Union Cabinet Approves INR 2,584 Crore Small Hydro Scheme to Add 1,500 MW Capacity by FY31
The Union Cabinet, chaired by Narendra Modi, has approved an INR 2,584.60 crore Small Hydro Power development scheme to add 1,500 MW capacity between FY27 and FY31, with targeted support for hilly and North Eastern regions.
March 19, 2026. By Mrinmoy Dey
The scheme will support small hydro projects – between 1-25 MW capacity – to come up in different states and will especially benefit hilly and North Eastern states with high potential for such projects, the Cabinet said in a statement.
In North Eastern States and in districts with an international border, central financial assistance to the tune of INR 3.6 crore/ MW or 30 percent of the project cost, whichever is lower, with an upper limit of INR 30 crore per project, will be available. In other states, INR 2.4 crore/MW or 20 percent of project cost, whichever is lower, with a cap of INR 20 crore per project, would be available.
This will help in tapping the small hydro potential in remote and difficult-to-reach locations. An amount of INR 2,532 crore has been earmarked for such projects. This is likely to bring in INR 15,000 crore of investment in the small hydro sector, giving a boost to the clean energy initiative, investment in remote and rural areas and creating significant employment opportunities. The investment will also leverage 100 percent of the plant and machinery from indigenous sources, fulfilling the objective of Atmanirbhar Bharat.
The scheme will also incentivise the states to prepare the detailed project report for about 200 projects to create a pipeline of small hydro projects in future. An amount of INR 30 crore has been kept to support state and central government agencies to prepare such a DPR.
The scheme will support 51 lakh person days of employment during the project construction and will also enable employment in maintenance and operation of these SHPs, which will come up in largely rural and remote locations. Since SHP projects are decentralised in nature, the requirement for long transmission lines is minimal, which also reduces the transmission losses.
The Cabinet further asserted that the launch of this scheme will rejuvenate the Small Hydro Power sector and will help in exploiting the available potential at a much faster pace. SHP projects are environmentally sustainable, as they avoid large-scale land acquisition, deforestation, and the displacement of communities. It will also promote socio-economic development of remote areas by boosting local investment, apart from creating long-term employment with project lifespans typically ranging from 40 to over 60 years.
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