Ministry Of Power Eases Bidding Norms For Transmission Projects With New Security Instruments

The Ministry of Power, Government of India, has issued a major amendment to its Standard Bidding Documents for the procurement of Inter-State Transmission Services. The amendment was announced in a letter dated June 5, 2025, and aims to bring more flexibility to the bidding process under the Tariff Based Competitive Bidding (TBCB) route. The change specifically allows the use of alternative financial instruments for bid security and performance guarantees by developers.

The amendment comes after several transmission developers requested that Insurance Surety Bonds (ISB) and Payment on Order Instruments (POI) be considered valid forms of security. Until now, the only accepted security instrument was an unconditional and irrevocable bank guarantee. By accepting these alternatives, the Ministry hopes to ease financial requirements and encourage wider participation in bidding for transmission projects.

Under the updated Standard Request for Proposal (RfP) and Transmission Service Agreement (TSA), the definition of a “Bid Bond” now includes not just bank guarantees, but also Insurance Surety Bonds issued by companies approved by the Insurance Regulatory and Development Authority of India (IRDAI), and Payment on Order Instruments. This expansion gives developers more flexibility in providing the required financial assurance for their bids.

The Bid Bond amount remains unchanged and is calculated as 2% of the total estimated capital cost of the project or the total payments for it. This bond must be submitted with the Technical Bid. New annexures have been added—Annexure 14A for Insurance Surety Bonds and Annexure 14B for Payment on Order Instruments—to provide standard formats and guidelines.

A new financial tool introduced in this amendment is the Payment on Order Instrument. It is a Letter of Undertaking issued by select financial institutions such as Indian Renewable Energy Development Agency Limited (IREDA), Power Finance Corporation Limited (PFC), and REC Limited (REC). These letters ensure payment in case a Transmission Service Provider defaults. This instrument is considered equivalent to a public sector bank guarantee and must ensure immediate payment to the Nodal Agency when demanded.

Changes have also been made to the rules concerning the Contract Performance Guarantee (CPG). The selected bidder must now submit the CPG within ten days of receiving the Letter of Intent. The CPG, calculated at 5% of the project’s total capital cost or payment amount, may now be submitted in the form of a bank guarantee, Insurance Surety Bond, or Payment on Order Instrument. It will remain valid for at least three months after the scheduled commercial operation date and can be extended.

To maintain reliability, only Payment on Order Instruments issued by IREDA, PFC, and REC are acceptable. Instruments from other agencies or in other formats will be rejected. The Central Transmission Utility of India Limited (CTUIL) will serve as the beneficiary of all these financial instruments.

This amendment is expected to reduce financial barriers for transmission developers while preserving the security of public investment. The goal is to improve participation and efficiency in the development of inter-state transmission infrastructure, in line with Section 63 of the Electricity Act, 2003.