Author: PPD Team Date: 28/05/2025
The Ministry of New and Renewable Energy (MNRE) has issued revised guidelines for Small Hydro Power (SHP) schemes. These changes apply to all projects sanctioned under the earlier 2009 and 2014 schemes. The updates are designed to address sector challenges, simplify compliance, and facilitate timely completion.
The calculation and release of Central Financial Assistance (CFA) have been modified. Earlier, developers had to submit monthly generation reports until the project met 80% of the expected generation over three consecutive months. The new rule allows full second instalment release if 80% generation is achieved in any one corresponding month as per the Detailed Project Report (DPR).
If this 80% target is not met, CFA will be disbursed proportionately. For example, a project achieving 73% generation will now receive 91.25% of the second instalment (calculated as 100×73/80). The first instalment remains unaffected.
Projects may now also qualify by achieving either 80% generation for three months or 80% cumulative annual generation.
The earlier guideline allowed a 12-month grace period beyond the original commissioning date. This remains, but any further delay will now lead to a 5% reduction in the second instalment of CFA for every quarter of delay. This reduction is capped at 50%. There will be no deduction from the first instalment.
For project completion, the threshold for seeking an extension has been reduced. Earlier, a minimum of 70% physical and financial progress was needed. Now, 50% physical progress is sufficient for the Secretary of MNRE to consider extensions on a case-by-case basis. Projects are still expected to be completed within five years of contract award. Extensions beyond seven years are not permitted.
The revised process specifies updated documentation requirements:
- For the first instalment of CFA: developers shall show 50% progress on the project, 50% expenditure supported by an audited statement, and disbursement of 50% of the term loan. Certification shall be obtained from the State Nodal Agency.
- For the second instalment: developers shall submit a commissioning certificate, an audited statement of total expenditure, three months of generation data, and a utilisation certificate (if applicable). Physical verification and equipment certification are mandatory.
Projects up to 1 MW capacity will undergo physical inspection to confirm rated output. Projects above 1 MW will undergo full performance testing and certification.
Certification of equipment and project performance will be carried out by AHEC, IIT Roorkee, Jadavpur University, or other institutions as designated by the Ministry.
Apart from the updated clauses, all other parts of the 2009 and 2014 SHP guidelines remain unchanged. The changes were approved following the Department of Expenditure’s memorandum dated 30 April 2025.
The revised guidelines were issued on 26 May 2025 and are now in effect. The power to relax any provision in these revised guidelines rests with the Minister of New and Renewable Energy.