Ministry of Finance lowers performance security deposits for solar tenders to 3 per cent

The Ministry of Finance (MOF) has announced that the performance security deposits for solar tenders will be reduced from 5-10 per cent of the contract value down to 3 per cent. Additionally, the MOF also ruled for bid security or earnest money deposit to be removed from bid documents in the future. The move has been motivated by a need to speed up the execution of projects amidst delays caused by Covid-19. Stakeholders have been dealing with a financial crunch since the Covid 19 pandemic begun and had requested the MOF to ease the situation. Requests were also received to reduce the security deposits to be paid in government contracts.After the announcement, the National Solar Energy Federation of India (NSEFI) released a request for the Solar Energy Corporation of India to incorporate the new provisions in its contracts and power purchase agreements. The statement also noted that developers had submitted security amounts worth Rs 2 million and EMD’s of about Rs 40,000 per MW at the time of bid submission. Further, the NSEFI also requested the exclusion of EMD requirements in future and active tenders.

The Covid-19 pandemic has disrupted the growth of the renewables sector, slowing down contract execution and restricting smaller contractors from participating. In August 2020, the MNRE granted a five-month extension to renewable projects under development. The renewable energy projects were treated as a force majeure event, due to the ongoing pandemic. In March 2019, the MNRE proposed alternative arrangements for earnest money deposits and performance bank guarantees for solar, wind, and hybrid projects.

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