The scheme will support projects across States, with special incentives for north-eastern and border regions. The initiative also aims to build a pipeline of future projects while strengthening India’s clean energy transition and energy security. | Photo Credit: PTI

The Union Cabinet on Wednesday approved the small hydro power (SHP) development scheme for the period FY27 to FY31, with an outlay of ₹2,584.60 crore for the installation of SHP projects of an approximate capacity of 1,500 megawatt (MW).

The scheme will support small hydro projects (between 1 and 25 MW capacity) in different States and will especially benefit hilly and north-eastern States with high potential for such projects, said the Ministry of New & Renewable Energy (MNRE).

In north-eastern States and in districts with international borders, Central financial assistance to the tune of ₹3.6 crore per MW, or 30 per cent of the project cost, whichever is lower, with an upper limit of ₹30 crore per project, will be available.

In other States, ₹2.4 crore per MW, or 20 per cent of project cost, whichever is lower, with a cap of ₹20 crore per project, will be available. This will help tap the small hydro potential in remote, difficult-to-reach locations.

₹15,000 crore investment boost expected

An amount of ₹2,532 crore has been earmarked for such projects. This is likely to bring in ₹15,000 crore of investment in the small hydro sector, giving a boost to the clean energy initiative, investment in remote and rural areas and creating significant employment opportunities.

The investment will also leverage 100 per cent of the plant and machinery from indigenous sources, fulfilling the objective of Atmanirbhar Bharat.

The Minister of New & Renewable Energy, Pralhad Joshi, said on X: “The Union #Cabinet under the leadership of Hon’ble PM Shri @narendramodiji has approved the SHP Development Scheme for FY27 to 31, marking a significant step towards strengthening India’s #RenewableEnergy capacity, promoting sustainable growth and enhancing energy security across the nation.”

Pipeline creation and industry response

The scheme will also incentivise the States to prepare detailed project reports for about 200 projects to create a pipeline of small hydro projects in the future. An amount of ₹30 crore has been set aside to support State and Central government agencies in preparing such reports.

PHDCCI Secretary General Ranjeet Mehta said this marks a targeted push towards decentralised renewable energy in the wake of geopolitical uncertainty concerning the oil and gas supply chain. The initiative balances environmental sustainability with rural employment generation, strengthening India’s commitment to long-term clean energy transition.

Employment and sustainability gains

The scheme will support 51 lakh person days of employment during the project construction, and will also enable employment in maintenance and operation of these SHPs, which will come up in largely rural and remote locations. SHP projects are decentralised in nature; the need 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 much faster pace. SHP projects are environmentally sustainable because they avoid large-scale land acquisition, deforestation, and community displacement. It will also promote socio-economic development in remote areas by boosting local investment, and will create long-term employment, with project lifespans typically ranging from 40 to over 60 years.

Published on March 18, 2026