New Delhi: The Union Cabinet, chaired by the Prime Minister Narendra Modi, has approved the Small Hydro Power (SHP) Development Scheme for the period FY 2026–27 to FY 2030–31, with an outlay of ₹2,584.60 crore for the installation of SHP projects with an approximate capacity of 1,500 MW.
The scheme will support small hydro projects (with capacities between 1–25 MW) across different states and will especially benefit hilly and North Eastern states with high potential for such projects. In the North Eastern states and districts with international borders, central financial assistance of up to ₹3.6 crore per MW or 30% of the project cost, whichever is lower, will be provided, subject to a maximum of ₹30 crore per project. In other states, assistance of ₹2.4 crore per MW or 20% of the project cost, whichever is lower, will be provided, with a cap of ₹20 crore per project.
This initiative will help tap the small hydro potential in remote and difficult-to-reach locations. An amount of ₹2,532 crore has been earmarked for such projects. The scheme is expected to attract investments of around ₹15,000 crore in the small hydro sector, boosting clean energy initiatives, promoting investment in remote and rural areas, and creating significant employment opportunities. It will also ensure that 100% of plant and machinery are sourced domestically, thereby supporting the objective of Atmanirbhar Bharat.
The scheme will also incentivise states to prepare Detailed Project Reports (DPRs) for about 200 projects to create a pipeline of small hydro projects for the future. An amount of ₹30 crore has been allocated to support state and central government agencies in preparing these DPRs.
The scheme is expected to generate approximately 51 lakh person-days of employment during the construction phase and will also create jobs in the maintenance and operation of SHP projects, primarily in rural and remote areas. Since SHP projects are decentralised in nature, the requirement for long transmission lines is minimal, thereby reducing transmission losses.
The launch of this scheme will rejuvenate the small hydro power sector and help exploit the available potential at a faster pace. SHP projects are environmentally sustainable, as they the avoid large-scale land acquisition, deforestation, and displacement of communities. The scheme will also promote socio-economic development in remote areas by boosting local investment and creating long-term employment, with project lifespans typically ranging from 40 to over 60 years.
