Ministry of Power Advises Use of Insurance Surety Bonds in Procurement Frameworks

The Ministry of Power, vide Office Memorandum dated April 4, 2026 (the “OM”), has advised the adoption of Insurance Surety Bonds (ISBs) as an alternative to bank guarantees and bid securities across power sector procurement frameworks. The OM builds upon the earlier amendment issued by the Ministry of Finance to the General Financial Rules, 2017 (GFR), and reflects a broader effort to facilitate the use of alternative security instruments in public procurement.

The foundation for this development lies in the Ministry of Finance’s Office Memorandum dated February 2, 2022, which amended Rules 170(i) and 171(i) of the GFR, 2017 to recognise ISBs as valid instruments for furnishing bid security and performance security, alongside traditional instruments such as bank guarantees, demand drafts and fixed deposits. In line with this framework, the Ministry of Power had already incorporated provisions for ISBs in standard bidding guidelines for renewable energy projects, including solar, wind, hybrid, FDRE, pumped storage and transmission projects.

The present OM advises all States/UTs and procuring utilities to incorporate provisions for acceptance of ISBs, or any other instruments permitted under the GFR (as amended from time to time), as valid instruments for bid security and performance security in their respective bidding documents. This includes procurement across long-term, medium-term and short-term power procurement, as well as projects relating to Battery Energy Storage Systems (BESS).

The OM reiterates that ISBs provide financial security comparable to bank guarantees, while also reducing credit exposure and liquidity constraints for project developers.

By extending the applicability of ISBs across these procurement segments, the OM seeks to promote consistency in procurement practices, improve ease of doing business, and facilitate wider participation in the power sector.