Abstract Small hydropower projects (SHPs), though generally considered more environmentally benign and socially acceptable as compared to large projects, yet their overall sustainability is under suspicion in the Himalayan regions. Almost all SHPs in this region are being developed as run of the river mode which generally causes less/no submergence and quite less displacement of people as compared to large reservoir based hydropower production mode. However, in the absence of proper planning and monitoring mechanism, these projects are causing implacable tunnelling of hills, choking of streams, conversion of streams into dry ditches and long term socio-environmental impacts. This paper presents a SHP development study from hydro rich Beas river basin of Himachal Pradesh, a state nestled in western Himalayan region of India. In depth field studies, focus group discussions with the project affected people and interaction with project proponents of five SHPs in this region suggest that sustainability issues with respect to SHPs are not small vis-a-vis size of their installed capacity. There is an urgent need to take steps to include SHPs having an installed capacity of above 10 MW into the ambit of environment clearance process which is absent in many countries of the world at present.