New Delhi has long been concerned about growing Chinese influence in the island nation, which sits near key global shipping lanes and which India considers to be within its sphere of influence.
The project, initially financed by an Asian Development Bank (ADB) loan, was temporarily shelved two years ago after India raised concerns over China's involvement.
Sri Lanka's energy ministry said Friday that the project had been revived and was now fully funded by an $11 million Indian government grant.
It added that renewables firm U-Solar from India's tech hub of Bengaluru had been awarded the building contract.
India's assistance "underscored the significance New Delhi attached to bilateral energy partnership", the Indian embassy said in a statement.
The three facilities will have a combined 2,230 kilowatts of renewable energy capacity and be located on islets near the northern city of Jaffna, not far from India's southern coast.
China and India have been competing for major infrastructure projects in Sri Lanka, which is currently emerging from its worst economic crisis since independence from Britain in 1948.
Beijing is also Sri Lanka's single largest bilateral creditor, accounting for around 10 percent of the island nation's $46 billion foreign debt at the time of a government default at the peak of the crisis in 2022.
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