MNRE Issues Operational Guidelines for ₹2,584 Crore Small Hydro Power Development Scheme

The Ministry of New and Renewable Energy (MNRE) has issued detailed operational guidelines for the implementation of the Small Hydro Power (SHP) Development Scheme for the period FY 2026–27 to FY 2030–31. The guidelines follow the Union Cabinet’s approval of the scheme earlier this year with a financial outlay of ₹2,584.60 crore. The initiative reflects the Government’s continued focus on expanding India’s renewable energy portfolio through decentralized and region-specific energy solutions, particularly in hilly, remote, and border areas where large-scale renewable projects may not be feasible.

Scheme Overview and Capacity Targets

The scheme is designed to promote the development of small hydro power projects ranging from 1 MW to 25 MW and aims to facilitate the addition of nearly 1,500 MW of new generation capacity by 2031.

Under the framework, MNRE has provided for Central Financial Assistance (CFA) to support project development and improve the commercial viability of small hydro projects. Higher financial assistance has been earmarked for projects located in North-Eastern States, hilly regions, and other strategically important areas, recognizing the unique geographical and infrastructural challenges associated with such projects.

Operational Guidelines and Implementation Framework

Key Features of the Guidelines

The operational guidelines lay down a comprehensive framework covering the following areas:

• Eligibility conditions for project developers and locations
• Implementation mechanisms and institutional arrangements
• Project timelines for construction and commissioning
• Procedures for disbursement of financial assistance
• Assistance for the preparation of Detailed Project Reports (DPRs), addressing one of the key barriers faced by developers during the early stages of project development

Expected Investment and Economic Impact

The Government expects the scheme to leverage investments of approximately ₹15,000 crore in the sector. It is also expected to support domestic manufacturing and supply chains associated with the small hydro power industry.

Policy Significance of Small Hydro Power

From a policy perspective, the scheme is significant because small hydro power projects are considered a reliable source of renewable energy capable of providing stable and decentralized electricity generation. Unlike solar and wind energy, which are dependent on weather conditions, small hydro projects can contribute to grid reliability while supporting rural electrification and regional energy security.

Key advantages of small hydro power include:

• Reliable and stable renewable energy generation independent of weather variability
• Contribution to grid reliability and decentralized power supply
• Support for rural electrification and regional energy security
• Generation of employment opportunities in remote regions
• Contribution to socio-economic development in underserved areas

Conclusion

The issuance of operational guidelines marks an important step in the implementation of India’s Small Hydro Power Development Scheme. By providing financial support, regulatory clarity, and a structured implementation framework, MNRE seeks to unlock the untapped potential of small hydro resources across the country.

The scheme is expected to play a crucial role in diversifying India’s renewable energy mix, promoting decentralized clean energy generation, and supporting the country’s long-term energy transition goals while fostering sustainable development in underserved regions.

Last Updated on 18 June, 2026