Cabinet Approves INR 2,584 Cr Small Hydro Scheme to Unlock 1,500 MW Clean Power and Boost Rural Energy Security

The Union Cabinet has approved the Small Hydro Power (SHP) Development Scheme with a total financial outlay of INR 2,584.60 crore, marking a major step toward strengthening India’s renewable energy ecosystem and improving energy access in remote and difficult terrains.

The scheme will be implemented from FY 2026–27 to FY 2030–31 and aims to add around 1,500 MW of new small hydro capacity across the country, especially in hilly and North Eastern regions where hydro potential remains largely untapped.

India currently has an installed small hydro capacity of about 5,171 MW, while the total assessed potential stands at 21,133.61 MW across more than 7,000 identified sites. The new scheme is designed to accelerate development by addressing key bottlenecks such as project financing, feasibility studies, and infrastructure gaps, while encouraging faster implementation through targeted financial incentives and support mechanisms.

Under the scheme, financial assistance will vary by region to encourage development in difficult areas. Projects in North Eastern States and international border districts will receive up to INR 3.6 crore per MW or 30 percent of project cost, whichever is lower, with a ceiling of INR 30 crore per project. For other locations, assistance will be capped at INR 2.4 crore per MW or 20 percent of project cost, with a maximum limit of INR 20 crore per project. Additionally, the government has allocated funds for preparing Detailed Project Reports (DPRs) for at least 200 projects, ensuring a strong pipeline for future development.

The scheme is also expected to attract investments of around INR 15,000 crore into the small hydro sector and generate approximately 51 lakh person-days of employment during the construction phase. Beyond direct job creation, it will support long-term employment opportunities in operations, maintenance, and allied rural economic activities, particularly in underserved and remote regions.

Small hydro power is considered a reliable and stable renewable energy source because it provides round-the-clock electricity, unlike solar and wind which are intermittent. It requires minimal land, has a low environmental footprint, and is well-suited for decentralised generation in hilly and river-rich regions. These features make it an important component of India’s clean energy transition while also supporting rural electrification and grid stability.

India’s small hydro potential is unevenly distributed across regions. The Northern region holds the largest share with about 7,978 MW, followed by the Southern region with 5,490 MW, the North-Eastern region with 3,262 MW, the Western region with 2,963 MW, and the Eastern region with 1,440 MW. While southern and western regions have achieved relatively higher utilisation due to better infrastructure, the northern and north-eastern regions remain key growth frontiers with significant untapped capacity.

By combining financial support, regional focus, and infrastructure development, the Small Hydro Power Development Scheme aims to unlock India’s remaining hydro potential in a structured way. It is expected to strengthen energy security, promote sustainable development, and contribute to a more decentralised and self-reliant clean energy future for the country.