The Union Cabinet, chaired by Prime Minister Narendra Modi, approved the Small Hydro Power (SHP) Development Scheme for FY 2026-27 to FY 2030-31 in March 2026, with a total outlay of Rs 2,584.60 crore for installing approximately 1,500 MW of small hydro capacity.
Scheme Details
The scheme supports small hydro projects between 1-25 MW capacity across different states, with special benefits for hilly and North Eastern states that have high potential for such projects. The total investment expected to be leveraged is approximately Rs 15,000 crore.
Financial Assistance Structure
North Eastern and Border States
Higher central financial assistance of Rs 3.6 crore per MW (or 30% of project cost, whichever is lower) with an upper limit of Rs 30 crore per project.
Other States
Rs 2.4 crore per MW (or 20% of project cost, whichever is lower) with a cap of Rs 20 crore per project.
Key Objectives
The scheme aims to exploit untapped small hydro potential in remote and rural areas, reduce transmission losses through decentralised power generation, and contribute to India’s target of 500 GW non-fossil fuel capacity by 2030.
Employment and Rural Impact
The scheme is expected to support 51 lakh person-days of employment during project construction. Additionally, it will create ongoing employment in maintenance and operation of these SHPs, which will predominantly come up in rural and remote locations, providing a significant boost to local economies.