The Power Ministry plans to make it compulsory for distribution companies to purchase certain percentage of their energy requirements from hydel sources.
The proposal, once implemented, would benefit hydel power producers as well as give a fillip to the hydro sector.
Power Minister Jyotiraditya Scindia today said provision for "Hydro Purchase Obligation (HPO)" is being considered.
This would be like the existing Renewable Purchase Obligation (RPO) that mandates power distribution companies to meet certain percentage of their energy needs by buying renewable power or green energy certificates.
India has substantial hydro power potential which is yet to be fully exploited and the government is working on ways to harness it.
The Minister was speaking on the sidelines of a conference organised by industry body Ficci.