The Union Cabinet has approved the Small Hydro Power Development Scheme to support small hydropower projects of one to 25 megawatt (MW) capacity, with a focus on hilly and North Eastern states. The scheme runs from FY2026–27 to FY2030–31 and carries an outlay of Rs25.846 billion (bn). It aims to unlock around 1,500 MW of new small hydropower capacity and to bolster decentralised, round-the-clock electricity provision in remote areas.

India has harnessed about 5,171 MW of small hydropower against an estimated potential of 21,133.61 MW, leaving over 15,960 MW to be developed. The scheme is expected to attract investments of roughly Rs150 bn and to generate 5.1 million (mn) person-days of employment during the construction phase. Support for indigenous plant and machinery is intended to strengthen domestic supply chains and contribute to the Atmanirbhar Bharat vision.

Financial incentives include assistance to North Eastern states and international border districts of Rs36 million (mn) per MW or 30 per cent of project cost, subject to a ceiling of Rs 300 million per project. Other locations will receive Rs 24 mn per MW or 20 per cent of cost, capped at Rs 200 mn per project. A separate allocation of Rs 300 mn will support the preparation of detailed project reports for at least 200 projects.

Regional potential is broadly distributed: the Northern region accounts for 7,978 MW, the Southern region for 5,490 MW, the North-Eastern region for 3,262 MW, the Western region for 2,963 MW and the Eastern region for 1,440 MW. States such as Himachal Pradesh, Uttarakhand and Karnataka figure prominently in their respective regions. The distribution allows tailored strategies, with some regions ready for quicker deployment owing to stronger infrastructure.

The scheme is designed to combine targeted financial support, streamlined procedures and project readiness measures to accelerate deployment in challenging terrains. Small hydropower offers a low ecological footprint, limited land requirement and long operational life, making it a viable tool for inclusive rural development. By enhancing grid resilience and local energy access, the programme is positioned to support sustainable and self-reliant energy growth.