Power Ministry expands financial options in transmission bidding norms

The Ministry of Power has revised the Standard Bidding Documents (SBDs) for the procurement of Inter-State Transmission Services under the Tariff-Based Competitive Bidding (TBCB) framework. The amendments, which took effect on 5th June 2025, expand the financial instruments that developers can use to meet bid security and performance guarantee requirements.  

These changes were driven by repeated representations from transmission developers who flagged the constraints imposed by the requirement for unconditional and irrevocable bank guarantees. Such guarantees tied up significant working capital and limited liquidity. In response, the Ministry has now included Insurance Surety Bonds (ISBs) and Payment on Order Instruments (POIs) as valid alternatives.

The revised definition of bid bond now includes traditional bank guarantees, ISBs issued by IRDAI-authorised insurers, and POIs issued exclusively by IREDA, PFC, or REC. The bid bond amount remains unchanged at 2 per cent of the aggregate capital cost or project payments.

POIs are treated as equivalent to bank guarantees and can only be issued by the three specified government-owned financial institutions. Developers are required to provide collateral to access these instruments, which are structured to ensure payment to the Nodal Agency upon demand. A new format for POIs is provided in Annexure 14B.

The revised documents also introduce updated formats for bid security instruments. Annexure 14A contains the revised format for ISBs. Annexure 14B outlines the new format for POIs. Annexures 15A and 15B provide the new formats for using ISBs and POIs, respectively, for Contract Performance Guarantees (CPGs).

Under the new rules, CPGs can now be submitted in the form of bank guarantees, ISBs, or POIs. The guarantee amount has been set at 5 per cent of the aggregate capital cost or project payments, higher than the earlier 3 per cent for projects bid before December 31, 2021. CPGs must be valid for three months beyond the Scheduled Commercial Operation Date and extended if necessary.

The Transmission Service Agreement (TSA) has also been updated. The definition of Contract Performance Guarantee now includes ISBs and POIs alongside bank guarantees. These guarantees must be submitted within ten days of the issuance of the Letter of Intent. Two new schedules have been introduced in the TSA: Schedule 8A for ISBs and Schedule 8B for POIs.

All accepted financial instruments—whether ISBs, POIs, or bank guarantees—must be irrevocable and payable on demand. They are also required to include an additional 365-day claim period post-expiry. Their validity remains unaffected by any restructuring, mergers, or insolvency events concerning either the developer or the issuing institution.

The amended SBDs apply to all new TBCB bids for Inter-State Transmission Systems issued after 5th June 2025. Requests for proposals issued before December 31, 2021, will continue to follow existing provisions unless specifically revised. The Nodal Agency will not accept POIs from any entity other than IREDA, PFC, or REC.