In News:

In a significant step towards strengthening India’s renewable energy portfolio, the Union Cabinet has approved the Small Hydro Power (SHP) Development Scheme for FY 2026–27 to FY 2030–31. The scheme aims to harness untapped hydro potential, particularly in remote and hilly regions, while promoting sustainable and decentralized energy generation.

About the SHP Development Scheme

The scheme focuses on the development of small hydro projects with capacities ranging from 1 MW to 25 MW, targeting an aggregate capacity of 1,500 MW across the country.

• Time Period: FY 2026–27 to FY 2030–31
• Total Outlay: ?2,584.60 crore
• Target Investment Mobilisation: ~?15,000 crore
• Focus Areas: Hilly regions, North-Eastern states, and border districts

Key Features of the Scheme

1. Differential Central Financial Assistance (CFA)

• North-Eastern & Border Areas:
  • ?3.6 crore per MW or 30% of project cost
  • Maximum ?30 crore per project
• Other States:
  • ?2.4 crore per MW or 20% of project cost
  • Maximum ?20 crore per project

This differentiated support reflects regional disparities and aims to unlock hydro potential in geographically challenging areas.

2. Dedicated Funding Allocation

• ?2,532 crore earmarked for project development
• ?30 crore allocated for preparation of Detailed Project Reports (DPRs) for ~200 future projects

This ensures both immediate implementation and a pipeline for long-term sectoral growth.

3. Promotion of Indigenous Manufacturing

• Mandates 100% domestic sourcing of plant and machinery
• Supports the Atmanirbhar Bharat initiative
• Encourages growth of local manufacturing ecosystems in the renewable sector

4. Employment Generation

• Estimated 51 lakh person-days of employment during construction
• Additional long-term employment in operation and maintenance
• Focus on rural and remote job creation

5. Decentralised and Efficient Energy Generation

• SHPs are decentralised, reducing dependence on long transmission lines
• Leads to lower transmission losses and improved grid efficiency

Technological Approach: Run-of-the-River Projects

The scheme emphasises run-of-the-river technology, which:

• Generates power using natural river flow
• Avoids large dams and reservoirs
• Minimises ecological disruption