An SHP Development Scheme has been approved for a period of five fiscal years from FY 2026-27 to FY 2030-31, worth an amount of Rs 2,584.60 crore by the Union Cabinet for generating nearly 1,500 MW of power capacity and enhancing energy access in remote areas, as per details from the official source.

The program will concentrate on SHP projects with capacities varying from 1 MW to 25 MW, especially in hilly and North Eastern States, where there is uneven access to electricity.

India's SHP potential is said to be about 21,000 MW with over 7,000 project sites, and out of which only 5,171 MW capacity—accounting for one-fourth—have been exploited till date. The proposed plan aims at filling this gap and developing a portfolio of SHPs with improved project execution, financial viability, and pipelining.

As per the SHP policy, financial assistance will vary based on geographical region; that is, projects in North Eastern States and border districts will be provided with comparatively higher assistance in order to compensate for increased costs compared to other geographical areas. Apart from this, funds have been allocated to develop Detailed Project Reports (DPRs) for at least 200 project sites.

The initiative is expected to generate around 51 lakh person-days of employment during construction, along with additional long-term roles in operations and maintenance. It is also projected to attract approximately ₹15,000 crore in private investment into the sector.

Small hydro projects function as decentralised energy systems suited for remote and difficult terrains. Unlike solar and wind, they can provide more stable, continuous electricity, supporting grid reliability in areas with limited infrastructure.

The scheme comes as part of efforts to diversify India’s renewable energy mix. While solar and wind capacity have expanded, their intermittent generation creates gaps that require more stable sources of power. Small hydro can contribute a consistent output, particularly in regions with suitable water resources.

The rollout will depend on addressing structural constraints, including financing challenges, project delays, and infrastructure gaps in remote regions. Past utilisation trends indicate that policy support alone may not ensure implementation without faster execution and coordination across states.

The scheme forms part of a broader effort to expand clean energy capacity and improve access in underserved regions. Its outcomes will depend on the pace of project execution and completion.