Hydropower / Wind is a renewable, non-polluting and environmentally benign source of energy. It is one of the oldest renewable energy techniques known to mankind for mechanical energy conversion as well as electricity generation. Hydropower represents use of water resources towards inflation free energy due to absence of fuel cost with mature technology characterized by highest prime moving efficiency and operational flexibility.

Hydro power constitutes about 25% at 38,863 MW of the power generation total installed capacity of 1,57,229 MW (February 2010) in the country. While Ministry of Power, Government of India is responsible for large hydro projects, the Small Hydro power sector (up to 25 MW) is governed by Ministry of New and Renewable Energy (MNRE).

The Government of India announced the Electricity Act in 2003, Electricity Policy in 2005 and Tariff Policy in 2006 to create conducive environment for private sector participation. Small Hydro power projects are now governed by these policies. The tariff is decided by the State Electricity Regulatory Commissions (SERCs) as per the Tariff Policy. Direct third party sales to large power consumers also are allowed in most of the States.

Small Hydro sector presents a good value creation opportunity, considering the advantages in implementation and operations. India has installed capacity of close to 2500 MW in the Small Hydro sector with (already) identified potential of another 15000 MW.