Cabinet Approves Massive ₹2,584 Crore Push for Small Hydro Power Projects in Hilly and Border Regions
New Delhi / Tarai 24 National Desk, March 18, 2026 — In a major push toward clean energy and sustainable infrastructure, the Union Cabinet, chaired by Prime Minister Narendra Modi, has officially approved the ‘Small Hydro Power (SHP) Development Scheme’ for the period spanning FY 2026-27 to FY 2030-31.
The comprehensive scheme comes with a substantial financial outlay of ₹2,584.60 crore and aims to install approximately 1,500 Megawatts (MW) of Small Hydro Power projects across the country.
Major Push for Hilly and Border Districts
The initiative specifically targets the development of hydro projects with a capacity of 1 to 25 MW, making it highly advantageous for hilly regions and states with high, untapped hydro potential.
For regions critical to national security and regional development—specifically the North Eastern states and districts sharing an international border—the Centre is offering significant financial assistance. Developers in these areas will receive ₹3.6 crore per MW or 30% of the project cost (whichever is lower), with a cap of ₹30 crore per project.
In all other states, the central financial assistance is set at ₹2.4 crore per MW or 20% of the project cost, up to a maximum limit of ₹20 crore per project.
Job Creation and ‘Atmanirbhar Bharat’
The government anticipates that this ₹2,532 crore direct project earmark will catalyze an overall investment of approximately ₹15,000 crore in the small hydro sector.
A primary focus of the scheme is domestic manufacturing. To fulfill the vision of an Atmanirbhar Bharat (Self-Reliant India), the initiative mandates that 100% of the plant and machinery used in these projects must be sourced indigenously.
Furthermore, the construction phase alone is expected to generate an impressive 51 lakh person-days of employment. Once operational, these decentralized power plants will create long-term jobs in operations and maintenance, largely benefiting remote and rural populations for the next 40 to 60 years.
Sustainable Energy Infrastructure
Small hydro projects are widely considered environmentally sustainable as they are decentralized and bypass the typical ecological controversies associated with massive dams. They avoid large-scale land acquisition, community displacement, and massive deforestation. Additionally, since the power generated is consumed locally or nearby, the requirement for long transmission lines is minimal, significantly reducing transmission losses.
To ensure long-term momentum, the Cabinet has also set aside an additional ₹30 crore to incentivize state and central government agencies to prepare Detailed Project Reports (DPRs) for an upcoming pipeline of 200 future hydro projects.