middle East. These markets typically offer better margins than Indian tenders, resulting in lower priority, longer lead times and tighter commercial terms for India.
“With India facing a combined 25–30 per cent rise in effective cell costs due to FX, materials and China’s VAT rebate cuts, do fixed-price INR storage tariffs still make sense?” Sen said. “Not every project is at risk; some may not proceed, and the likelihood of that is significant, but to suggest all projects are at risk is an exaggeration.”
He added that while prices may rise further in the near term, they are unlikely to return to the highs seen in 2022-23.
Domestic manufacturing still a medium-term solution
Industry participants point out that deeper reliance on imports exposes projects to forex volatility, commodity swings and policy shifts beyond domestic control. ICRA notes that scaling up domestic battery cell manufacturing is critical to derisk India’s storage ambitions.
“A scale up is needed in domestic battery cell-manufacturing capacity to derisk from deeper dependence on imported cells,” Jain said, warning of higher project costs, greater exposure to volatility and heightened execution risks if reliance on imports continues.
However, Sen cautioned against delaying storage deployment while waiting for domestic capacity. “If we wait for domestic manufacturing to ramp up, we could lose another three years,” he said. “By then, the grid will be increasingly vulnerable due to renewable integration.”
He added that cell manufacturing is highly technical and cost parity with China will take time, even after domestic production begins.
As India pushes ahead with its renewable expansion, the emerging cost shock in batteries is forcing a reassessment of tender design, risk sharing and supply strategy—issues that are now moving to the centre of the country’s energy transition debate.