Power Ministry allows ISBs and POIs for transmission bid security

The Ministry of Power has revised its Standard Bidding Documents (SBDs) for Inter-State Transmission Services. Announced on June 5, 2025, the amendment now permits bidders to submit Insurance Surety Bonds (ISBs) and Payment on Order Instruments (POIs) instead of relying solely on traditional bank guarantees.

The revised bid security norms expand the definition of a Bid Bond to include three instruments: unconditional bank guarantees, ISBs issued by IRDAI-authorised insurers, and POIs issued solely by IREDA, PFC, or REC. The required bond value remains unchanged at 2 per cent of the project’s estimated capital cost, as per Clause 2.1.2 of the Request for Proposal (RFP).

A POI is now formally defined as a Letter of Undertaking that functions like a bank guarantee. Issued by IREDA, PFC, or REC, it guarantees payment to the nodal agency “on demand without demur,” regardless of any ongoing disputes or changes in the issuer’s constitution. These instruments are legally enforceable and subject to strict timelines and claim conditions.

The amendment also updates the rules for Contract Performance Guarantees. The guarantee amount has been standardised at 5 per cent of the project cost, removing the earlier 3 per cent concession applicable to pre-2021 projects. Developers can submit this guarantee in the form of a bank guarantee, ISB, or POI. The validity has been extended to three months after the Scheduled Commercial Operation Date (COD), with provisions for further extensions if required.

To implement these changes, the Ministry has introduced four new annexures. Annexures 14A and 14B provide the bid security formats for ISBs and POIs, respectively. Annexures 15A and 15B cover their formats for contract performance guarantees. The conditions for invocation remain uniform across instruments—partial or full invocation is allowed without justification, similar to existing bank guarantees.

POIs must be honoured within two working days of demand. ISBs must follow IRDAI’s 2022 guidelines, and insurer liability remains binding through mergers or restructuring.

The changes aim to ease financial pressure on developers and speed up project awards. All agencies and regulators have been directed to implement the new SBDs immediately.