Scheme expected to attract Rs.15,000cr investments in small hydro sector
The Cabinet has approved Rs.2,584.60 crore Small Hydro Power Development Scheme for 2026-27 to 2030-31 under which around 5,171 MW capacity has been harnessed, whereas the total estimated potential stands at 21,133.61 MW, the Government said on 26 April in an update on power sector.
The Small Hydro Power (SHP) Development Scheme support projects between 1-25 MW capacity in different states, especially in hilly and North Eastern states with high hydro-dam power potential.
The scheme aims to unlock approximately 1,500 MW of new SHP capacity, with a strong focus on hilly regions and the North Eastern States rich in untapped small hydro potential and often constrained by energy access challenges. By promoting decentralised and locally generated power, the scheme seeks to deliver reliable electricity to remote and difficult-to-access regions while reducing dependence on conventional fuels.
Beyond energy generation, the initiative has the potential to catalyse inclusive growth. Small hydro projects, with their minimal ecological footprint, limited land requirements, and long operational life, offer a sustainable pathway for development. By fostering local investment, generating employment, and strengthening regional economies, the scheme is going to position small hydro as a cornerstone of India’s sustainable and self-reliant energy future.
The Ministry of New and Renewable Energy (MNRE) administered projects up to 25 MW while large hydropower projects, with capacity exceeding 25 MW, fall under the purview of the Ministry of Power.
The scheme outlines a set of targeted measures to support implementation, improve project viability, and ensure a steady pipeline of SHP projects across regions. It focuses on addressing key constraints related to financing, project readiness, and execution, particularly in challenging geographies. Together, these measures are intended to enable faster and more efficient deployment of SHP capacity.
Financial assistance to North Eastern States & International Border Districts of Rs.3.6 crore per MW or 30% of project cost (whichever is lower), subject to a ceiling of Rs.30 crore per project.
Financial assistance to other locations of Rs.2.4 crore per MW or 20% of project cost (whichever is lower), with a cap of ₹20 crore per project, said the Government.
The scheme is expected to attract investments of around Rs.15,000 crore in the small hydro sector.
It will also promote the use of indigenous plant and machinery, contributing to the vision of Atmanirbhar Bharat while boosting local manufacturing and supply chains.
To ensure long-term sector growth, the scheme provides support for the preparation of Detailed Project Reports (DPRs) for a minimum of 200 projects. An allocation of Rs.30 crore has been made separately to assist central and state agencies in developing a strong future project pipeline.
The scheme is expected to generate approximately 51 lakh person-days of employment during the construction phase. In addition, it will create sustained employment opportunities in the operation and maintenance of projects, particularly in rural and remote regions.
The approval of the SHP Development Scheme marks a significant step towards unlocking India’s untapped small hydro potential. By combining targeted financial support, infrastructure development, and sustainability, the scheme is set to strengthen clean energy capacity while driving inclusive growth in underserved regions.
Small hydro power plays a vital role in advancing clean, reliable, and decentralised energy in India. Particularly suited for remote and hilly regions, these projects utilise locally available water resources to generate electricity close to consumption centres. This not only improves energy access but also reduces dependence on long transmission networks and enhances overall efficiency.
Decentralised and Efficient Power Supply: Located near demand centres, these projects minimise transmission losses, improve voltage stability, and ensure reliable power in geographically challenging areas, including border and hilly regions.
Clean and Cost-Effective Energy Source: Small hydro power generates electricity without fuel consumption or emissions, making it a sustainable and economically viable long-term solution.
Driver of Rural Development: By improving electricity access in underserved areas, these projects support infrastructure development and act as a catalyst for local economic growth.
Employment and Livelihood Generation: They create both direct and indirect employment opportunities during construction and operation, while also promoting small-scale industries and self-employment.
Environmentally Sustainable: With minimal land requirement and negligible displacement, small hydro power projects have a low ecological footprint and limited social impact. Their long operational life further strengthens their sustainability.
SHP offers a balanced solution that combines energy security with sustainable development. By delivering reliable, round-the-clock power and strengthening grid resilience, especially in remote areas, they contribute significantly to inclusive growth. Their ability to integrate environmental sustainability with socio-economic benefits makes them a key component of India’s clean energy transition.
SHP is emerging as a vital and reliable component of India’s clean energy transition. It is particularly well-suited for hilly, remote, and difficult terrains where decentralised generation can deliver sustainable power, enhance energy access, and support local livelihoods.
India possesses a significant SHP potential of 21,133.61 MW across 7,133 identified sites. As of early 2026, approximately 5,171 MW (around 24.5%) has already been harnessed, demonstrating steady progress. The remaining over 15,960 MW represents a substantial opportunity for accelerated development through focused policy support and public-private collaboration. Fiinews.com
