MNRE Issues Operating Guidelines for INR 2,584.60 Cr Small Hydro Power Development Scheme
The Ministry of New and Renewable Energy (MNRE) has launched the INR 2,584.60 crore Small Hydro Power Development Scheme for FY27-FY31 to support the installation of around 1,500 MW of new small hydro capacity across India. The Scheme was approved by the Union Cabinet in March 2026, and now MNRE has also issued operational guidelines.
May 16, 2026. By Mrinmoy Dey
The scheme, approved by the Union Cabinet in March 2026, targets the installation of approximately 1,500 MW of new SHP capacity across India. SHP refers to hydroelectric power projects having an installed capacity of not less than 1 MW and up to 25 MW.
While MNRE will be the overall policy authority for the scheme, Solar Energy Corporation of India (SECI) shall be the National Programme Implementing Agency (NPIA) for this Scheme.
MNRE has issued detailed operational guidelines for the SHP Development Scheme for the period FY27 to FY31, outlining eligibility conditions, central financial assistance (CFA) structure, project timelines and implementation mechanisms for projects ranging from 1 MW to 25 MW.
Under the scheme, SHP projects where construction commenced after March 18, 2026 will be eligible for financial support, subject to compliance with the prescribed allotment process and statutory clearances. Projects allotted through transparent and competitive bidding will qualify for support, while projects allotted to government entities on a nomination basis may also be considered under certain conditions, mentioned the guideline.
The guidelines mandate developers to secure multiple approvals before availing benefits under the scheme, including forest clearance, techno-economic clearance, pollution control board approvals, fisheries and irrigation department NOCs, wildlife clearances and grid connectivity approvals.
MNRE has structured CFA support based on project location and capacity. Projects in North-Eastern states and districts with international borders will be eligible for CFA of up to 30 percent of the benchmark or actual project cost, subject to a cap of INR 30 crore per project. For projects in other regions, CFA support will range up to 20 percent with a maximum cap of INR 20 crore per project. Benchmark costs will be based on the Central Electricity Regulatory Commission’s 2024 renewable energy tariff regulations.
The scheme also specifies phased disbursement conditions. Developers can avail 50 percent of the CFA after achieving 50 percent physical and financial progress, while the balance amount will be released after commercial operation and achievement of at least 80 percent of the projected generation level. Projects failing to meet generation thresholds will receive proportionately reduced CFA support.
MNRE has mandated that SHP projects must be completed within four years from the start of construction, with a possible one-year extension in justified cases. Projects not commissioned within seven years from the construction start date will lose eligibility for CFA support, and developers may be required to refund disbursed assistance along with applicable interest.
The guidelines also provide support for the preparation of Detailed Project Reports (DPRs). MNRE plans to sanction at least 200 DPRs during the scheme period, with CFA support of up to INR 10 lakh per DPR for projects up to 15 MW and up to INR 15 lakh for larger capacities.
In addition, MNRE has introduced support for technical institutions, including IITs, NITs and specialised research organisations working in small hydro technologies, turbine design, civil engineering and grid integration. A maximum support of INR 2 crore per year will be available for eligible institutions undertaking research, testing facility development and sectoral studies.
The ministry has also earmarked INR 14 crore for information, education and communication activities, capacity building programmes, international cooperation and establishment of a dedicated Project Monitoring Unit (PMU) to oversee scheme implementation and project progress.
Fresh applications under the SHP scheme will be accepted through the online portal until December 31, 2030.
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