The Ministry of New and Renewable Energy (MNRE) has announced revisions to the guidelines for Small Hydro Power (SHP) schemes, initially circulated in 2009 and 2014. This move comes in response to various challenges and difficulties faced by stakeholders in the SHP sector.
The modifications, outlined in an Office Memorandum dated May 26, 2025, will be applicable to all projects sanctioned under the existing SHP schemes. The MNRE aims to address the concerns of the SHP sector and further promote the development of these projects as part of India’s renewable energy initiatives.
Key Changes Introduced in the Guidelines
Several clauses within the existing guidelines have been amended to provide more flexibility and address practical challenges. Some of the significant changes include:
The criteria for the release of the balance Central Financial Assistance (CFA) have been revised. Instead of requiring consistent achievement of 80% of the projected monthly generation for three months, projects can now receive the balance CFA if they achieve 80% of the projected generation for any one corresponding month as per the Detailed Project Report (DPR). If this isn’t met, the second installment of CFA will be proportionately restricted. The developer still needs to provide proof of energy generation.
A uniform grace period of 12 months from the original scheduled commissioning date will now be available for project commissioning due to unforeseen reasons. For any further delays, the financial support will be reduced by 5% per quarter of delay, with a maximum reduction of 50% from the second installment of eligible CFA (after deducting the first 50% CFA). Developers are required to regularly inform the Ministry of any anticipated delays along with detailed reasons.
The timeline for project completion remains five years from the date of contract award. However, the criteria for granting extensions by the Secretary, MNRE, have been modified. Extensions will now be considered on a case-to-case basis based on justified reasons and subject to achieving at least 50% aggregate physical progress on the project. Notably, the previous requirement of over 70% progress for extension consideration has been lowered.
The guidelines for project performance verification after completion have been updated. For projects with an installed capacity of 1 MW and below, the physical inspection will focus on proper installation and commissioning to determine rated capacity and generation. Projects with a capacity above 1 MW will undergo full testing and certification of performance. The entities authorized for this verification now include HRED, IIT Roorkee/Jadavpur University, or any other organization decided by the Ministry.
The criteria for the release of both the first and second/final installments of CFA have been revised and clarified, outlining the necessary documentation and achievements required at each stage.
The MNRE has also stated that the power to relax any of the provisions in these SHP scheme guidelines will vest with the Minister of New & Renewable Energy. All other contents of the original guidelines will remain unchanged.
This revision in guidelines is expected to provide much-needed relief and support to the Small Hydro Power sector, encouraging smoother project implementation and contributing to India’s renewable energy goals.
