[Shivam Gupta is a 4th year BA LLB (Hons) student at the National Law School of India University, Bengaluru]
On 27 November 2025, Sustainable Energy Infra Investment Managers Pvt. Ltd. submitted a request letter to the Securities and Exchange Board of India (SEBI) under the SEBI (Informal Guidance) Scheme, 2003. The request sought clarification on whether renewable energy assets materialised through a government-awarded contract could be classified as public-private partnership (PPP) projects in relation to the SEBI (Infrastructure Investment Trusts) Regulations, 2014 (InvIT Regulations). SEBI replied in February 2026, and the interpretative letter was published in May 2026. It clarified that certain renewable energy projects, awarded through government bidding processes and operating under long-term power purchase agreements (PPAs), can be treated as “PPP projects” under the InvIT Regulations. This post analyses the regulatory implications of that move.
Analysing the Public Private Partnership (PPP) Contract
To examine why the classification matters, three building blocks must be in place. In practice, an InvIT does not invest directly into infrastructure projects. Rather, it channels investment through special purpose vehicles (SPVs). Regulation 2(1)(zy) of the InvIT Regulations defines an SPV as a company or limited liability partnership in which the InvIT (or a holding company) holds a controlling interest and not less than 51% of the equity, which holds at least 90% of its assets directly in infrastructure projects, and which is not engaged in any unrelated activity. These SPVs frequently enter into PPAs.
What, then, is a PPP? The InvIT Regulations define a “PPP project” in regulation 2(1)(zm) as an infrastructure project undertaken on a public-private partnership basis between a public concessioning authority and a private SPV concessionaire, selected on the basis of open competitive bidding or a memorandum of understanding with the relevant authorities. Crucially, the InvIT Regulations do not explain what a “public-private partnership basis” actually means. To fill that gap, both the applicant and SEBI fell back on the descriptive definition maintained by the Department of Economic Affairs in its PPP glossary, which frames a PPP as a fixed-term contractual arrangement between a public and a private entity for the provision of public assets or services, with a well-defined allocation of risk and performance benchmarked to pre-determined standards.
This creates a conceptual ambiguity as a traditional understanding provides a different meaning to PPAs which cannot be construed to mean PPP contracts. PPAs are distinct from the concession agreements that are considered PPP contracts. Under a concession, a private entity is allowed to exercise authority over a public asset for a limited period in order to develop, operate and maintain it; once that period is over, ownership and control over the infrastructure revert to the government. A PPA looks different. The SPV builds and owns the plant in perpetuity, the government entity is essentially a buyer of electricity rather than a grantor of public assets, and nothing reverts at the end of the term. In short, a concession transfers temporary control over a public asset, whereas a PPA is, in substance, a long-term supply contract. SEBI’s letter has blurred this distinction, raising two questions: whether a renewable energy project operating through a government-awarded PPA (tendered under section 63 of the Electricity Act, 2003) still qualifies as a PPP project under the InvIT Regulations; and whether SEBI’s observations carry implications beyond the Regulations.
SEBI’s Informal Guidance
Although not categorically, SEBI answered in the affirmative that such PPAs operating through a government-awarded contract should be considered PPP projects under regulation 2(1)(zm) of the InvIT Regulations. Importantly, however, it prefaced its view with the words “without necessarily agreeing with your analysis”, endorsing the conclusion on the facts presented while declining to commit to the applicant’s reasoning.
SEBI’s analysis was founded on the following considerations under the definition in regulation 2(1)(zm): first, electricity generation is indeed recognised as infrastructure, and electricity generation, transmission and distribution feature in the Updated Harmonized Master List of Infrastructure Sub-sectors notified by the Ministry of Finance on 19 September 2025; second, the projects are awarded through competitive bidding; third, public-sector entities such as SECI and NTPC participate as the public counterparties; and fourth, the contractual framework allocates risk between the public and private participants.
Why It Matters under the InvIT Regulations
The InvIT Regulations contain several provisions that operate differently depending upon whether a project is classified as a PPP Project or a non-PPP Project. Once a renewable energy project is classified as a PPP Project, it gains access to the PPP-specific framework within the regulatory framework.
The most significant transition lies in the acquisition flexibility unlocked due to this classification. Under regulation 2(1)(o), an “eligible infrastructure project” which is classified as a PPP has relaxed norms for acquisition by the InvIT. An InvIT can acquire a PPP project if it has reached these milestones: (i) if it has fully completed one year of operation, (ii) if it has newly achieved its commercial operation date (COD) without needing a full year’s revenue track record, or (iii) even while it is still in its pre-COD (half of the construction is completed or half of the capital expenditure has been undertaken) phase. This enables renewable energy developers to seamlessly drop newly built or under-construction pipelines into an InvIT vehicle, significantly accelerating capital recycling.
Next, under regulation 18(2), if an asset is classified as a PPP project, the InvIT is legally mandated to hold and channel its investments through a holding company or an SPV; the trust cannot own the infrastructure asset directly on its balance sheet. In practice, virtually every major renewable InvIT already utilises a multi-tiered corporate SPV structure for tax and ring-fencing purposes, meaning this rule automatically aligns with current industry practices. However, what changes is that it now hardens into an unalterable structural constraint.
Finally, there is the ownership threshold. Ordinarily, an InvIT must hold a controlling interest and not less than 51% of the equity shareholding in its project SPVs. However, the proviso to regulation 2(1)(zy)(i) creates an exception for PPP projects: if government guidelines, tender terms, or state policies legally disallow a private entity from holding a full 51% stake, the requirement has been relaxed. While most solar and wind SPVs are 100% owned by the trust, this latent exemption protects an InvIT if a future state policy or auction mandate forces a joint venture with a government body or requires a minimum local shareholding.
Implications Beyond InvIT Regulations & Way Forward
SEBI was equally clear about the limits of its guidance. Within the letter itself SEBI has clarified that the interpretation that it has provided would be relevant only for the purpose of the InvIT Regulations. It would be operative only as an internal regulatory mechanism and should not be relevant for other laws, rules or regulations or binding over other regulators. Going a step further, SEBI noted that if different facts were presented before it, different interpretations would be possible, and that the Board itself or indeed anyone remains free to take a different view. This is consistent with the very nature of informal guidance: under the 2003 Scheme, an interpretive letter reflects the view of a SEBI department, is not binding on the Board, and is not appealable.
Overall, read alongside the InvIT Regulations, the letter unlocks highly flexible acquisition and structuring pathways for renewable InvITs, ensuring that capital can be rapidly deployed into energy contracts at various stages of development. Yet because this classification stems from non-binding informal guidance based on specific facts, developers and investors must remain cautious. The interpretation acts as an enabler strictly for the InvIT ecosystem rather than serving as a universal legal precedent, and it should not be assumed to travel into tax, foreign-exchange or other regulatory regimes. It is also worth remembering that the comfort is strongest where there is a genuine government off-taker selected through competitive bidding; bilateral corporate PPAs, merchant capacity or unsolicited awards may not fit the PPP mould at all. Ultimately, while the letter invites a legitimate theoretical debate over what truly constitutes a concession, it serves as a progressive and necessary fuel for India’s green-infrastructure market.
– Shivam Gupta