Bank Guarantee increased and EMD restored by MNRE for upcoming RE Tenders

The Ministry has asked implementing agencies to restore EMD at 2% and performance bank guarantees at 4% to 5% for future Renewable energy tenders.

For the upcoming renewable energy tenders, the Ministry of New and Renewable Energy (MNRE) has reinstated the earnest money deposit (EMD) requirement. MNRE has set it at 2% of the estimated project cost. 

In addition, instructions to set the performance bank guarantee at increased rates for upcoming renewable energy tender have been given to the implementing agencies, like Solar Energy Corporation of India (SECI), NTPC, and NHPC by MNRE. 

The ministry has instructed the implementing agencies that performance bank guarantees for upcoming tenders are to be set at 4% of the estimated project costs (where the procurer specifies the site) and 5% (where the generator chooses the site).

The Ministry of Finance had amended the performance bank guarantee for tenders to 3% of the contract value, down from 5% to 10% in November last year.

Additionally, it had removed the EMD provision and permitted bid security declarations in future tenders. Aslo, the implementing agencies were asked to refrain from additional security deposits and bank guarantee provisions, when there were abnormally low bids.

A performance bank guarantee and an EMD will now be required, which is a significant amount. According to some industry experts, this will interfere with the use of working capital for operational expenses and may negatively impact upcoming tenders. 

While others believe that a small amount in the form of EMD or performance security should not be a deterrent for entities that are serious about participating in a long-term infrastructure project tender involving billions in investment.

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