The Ministry of New and Renewable Energy (MNRE) is introducing changes to the Guidelines for Small Hydro Power Schemes, initially published in 2009 and amended in 2014, to address the challenges faced by stakeholders in the small hydropower sector.

The amendments cover receiving the Central Finance Assistance (CFA) and the grace period for project commissioning.

The changes will apply to all projects approved under the program after the 2014 amendment.

Central Financial Assistance

Per the changes, projects that have received the initial CFA installment must achieve at least 80% of the projected generation for any of the months mentioned in the detailed project report to receive the balance amount.

This assistance will be proportionately restricted by reducing the second CFA installment if these conditions are not met.

To receive the full CFA, developers must notify the MNRE about order placements for electromechanical equipment, the disbursement of 50% of the term loan, and 50% spending of the project cost, supported by an audited expenditure statement. They must also inform when their projects reach 50% progress, certified by a state nodal agency.

Developers must ensure that their projects undergo a physical inspection after they are commissioned. They must also provide certificates proving that the major equipment used adheres to the relevant Indian or international standards set by organizations selected by the Ministry.

To receive the final CFA installment, they must submit commissioning and utilization certificates for the installment released. They must also submit an audited statement of expenditure based on actual total spending on the project and three months’ generation data.

Grace Period

Developers will be allowed a 12-month grace period for project commissioning if they encounter any unforeseen delays during its development.

Further delays will result in the second installment of the financial support being reduced to 5% for every quarter postponed. The reduction will be limited to 50% of the aggregate physical progress. The 2014 guidelines allowed for a seven-year extension, provided that at least 70% aggregate physical progress was achieved.

Small hydro contributed 1.1% to India’s total installed power capacity as of March 2025.