- Why in news
- On 18 March 2026 the Union Cabinet approved the Small Hydro Power (SHP) Development Scheme for FY 2026-27 to FY 2030-31, with an outlay of Rs 2,584.60 crore.
- What it is
- The scheme gives central financial assistance to small hydro projects of 1-25 MW capacity. It favours hilly and North Eastern states and border districts. It also funds detailed project reports to build a pipeline of future projects.
- Outlay and target
- Outlay of Rs 2,584.60 crore for about 1,500 MW of SHP capacity, for FY 2026-27 to FY 2030-31.
- Eligible capacity
- Projects between 1 and 25 MW are supported.
- CFA in North East and border districts
- Rs 3.6 crore per MW or 30% of project cost, whichever is lower, capped at Rs 30 crore per project.
- CFA in other states
- Rs 2.4 crore per MW or 20% of project cost, whichever is lower, capped at Rs 20 crore per project.
- Employment
- The scheme will support 51 lakh person days of employment during construction.
Don’t confuse with Small hydro vs large hydro: This scheme covers 1-25 MW projects. Larger hydro projects fall under separate policies and are not covered here.
Schemes: 52 Prelims questions since 2013, 10 in Prelims 2026 alone. They test features, the period and who funds it. In Mains, 33 news-triggered questions, mostly GS3.
Why it matters
- Taps hydro potential in remote hilly and border areas with little land acquisition or displacement.
- Needs little transmission line, which cuts transmission losses, and creates local jobs.
Problems
- Projects can face delays in clearances, land access and difficult terrain in remote areas.
- Hydrological variability and climate risk can affect output.
Way forward
- Speed up DPR preparation and single-window clearances so the pipeline turns into projects.
- Strengthen state capacity and private investment through assured offtake.
Put in your answer
Investment expected: The scheme is likely to bring about Rs 15,000 crore of investment in the small hydro sector.
Project lifespan: SHP projects typically last 40 to over 60 years.
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UPSC’s own questions that come close to this issue, from our Prelims and Mains banks.
Prelims practice · Statements
Ours, not from a UPSC paper
Consider the following statements:
- 1.The Small Hydro Power Development Scheme (2026-27 to 2030-31) supports small hydro projects with capacity between 1 MW and 25 MW.
- 2.Under the scheme, central financial assistance in North Eastern states and in districts with an international border is the lower of Rs 3.6 crore per MW or 30% of project cost, with a cap of Rs 30 crore per project.
- 3.In states other than the North Eastern states, central financial assistance under the scheme is capped at Rs 30 crore per project.
Which of the statements given above is/are correct?
True or false?
1 of 5
Statements the way Prelims prints them. Say first, then see the fact.
1.The scheme supports small hydro projects with capacity between 1 MW and 25 MW.
True. Eligible projects are 1-25 MW.
2.The scheme is meant to cover projects of about 1,500 MW in total over FY 2026-27 to FY 2030-31.
True. Target is about 1,500 MW.
3.In North Eastern states, central assistance is the lower of Rs 3.6 crore per MW or 30% of project cost, capped at Rs 30 crore per project.
True. Rs 3.6 crore/MW or 30%, cap Rs 30 crore.
4.The higher rate of central assistance applies only to North Eastern states and not to districts with an international border elsewhere.
False. The higher rate also applies to districts with an international border.
5.The scheme provides funds to help prepare detailed project reports for about 200 projects.
True. Rs 30 crore for DPRs for about 200 projects.
Written by us from the release, not by UPSC; checked by a second model.
Worth revising until Prelims 2027: most news questions come within two years of the event.