In this industrialized world the economic growth, growing electrical applications, increase oil prices and subsequent worldwide energy crisis prompted many countries to develop renewable sources of energy. Under these circumstances power planners are giving special attention to accelerated development of hydropower as an important energy resource. The study concludes that the financial analysis of the entire project indicates that Equity Internal Rate of Return without CDM involvement is 13.00% which is very low (considering emissions reductions the inflation rate of 6% in case of India) and the other hand with CDM involvement the internal rate of return is become 21.15%. The CDM revenue by sale of will raise the Equity IRR to respectable levels helping in the repayment of loan as soon as possible. The average annual emissions reductions due to the project activity for seven years crediting period has been calculated ex-ante as 17, 802 tCO2e per annum and CER generated from the project activity in the monitoring period of 29.10.2008 to 31.12.2009 is calculated as 20463.056 tCO2e per annum.