Introduction of Insurance Surety Bonds (ISBS) as an Alternative to Bank Guarantee/Bid Security across all Power Procurement Frameworks – EQ
Summary:
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The Ministry of Power has already integrated ISB provisions into **Standard Bidding Guidelines** for:
– Renewable energy projects (Solar, Wind, Hybrid, FDRE)
– Pumped Storage Projects
– Transmission projects
– Battery Energy Storage Systems (BESS)
The memorandum **advises all States/UTs and procuring utilities** to amend their bidding documents accordingly for **long-term, medium-term, and short-term power procurement** to ensure **policy consistency**, improve **ease of doing business**, and encourage **wider participation**.
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## **Key Business Points**
### 1. **New Financial Security Instrument**
– **Insurance Surety Bonds (ISBs)** are now at par with Bank Guarantees, Demand Drafts, FDRs, and online payments for bid and performance security.
### 2. **Reduced Credit & Liquidity Burden**
– ISBs reduce **credit exposure** and **liquidity constraints** for bidders and contractors, unlike bank guarantees which block working capital.
### 3. **Applicability Across Power Segments**
– Covers all power procurement frameworks:
– Renewable energy (solar, wind, hybrid, FDRE)
– Pumped storage
– Transmission
– Battery Energy Storage Systems (BESS)
### 4. **Mandate for States & Utilities**
– All States/UTs, Discoms, Gencos, and procurement utilities **must** update their bidding documents to accept ISBs.
### 5. **Regulatory Alignment**
– Based on GFR 2017 amendments (Rules 170(i) and 171(i)), effective from **February 2022**.
– Backed by Ministry of Finance and Ministry of Power – strong policy consistency.
### 6. **Ease of Doing Business**
– Encourages more **competitive bidding** by lowering entry barriers for smaller or less capitalized firms.
– Reduces administrative burden of managing multiple bank guarantees.
### 7. **Risk Transfer to Insurers**
– Security risk shifts from bidder’s bank to **insurance companies**, potentially lowering cost for bidders depending on credit rating and insurance premium.
### 8. **Implementation Timeline**
– Issued April 2026 – immediate advisory status for all power procurement contracts going forward.
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