What is Special Purpose Vehicle?

A Special Purpose Vehicle (SPV) as the name says, is formed for a specific purpose. The name SPV is given to an entity which is formed for a single, well-defined and a narrow motive. Its powers are limited and its life is destined to end when the purpose is attained. An SPV can only be formed for fulfilling any lawful purpose and cannot be formed for activities to be undertaken which are prejudicial or opposed to the public policy.

Also Read: All About SFURTI Scheme: Objective, Eligibility, Process, Benefits and More

The Purpose Of Special Purpose Vehicle

In SFURTI, SPV is formed to achieve the motive of Cluster Development. SPV works for development and sustainability of the cluster even after the project implementation process is over. Formation of the Special Purpose Vehicle is mandatory to seek the final approval for hard intervention activities by the Implementing Agency.

Which Legal Entities Are Eligible For SPV?

An SPV has to be formed for all the clusters and it can be any of the following entities:

  1. a Society registered under Societies (Registration) Act, 1860;
  2. a Co-operative Society under an appropriate statute;
  3. a Producer Company under section 581C of Companies Act, 1956; iv. a Section 25 Company under Companies Act, 1956;
  4. a Trust; or
  5. Any other legal entity, with the prior approval of SSC.

When we talk about the members and formation of SPV, according to the revised SFURTI guidelines, An SPV has to be formed for each cluster with minimum 33% representation of artisans in the Governing body / Managing Committee, by whatever name it is called. But this won’t be happening in case of Khadi Institutions (KIs) of KVIC being IA, since Khadi Institutions (KIs) are already deemed SPV & in KVIC model the role of SPV comes into play at the time of exit of IA, only.

Also Read: Hand-Holding as a Technical Agency

Other Methods For Creation Of SPV

In case the Panchayati Raj Institutions (PRIs) at the cluster level desires to be the IA, it can form an SPV ensuring that the cluster microenterprises/beneficiaries hold a minimum 33% of the total equity in the SPV’s governing body.

In the case of private sector-promoted SPVs, the shareholding of the lead investor/private partner should not normally exceed 50% of the total equity. IA/SPV may deposit their share (10% or 5%, as the case may be) in a phased manner with minimum 25% amount in a single instalment as per the satisfaction of NA.

Also Read: Backward and Forward Linkages in SFURTI


Hence, forming an SPV is important and mandatory for sanctioning of the project. The reason being, SFURTI is all about clusters and their development and SPV under SFURTI Scheme is formed so that it can look out for cluster’s development and it’s sustainability. It is an entity formed for the artisans and consists of the artisans.

For more information about SFURTI, be sure to check out our guide on backwards and forward linkages and our blog. Feel free to drop your thoughts in the comment section below as well.