The Ministry of New and Renewable Energy (MNRE) has issued the administrative approval and operational guidelines for the implementation of the small hydro power (SHP) development scheme for the period financial year (FY) 2026-27 to FY 2030-31. The Government of India had approved the scheme in March 2026, with a total financial outlay of Rs 25.85 billion. The scheme aims to support the installation of around 1,500 MW of new SHP capacity (projects with an installed capacity of 1 to 25 MW) across the country during the five-year period.
Under the scheme, central financial assistance (CFA) will be provided to encourage the development of SHP projects, especially in hilly and north-eastern states. The scheme also aims to reduce the tariff of SHP-generated electricity, making it more competitive and affordable for discoms and state governments. The scheme is estimated to offset approximately 4.3 million tonnes of carbon emissions annually. Additionally, it targets the preparation of detailed project reports for at least 200 SHP projects and support for IITs, NITs, and technical institutions working in the small hydro sector.
Solar Energy Corporation of India will serve as the implementing agency for the scheme. The state/UT governments will also play a significant role in scheme facilitation, and will have to designate a state nodal agency for the same. Furthermore, the guidelines state that projects must be completed within four years from the start of construction, with a possible one-year grace period for justified delays upon approval by the MNRE. The CFA will be reduced by 4 per cent for every quarter of delay, and no CFA will be provided for projects that fail to achieve commercial operations within seven years from the start of construction.
