Offshore Wind VGF Scheme: From Zero Bids To A Second Attempt

Policy Update
Anshu Kumari

Background

India’s renewable energy transition has largely been driven by solar and onshore wind. Its long coastline and Exclusive Economic Zone (EEZ) also offer offshore wind potential, which draws on stronger and more consistent wind resources at sea than onshore sites can access. But offshore projects are far more capital-intensive and technically complex, requiring marine surveys, offshore foundations, specialised installation vessels, subsea cables, offshore substations, and dedicated port infrastructure.

India’s policy framework dates to the National Offshore Wind Energy Policy, 2015, under which the Ministry of New and Renewable Energy (MNRE) was designated the nodal ministry and subsequently identified potential development zones off Gujarat and Tamil Nadu, with an estimated 36 GW and 35 GW of offshore wind potential respectively in the initially assessed areas (MNRE, 2015). Offshore power is considerably more expensive to generate than onshore renewable energy, and the government needed to close the gap between this higher generation cost and the tariffs that distribution companies (DISCOMs) can afford to pay without passing unaffordable costs on to consumers.

To address this, the Union Cabinet approved the Viability Gap Funding (VGF) Scheme for Offshore Wind Energy Projects on 19 June 2024, with a total outlay of ₹7,453 crore — ₹6,853 crore for installing and commissioning an initial 1 GW of capacity (500 MW each off Gujarat and Tamil Nadu) and ₹600 crore for upgrading two ports (Deccan Herald, 2024).

This update examines what has happened since: both tenders issued under this framework failed to attract a single bid and were cancelled, making the scheme’s first real market test, not merely its design, the central story.

Functioning

The scheme operates through a defined institutional and financial structure:

Policy oversight: MNRE issued detailed Scheme Guidelines on 11 September 2024 and retains overall policy oversight of the scheme.
Implementation: the Solar Energy Corporation of India (SECI) is the implementing agency, responsible for bid management, award issuance, fund disbursal, and quarterly reporting to MNRE.
Technical support: the National Institute of Wind Energy (NIWE) serves as nodal technical agency, supporting site identification, resource assessment, and surveys.
Financial support: VGF disbursement is capped at 20% of project cost, with a further 20% available as additional grant support, intended to reduce the effective cost of offshore power for DISCOMs.
Selection process: developers are chosen through international competitive bidding, with the lowest VGF bid winning in the event of a tie.
Contract terms: selected developers sign 25-year power purchase agreements (PPAs), set at a ceiling tariff of ₹4.5/kWh for the Gujarat project and ₹4/kWh for Tamil Nadu under the original guidelines (Mercom India, 2024), figures that would prove central to the scheme’s outcome.
Infrastructure support: ₹600 crore is earmarked separately for upgrading two ports to handle offshore-scale turbines, foundations, and vessels.

This structure sits within a broader three-model offshore wind strategy MNRE revised in September 2023. Model A, under which government agencies conduct or facilitate site studies before competitive bidding with central financial support, governs the VGF-supported projects (MNRE).

Performance

MNRE’s preparatory work has genuinely progressed. National Institute of Wind Energy (NIWE) has identified eight potential offshore zones, each in Gujarat and Tamil Nadu, completed geophysical surveys covering 365 sq. km off Gujarat (sufficient for roughly 1 GW), and carried out a rapid environmental impact assessment. Transmission planning for offshore evacuation in Tamil Nadu is also under way, with some components already commissioned.

But on the metric that matters most, whether developers were willing to build at the prices offered, both tenders issued under this framework failed outright.

Tender	Capacity	Basis	Final Bid Deadline	Outcome
Gujarat (Gulf of Khambhat), issued Sept 2024	500 MW	VGF-supported build-own-operate 25-year PPA at ceiling tariff of ₹4.5/kWh	31 July 2025 (extended from Aug 2024)	No bids received; tender cancelled 13 August 2025
Tamil Nadu seabed lease rights, issued Feb 2024	4,000 MW	Seabed lease allocation across four blocks (non-VGF)	Extended through mid-2025	No bids received; cancelled alongside the Gujarat tender

Table 1: Offshore wind tenders issued under India’s VGF framework, 2024-25

Source: SECI; PSU Watch, August 2026; Maritime Executive, August 2025.

The scale of the tariff mismatch is striking. The Global Wind Energy Council’s (GWEC) Global Offshore Wind Report 2026 estimates that realistic viable tariffs for these sites would need to be around ₹9.60/kWh for Tamil Nadu and ₹10.50/kWh for Gujarat, more than double the ₹4-4.5/kWh ceilings set in the original 2024 guidelines (Indian Infrastructure, 2026). This gap, more than any single factor, explains why developers stayed away despite VGF support.

The Lok Sabha Standing Committee on Energy’s 13th report (presented 6 August 2026) confirmed the Gujarat tender “drew no bid” by its final 31 July 2025 deadline and recorded MNRE’s own assessment that developers are “extra cautious” because offshore wind technology remains unproven in the Indian market (PSU Watch, 2026).

Impact

Eleven years after the 2015 policy and over a decade after an initial target of 5 GW by 2022, India has commissioned zero megawatts of offshore wind capacity. This is not solely an Indian problem, Germany’s second 2025 offshore wind auction also drew no bids for either of its two North Sea sites, reflecting a harder global financing and cost environment for offshore wind generally. But it does mean the VGF scheme’s core objective, creating a functioning first market, remains unmet.

Beyond this headline outcome, the scheme’s potential impact spans several dimensions that remain largely unrealised. On energy security, offshore wind typically achieves higher and more consistent capacity utilisation than onshore wind or solar, helping grid stability as India’s renewable share grows and reducing curtailment risk, a benefit India cannot yet draw on. On industrial development, successful projects could anchor a domestic supply chain in specialised vessels, subsea cables, offshore substations, and foundation manufacturing, alongside port-linked jobs in Gujarat and Tamil Nadu, none of this has yet materialised.

On climate goals, offshore capacity would contribute to India’s 500 GW non-fossil target by 2030, and would be particularly valuable for coastal states with limited land for solar or onshore wind. Regarding regional development, port towns could see meaningful employment and infrastructure spillovers, though this, too, remains contingent on projects actually being built.

Underlying this gap between potential and actual impact is that offshore wind remains a technologically immature sector in India. Unlike onshore wind and solar, where India has over two decades of commercial operating experience, offshore wind has no completed domestic project, no established local cost benchmark, and no domestic supply chain for marine-specific components. This immaturity plausibly explains developer caution directly without operating data from Indian conditions.

Developers face higher perceived risk and price accordingly, which likely accounts for why GWEC’s estimated viable tariffs run so far above the government’s original ceiling. Closing this gap will require not just better-calibrated VGF support, but parallel readiness in local infrastructure, ports capable of handling offshore-scale components, adequate grid capacity for evacuation, and a trained marine workforce, since technology risk and infrastructure risk compound each other for a first mover.

The scheme’s genuine impact so far is preparatory rather than commercial, completed surveys, an identified project site, and clearer transmission planning represent real institutional learning, even though the actual contribution to investment, employment, and generation remains unrealised.

Emerging Issues

Several structural issues underlie these outcomes and will shape whether a second attempt succeeds:

Tariff-viability gap: the original ceiling tariffs were set well below what analysts now estimate developers need, and this mismatch, not merely general market caution, appears to be the direct cause of the zero-bid outcome.
Marginal ministerial priority: the Standing Committee found 92.8% of MNRE’s entire budget flows to solar energy alone and noted no dedicated budgetary allocation exists for offshore wind specifically in 2026-27, with wind-programme funds instead servicing legacy Generation Based Incentive liabilities.
Technological immaturity and infrastructure readiness: as discussed above, the absence of any operating Indian project compounds with underdeveloped ports, grid evacuation capacity, and marine workforce skills, raising the risk premium developers’ price into their bids.
Domestic supply chain absence: India’s onshore wind manufacturing base does not extend to offshore-specific needs, foundations, subsea cables, offshore substations, and installation vessels, all of which currently depend on imported technology and expertise.

Way Forward

Several steps could improve the odds of a successful second attempt:

Retender with revised tariffs: MNRE has told the Standing Committee it plans to issue a fresh Tamil Nadu offshore tender during 2026-27, structured as either two 500 MW projects or a single 1 GW tender; pricing will need to reflect the tariff gap the first attempt exposed rather than repeating the original ceilings.
International cooperation: the India-UK Offshore Wind Task Force, launched February 2026 under the Vision 2035 partnership, offers a channel for technology transfer and knowledge-sharing given India’s limited operating experience (News on Air, 2026).
Parallel infrastructure investment: port upgrades, transmission planning, and domestic supply chain development should continue regardless of bidding outcomes, since these are prerequisites for any future offshore wind capacity, not contingent on this particular scheme’s success.
Budgetary diversification: the Standing Committee’s call for MNRE to reduce its near-total reliance on solar in budget allocation will directly affect whether offshore wind receives the sustained institutional attention a technologically immature sector needs to mature.
Transparent risk-sharing: clearer allocation of construction, grid-connectivity, and marine-logistics risk between government and developers could reduce the risk premium built into bids for a still-unproven technology in the Indian context.

References

Deccan Herald. (2024, June 19). Cabinet approves 1 GW offshore wind energy projects in Gujarat, Tamil Nadu. https://www.deccanherald.com/india/cabinet-approves-1-gw-offshore-wind-energy-projects-in-gujarat-tamil-nadu-3073025
Mercom India. (2024, September 16). Government issues VGF guidelines for 1 GW offshore wind projects. https://www.mercomindia.com/government-issues-vgf-guidelines-for-1-gw-offshore-wind-projects
Ministry of New and Renewable Energy (MNRE). (2015, September 9). Approval of National Offshore Wind Energy Policy [Press release]. Press Information Bureau, Government of India. https://www.pib.gov.in/newsite/PrintRelease.aspx?relid=126755
Ministry of New and Renewable Energy (MNRE). (n.d.). Offshore wind. Government of India. https://mnre.gov.in/en/off-shore-wind

Solar Energy Corporation of India (SECI). (2024, September). Viability Gap Funding (VGF) scheme for offshore wind energy projects: Request for Selection document. https://www.seci.co.in/Upload/Tender/SECI000188-1526005-RfSfor500MWOffshoreWind-Gujarat-finalupload.pdf
The Maritime Executive. (2025, August 13). India’s first offshore wind tenders fall flat and are canceled. https://maritime-executive.com/article/india-s-first-offshore-wind-tenders-fall-flat-and-are-canceled
Down To Earth. (2026, March 13). India reconsiders 1 GW offshore wind tender after earlier auctions fail to attract bidders, official tells DTE. https://www.downtoearth.org.in/energy/india-reconsiders-1-gw-offshore-wind-tender-after-earlier-auctions-fail-to-attract-bidders-official-tells-dte
PSU Watch. (2026, August). Look beyond solar, draw up roadmap for all renewable energy sectors: House panel to MNRE. https://psuwatch.com/newsupdates/look-beyond-solar-draw-up-roadmap-for-all-renewable-energy-sectors-house-panel-to-mnre
Indian Infrastructure. (2026, July 3). The wind turns: Signs of revival in the sector. https://indianinfrastructure.com/2026/07/03/the-wind-turns-signs-of-revival-in-the-sector/
News on Air. (2026, February 18). Offshore wind can become strong pillar of country’s clean, self-reliant energy future, says Union Minister Pralhad Joshi. https://www.newsonair.gov.in/offshore-wind-can-become-strong-pillar-of-countrys-clean-self-reliant-energy-future-says-union-minister-pralhad-joshi
PRS Legislative Research. (2026). Demand for Grants 2026-27 analysis: Power and New & Renewable Energy. https://prsindia.org/budgets/parliament/demand-for-grants-2026-27-analysis-power-and-new-renewable-energy

About the Contributor

Anshu Kumari is a Research Intern at IMPRI, and holds an MA in Public Policy and Sustainable Development from TERI School of Advanced Studies, New Delhi. Her research focuses on energy policy, renewable energy manufacturing, and workforce development in India’s clean energy transition.

Acknowledgement

The author sincerely thanks the reviewers and editorial team at IMPRI Insights for their valuable comments, constructive suggestions, and guidance throughout the preparation of this article, which significantly enhanced its clarity and analytical quality. The author also acknowledges the support received during the research and writing process that contributed to the completion of this work.

Disclaimer

The views and analysis presented in this article are those of the author alone and do not necessarily reflect the official position of IMPRI or any institution the author is affiliated with. Every effort has been made to ensure the accuracy of the data and figures cited, drawn from publicly available government, parliamentary, and other credible secondary sources referenced in the article; however, readers are encouraged to verify critical information independently, as official figures may be revised subsequent to writing.