MNRE issues revised guidelines for SHP projects to streamline CFA disbursal

Under the new framework SHP developers must now demonstrate a minimum of 80 percent of the projected monthly generation based on the Detailed Project Report (DPR) for any one corresponding month to be eligible for the release of the second CFA installment.

The Ministry of New and Renewable Energy (MNRE) has issued revised guidelines for Small Hydro Power (SHP) projects to address sectoral challenges and streamline the release of Central Financial Assistance (CFA). These updated norms apply to all projects sanctioned under earlier schemes.

Under the new framework, SHP developers must now demonstrate a minimum of 80 percent of the projected monthly generation based on the Detailed Project Report (DPR) for any one corresponding month to be eligible for the release of the second CFA installment. Failure to meet this benchmark will lead to a proportionate reduction of the second installment. For instance, if a project generates only 73 percent of the projected output over three consecutive months or over a year cumulatively, the second CFA installment will be adjusted on a pro-rata basis, as outlined in the revised policy. However, the first installment constituting 50 percent of the eligible CFA will remain unaffected.

Projects are now required to submit valid proof of energy generation, including certification from the State Electricity Board, transmission company or other authorised utilities. In the event of delays beyond the original commissioning schedule due to unforeseen circumstances, developers will be granted a 12-month grace period. Any delay beyond this will attract a 5 percent penalty per quarter on the second installment of CFA, capped at 50 per cent after deducting the first installment.

To qualify for CFA disbursal, developers must meet several milestones: placement of orders for electro-mechanical equipment, disbursement of at least 50 percent of the term loan, incurring 50 per cent of the project cost (with proof through audited financial statements), and achieving 50 percent physical progress certified by the respective state nodal agency.

Post-commissioning, projects will be subject to physical verification and must provide certifications confirming that key equipment adheres to Indian or international standards. For the release of the final CFA tranche, developers must submit a commissioning certificate, utilisation certificate, audited financial statements, and three months’ generation data.

The updated guidelines also mandate that projects be completed within five years from the date of contract award. Extensions, if needed, will be considered by the MNRE Secretary only if 50 per cent physical progress has been achieved. However, no extension beyond seven years will be permitted. Projects delayed beyond the approved period may see financial assistance capped at funds already disbursed or face recovery with applicable interest.

Performance certification and testing must be carried out by accredited institutions such as IIT Roorkee, Jadavpur University, or other MNRE-designated bodies. All other provisions of the previous SHP guidelines remain in effect, with any further relaxations to be decided at the ministry’s discretion.