Central Financial assistance/
Final support in the form of grants/ assistance/ subsidy is given upto 25 MW capacity SHP in respect of
following schemes/activities.

A)    Resource Assessment and support for identification of new sites: Scheme to support
Identification of new potential SHP sites, preparation of Plan and Detailed
Project Report (DPR) including survey &investigation (DSI) for SHP project
sites to the Central / State Govt. Dept. & agencies /local bodies. Details
are given at Annexure- A.

B)    Scheme to support for setting up new SHP projects in the private/ co-operative / joint
sector etc. Details are given at Annexure-B.

C)    Scheme to to support for setting up new SHP projects in the Government sector. Details
are given at Annexure-C.

D)    Scheme to support for Renovation and Modernization of existing SHP projects in the
Government sector. Details are given at Annexure-D.

E)     Scheme to support for development / up gradation of water Mills (Mechanical/electrical
output) and setting up Micro Hydel Projects (upto 100 KW capacity). Details are
given at Annexure-E.

F)     Research & Development and Human Resource Development: Support to R & d
projects, Strengthening of technical institutions, setting up of turbine
laboratory, business meets, training programs / courses , fellowships etc.
monitoring of SHP projects, consultancy and/ or any other activity felt necessary
for the SHP development. The financial assistance will be considered for these
activities on case to case basis. Details are given at Annexure-F.

2. The scheme will be implemented through the state Governments departments, State Electricity Boards,
State Nodal Agencies , private developers, individual Entrepreneurs Tea Gardens
, NGOs, Water Mill associations, academic and financial institutions/ Banks
etc. as indicated under individual schemes, given at annexures A to F. The
Proposals by the implementing agencies / developers should be in the format
prescribed by this Ministry for individual schemes. Incomplete proposals in any
form received by this Ministry for individual schemes. Incomplete proposals in
any form received by this Ministry will not be entertained.

3. Monitoring Mechanism: The implementing agencies will set up a reviewing arrangement to closely monitor the implementation of their projects covered under the programme. The Ministry will also monitor the
progress of the projects. The Ministry may also appoint independent
consultants/ organizations to monitor the projects.

4. Payment Terms: The release of funds under each scheme will as per the terms and conditions mentioned in the respective schemes and also subject to the general terms and conditions for grants/ assistance of
the Government of India. UCs are to be submitted as per the Performa attached
with the Administrative Approval.

5. Budget Provision: The expenditure on the above schemes of SHP programme will be met from the budget provisions for the SHP programme.

6. The aforesaid programme on Small Hydro Power development is subject to such change(s)/modification(s) as may be decided by the Government of India from time to time and subject to the availability of

7. In case of any ambiguity in these schemes, decision of the Ministry shall be final.

8. The issue under the delegated powers of the Ministry and with the concurrence of IFD, MNRE vide their diary No.
1206/JS&FA/14 dated 30th May, 2014 and with the approval of the Minister (NRE).



1.      The Ministry of New and renewable Energy (MNRE) is encouraging setting up of Small
Hydro Power (SHP) projects in the private sector, Joint sector, co-operative
sector, etc. The Ministry will provide financial support for the new SHP
projects up to 25 MW capacity.

2.      The Financial support would be released in two installments. The first installment
of 50% of financial support is proposed to be released to the financial
institution /bank, after placement of order for electro-mechanical equipment
and disbursement of 50% loan during execution of the project and the balance
50% of financial support after successful commissioning of project, commercial
generation & performance testing. In case a project is set up by a
developer (such as tea garden, captive power projects etc.) fully through its
own financial resources, the total financial support will be released directly
to him after successful commissioning of the project & performance testing.

3.      The quantum of financial support will be independent of the term loan and will be
limited to the amount indicated below:


Above 0.1 MW-25 MW

NE Region, J& K, H.P. &


(Special category States)

1.5 crore/MW limited to 5.00 crore per

Other states

1.0 crore/ MW limited to 5.00 crore
per project


4.      The Project developers/ owners are required to contribute a minimum of 50% of
approved project cost (Loan + Equity).

Eligibility Criteria:

5.      The SHP projects up to 25 MW capacity taken up in private sector , joint sector,
co-operative sector, etc. are eligible for financial support under the scheme .
This is subject to the following:

(i)        The request on application form along with documentary proof, for the grant of
financial support for SHP project, complete in all respect from the developer
should be submitted to the Ministry within six months from the commencement of
the project work at the site or within six months from the date of first
disbursement of loan from the Financial institution / Bank whichever is earlier.

(ii)       The financial institutions (FIs) such as IREDA, PFC,REC,IDBI, ICICI,IFCI, and state
/Nationalized / Scheduled Banks, controlled /governed by RBI , or any other FI/
Bank as may be acceptable to the Ministry from time to time , shall be eligible
under the scheme.

(iii)      Defaulter in repayment of loan will not be eligible for financial support.

(iv)      The projects where the existing capacity has been enhanced / uprated by adding more
new units after obtaining the specific approval of the competent authorities
will also be eligible for financial support limited to the new additional units

6.      The SHP projects where construction work had commenced on or before 31st
March , 2013, the amount of financial support would be decided as per SHP
scheme 2009-10 as was circulated vide this ministry`s letter no. 14 (1) /
2008-SHP dated 11th Dec, 2009 and continued up to year 2012-13.

7.      The SHP projects where the project has commenced on or after 1st April
2013 with intimation to this ministry will be given subsidy as per this scheme.

Procedure to Avail Subsidy

8.      The developers intending to avail financial support , are required to submit the
request on application form ( Performa B-I) along with the following enclosures
directly to the ministry:

i)          Detailed Project Report.

ii)        Copy of Allotment letter from the State Govt./Agency.

iii)       Copy of MOU with State Govt.

iv)       Copy of the Power Purchase agreement.

v)        Scheduled date of commencement of works.

vi)       Scheduled date of completion of project.

vii)     Expected monthly and annual generation as per approved DPR.

viii)    Copy of the loan sanction letter of the FI/ bank.

ix)      Copy of the loan agreement between the FI/bank and developer.

x)       Copy of the loan installment release letter /certificate.

9.      If the total cost of project is fully met/borne by developer through its own
financial resources, the details mentioned at (viii), (ix) $ (x) of para 8
above will not be applicable.

10.  A copy of the application should also be submitted to the concerned FI/bank and
to the State Govt. dept./agency which has allotted the project.

11.  The State Govt. dept./agency will forward their recommendations & verifications
on the details given in the application with respect to the allotment of
project along with present progress & expected date of commissioning.

12.  The FIs / banks will forward their recommendations & verifications on the
details given in the application, present & proposed financial disbursement
and a copy of their loan appraisal report duly filled application with form
(Performa B-II ).

13.  In case more than one FI/ bank is providing term loan for a project , the lead FI
/ bank will co-operative with the Ministry for the financial support proposal
on behalf of other FIs / banks also and will operate the scheme for financial

14.  At the time applying for financial support, the developer would clearly &
carefully indicate the proposed dates of successful completion of the project
and commencement of commercial generation.

15.  After completion of the project and performance guarantee tests, the developer would
ensure physical inspection / testing & certification of performance of the
project from AHEC-IIT Roorkee and / or any other organization decided by the

a.       Projects with installed capacity of 1MW and below will only be subjected to physical inspection relating to proper installation and commissioning in order
to determine the related capacity and generation at rated load with 10%
overloading for grid connected or load capacity as available for off grid

b.      Projects with installed capacity of 1MW would be subjected to full testing and
certification of performance.

16.  The Ministry will examine the request and will issue “in-principle” approval
subject to fulfilling of all eligibility conditions for the grant of financial
support with intimation to the integrated Finance Division (IFD) of this Ministry
for the project as per scheme and the FI / bank & developer will also be
informed accordingly.

Sanction of Subsidy and
Release of Funds

17.  The Ministry will examine the proposal and approve grant of financial support on
the basis of overall viability of the proposal, fulfillment of general terms
and conditions and availability of funds.

18.  First installment of 50% of the sanctioned financial support would be considered for
release, as advance, to the FI / Bank during the execution of the project,
subject to the following conditions:

i.          After placement of order for electro-mechanical equipment.

ii.        After disbursement of 50% of the sanctioned loan by the FIs / Banks

iii.       On submission of bank guarantee and

iv.       Subject to fulfillment of order conditions, as required.

19.  The irrevocable bank Guarantee (BG) should be submitted to the Ministry for the
release of 50% of eligible financial support as advance during the execution of
project. The period of BG should be valid till the Project is actually
commissioned and the next installment of balance funds are also released by their
Ministry. Further, the BG should not be encased without the prior approval of
the Ministry. In case of any default conditions in completion / commissioning
of project, the Ministry would have full authority to encase the BG without any
notice to the developer. BG is further to terms and conditions as per
Government of India Rules.

20.  Balance 50% of the sanctioned financial support would release to the FI/ Bank, after
commissioning, commercial generation & testing of project.

21.  The release of first installment of 50% of sanctioned financial support will be
optional to the developers. Alternatively, total financial support would be
released after successful commissioning, commercial generation & testing of

Pattern of releases:

22.  Eligible financial support will be released in two installments as per the following



as advance on award of E&M works, 50% loan disbursement, achieving 50%
progress and submission of physical & financial progress reports,
photographs, and audited statement of Expenditure. The fund will be released
only on receipt of Bank Guarantee for proposed release of funds.



the successful commissioning of the project and on Receipt of:




Statement of Expenditure (based on actual expenditure on the project etc.)

testing for projects above 1 MW.

inspection report for the projects of 1MW and below.

of generation for the corresponding months as envisaged in the DPR for a
minimum of three consecutive months


80% cumulative
annual generation for one year as envisaged in the DPR.



Release of Financial

23.  The developer would inform the Ministry about placement of orders for electro-
mechanical equipment, disbursement of 50% of term loan & achievement of 50%
on the project to consider for release of first installment of financial
support. For release of second installment of financial support, the developer
would further inform the Ministry of successful completion of the project,
fulfillment of performance guarantee tests / testing & certification of
performance, physical inspection of the project and the commencement of
commercial generation.

24.  The developer would send monthly generation report to the Ministry after start of
commercial generation till the time the project attains 80% of the quantum of
generation for the corresponding months as envisaged in the DPR for a minimum
of three consecutive months or 80% annual cumulative generation whichever is
application. The developer would also provide proof of energy generation whichever
such as certificate from SEB/Power Transmission corporation/company etc.
regarding purchase/wheeling of power. In case of grid failure, the documentary
proof from the EB/ Power Transmission Corp./Company/Utility should be attached.

25.  At this stage, the FI would submit a certificate to the Ministry that the project
is not a “nonperforming asset” (NPA) and the developer is not a defaulter .
In case, the developer is a defaulter/NPA as per the FI norm, he will not be
eligible for the financial support.

26.  After being satisfied regarding power generation as per clause 24 above, the Ministry
would release the financial support to the financial institutions/ banks,
subject to availability of funds.

27.  The Financial Institution/bank would adjust the amount as deemed fit, after receipt
of the financial support. The FI/ bank will not charge any pre-payment penalty,
if any, from the developer for this amount.

28.  After utilization of the financial support as pre-payment, the FI would immediately
submit utilization certificate as per format (Performa- P) to the Ministry.

29.  A grace period of 12 months will be available for commissioning of project from
the original schedule date of commissioning as indicated by the developer in
his application due to natural calamities and / or any other unforeseen reasons
for delays during execution of project. For any further delay, the financial
support would be reduced @ 5% for every quarter delay in commissioning of the
project. The developers should regularly inform the Ministry if the project is
getting delayed along with detailed reasons.

30.  The projects could not complete or commission within scheduled period due to
exceptional / inordinate delays in completion of allied structures of the
projects, by other Government departments or agencies such as SEB, irrigations,
PWD or contractual programs / under litigation etc. would be considered on
merits of the case which otherwise would have been commissioned as per
schedule, on receipt of specific representation with documentary proof from the
developer and verification from the concerned State authorities.


31.  Incomplete proposals in any form and without requisite documents will not be entertained
in the Ministry.

32.  In case the financial support is not adjusted against loan of the developer by the
FIs / Banks within three months from the date of release of financial support
by the Ministry , the FI / Bank will required to pay interest on the amount @
10% per annum, to Ministry.

33.  Contracts for electro-mechanical works should be decided through competitive bidding
process. The procurement of SHP equipment should be made as per the following
provisions. This must be ensured by the FI / bank.

●   The bidder must be a turbine manufacturer, or his authorized representative, who
has designed, manufactured, supplied, erected and commissioned hydro generating
units of similar type and capacity. He can also be a turnkey contractor with
experience of similar SHP works.

●   The
equipment supplied must conform to relevant International / National codes of
practice / AHEC issued standards/ guidelines / manuals including the following



and generator (rotating electrical machines)

34 – 1 : 1983

61366 – 1 : 1998

61116 – 1992

: 4722 – 2001

: 12800 (part 3) 1991

system for hydraulic turbines



3156 – 1992

2705 – 1992

2026 – 1983

valves for hydro power stations & systems

7326 – 1902


●   Generating equipment is also required to have 10% overloading capacity.

34.  The tender document must clearly specify the standard clauses of minimum functional
efficiency of the units (60% weighted average efficiency of TG units up to 100
KW and 75% weighted average efficiency of TG units above 100 KW capacity), evaluation
criteria based on loading on the basis of efficiency variations etc., ensuring
quality of the equipments as per prevailing Indian / International standards and
provisions for type tests & field tests for the purpose of acceptance of
the equipments. The tender document must also contain sufficient penalty and guarantee

35.  The Ministry reserves the right to review/revoke the financial support and in case
the financial support has already been released to withhold the financial
support and in case the financial support already released to the developer in
the event of subsequent developments coming to the notice of the Ministry which
may affect the project and the FI / Bank / developer shall be bound by the
decision of the Ministry in this regard.

36.  The above scheme will be effective for the financial year 201-15 & remaining
period of the 12th Plan i.e. up to 31st March 2017,
unless further modified, and will supersedes the earlier scheme in this regard
under SHP programme of the Ministry, circulated prior to this Administrative
Approval. However, the scheme will be effective for projects taken up on or
after 1st April, 2013 under intimation to the Ministry as Mentioned
in Para-7 above (page no. 8).