Cabinet Nod for ₹2,584 Crore Small Hydro Scheme to Add 1.5 GW Capacity

The Union Cabinet has approved the Small Hydro Power (SHP) Development Scheme for the period FY 2026–27 to FY 2030–31, with a total financial outlay of ₹2,584.60 crore. The initiative aims to accelerate the development of small hydro projects across India and strengthen the country’s diversified renewable energy portfolio.

The scheme is designed to support the installation of around 1,500 MW of small hydro capacity, focusing on projects with capacities ranging from 1 MW to 25 MW. These projects are particularly suited for hilly terrains, remote regions, and canal-based systems, offering a reliable and decentralised source of clean energy.

A major thrust of the scheme is on promoting development in the North Eastern states, Himalayan regions, and other border areas where hydro potential remains largely untapped. To incentivise project development, the government will provide central financial assistance, with higher support extended to projects in these priority regions. This includes funding of up to ₹3.6 crore per MW or 30% of the project cost in special category states, while projects in other regions will receive up to ₹2.4 crore per MW or 20% of the cost, subject to specified caps.

The scheme also seeks to revive the small hydro sector, which has seen slower growth compared to solar and wind energy in recent years. By addressing financial and infrastructural challenges, the government aims to improve project viability and attract greater private sector participation.

In addition to enhancing renewable energy capacity, the initiative is expected to generate local employment, support rural electrification, and contribute to grid stability. Small hydro projects, with their minimal environmental footprint and ability to provide round-the-clock power, are considered a valuable complement to intermittent renewable sources.

The approval underscores the government’s continued efforts to diversify India’s clean energy mix while promoting sustainable development in geographically challenging regions.