New Delhi, March 18: The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved a ₹2,584.60 crore Small Hydro Power (SHP) Development Scheme for the period 2026–31, aimed at adding around 1,500 MW of clean energy capacity across the country.
The scheme will support the development of small hydro projects with capacities ranging between 1 MW and 25 MW, with a focus on hilly and North Eastern states where such potential remains largely untapped.
Higher Incentives for Border, Northeastern Regions
Under the scheme, projects in Northeastern states and districts along international borders will receive central financial assistance of up to ₹3.6 crore per MW or 30% of the project cost, whichever is lower, with a cap of ₹30 crore per project.
For other states, the support will be ₹2.4 crore per MW or 20% of the project cost, capped at ₹20 crore per project.
Out of the total outlay, ₹2,532 crore has been earmarked for project development.
₹15,000 Cr Investment Expected
The government expects the scheme to attract investments worth around ₹15,000 crore in the small hydro sector. It also aims to promote indigenous manufacturing, with 100% of plant and machinery to be sourced domestically in line with the Atmanirbhar Bharat initiative.
Focus on Remote Areas, Low Environmental Impact
Officials said the scheme will help tap hydro potential in remote and difficult-to-access regions, where large-scale projects are not feasible. Small hydro projects are considered environmentally sustainable as they avoid large-scale land acquisition, deforestation, and displacement.
Being decentralised, such projects also reduce the need for long transmission lines, thereby lowering transmission losses.
Employment Generation and Rural Boost
The scheme is expected to generate around 51 lakh person-days of employment during the construction phase, along with long-term jobs in operations and maintenance.
It is also seen as a driver of socio-economic development in rural areas by boosting local investments and infrastructure.
Pipeline of Future Projects
To ensure sustained growth, the scheme includes provisions to support preparation of Detailed Project Reports (DPRs) for around 200 projects. An allocation of ₹30 crore has been set aside for this purpose.
Sector Revival Push
The government said the launch of the scheme will help rejuvenate the small hydro power sector and accelerate the exploitation of available potential. SHP projects typically have a lifespan of 40 to over 60 years, making them a reliable source of long-term clean energy.
The move is part of India’s broader push to expand renewable energy capacity while promoting balanced regional development.
