MNRE receives approval for Rs 2,585 crore small hydro scheme

The Ministry of New and Renewable Energy (MNRE) has received administrative approval from the President of India for the implementation of the Small Hydro Power (SHP) Development Scheme for projects ranging from 1 MW to 25 MW. The scheme carries a total outlay of Rs 2,584.60 crore for the period from FY 2026–27 to FY 2030–31 and aims to add around 1,500 MW of new small hydro capacity across the country.

The scheme, issued on May 15, 2026, also includes committed liabilities of Rs 96 crore from earlier SHP schemes. The Solar Energy Corporation of India Limited has been appointed as the National Programme Implementing Agency (NPIA). SECI will oversee application scrutiny, project monitoring and disbursement coordination.

Central Financial Assistance (CFA) forms the largest share of the scheme allocation, with Rs 2,532.60 crore earmarked for SHP projects. Projects located in North-Eastern states and districts along international borders will be eligible for CFA equal to 30% of the Central Electricity Regulatory Commission’s (CERC) normative capital cost, or 30% of the actual project cost, whichever is lower, subject to a ceiling of Rs 30 crore per project. Projects in other regions will receive 20% CFA, capped at Rs 20 crore per project.

Apart from project funding, the scheme allocates Rs 30 crore for preparing at least 200 Detailed Project Reports (DPRs), Rs 8 crore for technical institutions including Indian Institutes of Technology (IITs) and National Institutes of Technology (NITs), and Rs 14 crore for information, education and communication activities, capacity building, international cooperation and a Project Monitoring Unit.

Under the implementation framework, eligible projects are required to be allotted through transparent competitive bidding. Construction activities should begin after March 18, 2026, which was the date of the scheme announcement. Developers are also required to secure approvals including forest clearance, techno-economic clearance, grid connectivity and no-objection certificates from pollution control boards.

Projects are expected to achieve commercial operation within four years from the start of construction. A one-year extension may be allowed in justified cases. However, delays beyond four years will attract a reduction of 4% in CFA for every quarter of delay.

The first instalment of CFA, amounting to 50% of the approved assistance, will be released after achieving 50% physical and financial progress. Private developers will be required to furnish a bank guarantee, while government departments may provide an undertaking. The remaining assistance will be released after commercial operation and after the project achieves at least 80% of its projected monthly generation within one year of commissioning.

MNRE has also proposed a dedicated online SHP portal for application processing, project monitoring and grievance redressal. Fresh applications under the scheme will be accepted until December 31, 2030.

The operational guidelines further specify compliance with technical standards prescribed by the Bureau of Indian Standards (BIS), International Electrotechnical Commission (IEC) and Central Electricity Authority (CEA). Physical verification of projects will be carried out by designated institutions, including HRED-IIT Roorkee.

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