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Cabinet Clears Rs 2,584 Crore Small Hydropower Scheme to Boost Decentralised Clean Energy

The Union Cabinet has approved a new small hydropower (SHP) development scheme for the period FY2027 to FY2031, with a total outlay of Rs 2,584.60 crore. The initiative aims to support the installation of around 1,500 MW of capacity through projects ranging between 1 MW and 25 MW across various states.

The scheme is designed to unlock hydropower potential in hilly and North-Eastern regions, where such projects are particularly viable. According to Union Minister Pralhad Joshi, these areas will receive higher financial support to encourage development in remote and strategically important locations.

Under the policy, projects in North-Eastern states and border districts will be eligible for central financial assistance of up to Rs 3.6 crore per MW or 30% of the project cost, subject to a cap of Rs 40 crore per project. For other states, support will be limited to Rs 2.4 crore per MW or 20% of the cost, with a maximum assistance of Rs 20 crore per project.

Out of the total allocation, Rs 2,532 crore has been earmarked specifically for project implementation. The scheme is expected to catalyse investments worth nearly Rs 15,000 crore in the small hydropower sector, giving a strong push to India’s clean energy transition while driving development in rural and remote regions.

In addition to capacity creation, the programme will promote domestic manufacturing by ensuring full utilisation of indigenous plant and machinery, aligning with the Aatmanirbhar Bharat vision. It is also expected to generate significant employment, with an estimated 51 lakh person-days of work during the construction phase, along with long-term operational jobs.

To build a future pipeline, the scheme includes provisions for preparing detailed project reports (DPRs) for nearly 200 potential projects. An allocation of Rs 30 crore has been set aside to support both state and central agencies in this effort.

Industry stakeholders have welcomed the move, noting that it strengthens India’s push towards decentralised renewable energy, particularly at a time when global uncertainties are impacting conventional fuel supply chains. Small hydropower projects, being less land-intensive and environmentally sustainable, also help minimise transmission losses due to their proximity to consumption centres.

Overall, the initiative is expected to revitalise the small hydropower sector, accelerate capacity addition, and contribute to the socio-economic development of underserved regions while supporting India’s long-term clean energy goals.