New Delhi | 18 March 2026

The Union Cabinet, chaired by Narendra Modi, on Wednesday approved the Small Hydro Power (SHP) Development Scheme for the period FY 2026–27 to FY 2030–31. The scheme, with a total outlay of ₹2,584.60 crore, aims to support the installation of small hydro projects with a combined capacity of around 1,500 MW, marking a significant push towards clean energy expansion.

According to the government, the scheme will focus on developing projects ranging from 1 MW to 25 MW across various states, with special emphasis on hilly regions and North Eastern states where hydro potential remains largely untapped. To encourage development, higher financial assistance will be provided in these regions, ensuring better participation and faster project execution.

Under the policy, projects in North Eastern and border areas will receive central financial assistance of ₹3.6 crore per MW or 30% of the project cost, whichever is lower, with a maximum limit of ₹30 crore per project. For other states, the assistance will be ₹2.4 crore per MW or 20% of the project cost, capped at ₹20 crore per project. Out of the total budget, ₹2,532 crore has been allocated specifically for project development.

The government expects the scheme to attract investments worth around ₹15,000 crore in the small hydro sector, boosting economic activity in rural and remote areas. The initiative will rely on domestic equipment, supporting the “Atmanirbhar Bharat” vision, and is projected to generate nearly 51 lakh person-days of employment during construction, along with long-term operational jobs.

Additionally, the scheme includes provisions to prepare detailed project reports (DPRs) for nearly 200 potential projects, with a separate allocation of ₹30 crore for this purpose. Officials noted that small hydro projects, being decentralised, require minimal transmission infrastructure, reducing losses and environmental impact. With project lifespans ranging from 40 to over 60 years, the scheme is expected to revive the sector while ensuring sustainable and inclusive development.

 Cabinet Clears ₹2,584 Crore Small Hydro Power Scheme to Boost Clean Energy and Rural Growth

The Union Cabinet, chaired by Narendra Modi, on Wednesday approved the Small Hydro Power (SHP) Development Scheme for the period FY 2026–27 to FY 2030–31. The scheme, with a total outlay of ₹2,584.60 crore, aims to support the installation of small hydro projects with a combined capacity of around 1,500 MW, marking a significant push towards clean energy expansion.

According to the government, the scheme will focus on developing projects ranging from 1 MW to 25 MW across various states, with special emphasis on hilly regions and North Eastern states where hydro potential remains largely untapped. To encourage development, higher financial assistance will be provided in these regions, ensuring better participation and faster project execution.

Under the policy, projects in North Eastern and border areas will receive central financial assistance of ₹3.6 crore per MW or 30% of the project cost, whichever is lower, with a maximum limit of ₹30 crore per project. For other states, the assistance will be ₹2.4 crore per MW or 20% of the project cost, capped at ₹20 crore per project. Out of the total budget, ₹2,532 crore has been allocated specifically for project development.

The government expects the scheme to attract investments worth around ₹15,000 crore in the small hydro sector, boosting economic activity in rural and remote areas. The initiative will rely on domestic equipment, supporting the “Atmanirbhar Bharat” vision, and is projected to generate nearly 51 lakh person-days of employment during construction, along with long-term operational jobs.

Additionally, the scheme includes provisions to prepare detailed project reports (DPRs) for nearly 200 potential projects, with a separate allocation of ₹30 crore for this purpose. Officials noted that small hydro projects, being decentralised, require minimal transmission infrastructure, reducing losses and environmental impact. With project lifespans ranging from 40 to over 60 years, the scheme is expected to revive the sector while ensuring sustainable and inclusive development.