Introduction of Insurance Surety Bonds (ISBs) as an Alternative to Bank Guarantees/Bid Security across all Power Procurement Frameworks- Reg. – EQ
Summary:
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### Key Business Point
**Insurance Surety Bonds (ISBs) are now officially recognized as a direct alternative to Bank Guarantees (BGs) for Bid Security and Performance Security across all power procurement frameworks in India.**
### Matters for Businesses
– **Reduced Liquidity Lock-up:** Unlike bank guarantees that block working capital, ISBs are issued by insurance companies, typically requiring lower collateral or no cash margin.
– **Lower Credit Exposure:** Companies can participate in more bids without exhausting bank credit limits.
– **Easier Access for Smaller Players:** Firms with limited banking relationships can use ISBs to compete for power projects.
### Scope of Application
All segments of power procurement now accept ISBs, including:
– Renewable energy (Solar, Wind, Hybrid, FDRE)
– Pumped Storage Projects
– Transmission projects
– Battery Energy Storage Systems (BESS)
– Long-term, medium-term, and short-term power procurement
### Legal Basis
– Ministry of Finance amended **GFR Rules 170(i) and 171(i)** on **2nd February 2022** to include ISBs.
– Ministry of Power issued this memorandum on **4th April 2026** mandating all States/UTs and utilities to update their bidding documents accordingly.
### Action Required from Businesses
– **Bidders and contractors** can now submit Insurance Surety Bonds instead of bank guarantees for tenders issued after state utilities adopt this change.
– **Check individual tender documents** to confirm ISB acceptance (utilities are advised to incorporate this, but implementation timelines may vary by state).
### Business Advantage
– Faster, cheaper, and more flexible bid security.
– Frees up bank limits for other operational needs.
– Encourages wider and more competitive participation in India’s power sector.
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