MoP allows insurance surety bonds in power procurement

The Ministry of Power (MoP) has directed all states, union territories, and power utilities to accept Insurance Surety Bonds (ISBs) as an alternative to bank guarantees for bid security and performance security. The directive takes effect from April 4, 2026.

The instruction was issued through an Office Memorandum signed by Director Manish Mishra. It follows the February 2, 2022 amendment to the General Financial Rules (GFR), 2017 by the Ministry of Finance. The amendment to Rules 170(i) and 171(i) formally included ISBs alongside instruments such as account payee demand drafts, fixed deposit receipts, banker’s cheques, and bank guarantees.

The MoP stated that ISB provisions have already been incorporated in standard bidding guidelines for renewable energy projects, including solar, wind, hybrid, and Firm and Dispatchable Renewable Energy (FDRE), as well as pumped storage and transmission projects. The memorandum notes that ISBs offer financial security comparable to bank guarantees while reducing credit exposure and easing liquidity constraints for developers.

States, union territories, and procuring utilities have been advised to revise their bidding documents to include ISBs or any other instruments permitted under the GFR as acceptable forms of bid security and performance security. The directive applies across long-term, medium-term, and short-term procurement, including Battery Energy Storage Systems (BESS).

The government stated that the measure is intended to improve policy consistency, support ease of doing business, and enable broader participation in the power sector.

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