The Ministry of New and Renewable Energy (MNRE) has directed the Solar Energy Corporation of India (SECI), NTPC, NHPC and other state-owned organizations to reduce RE contracts’ performance security from 5-10% to 3% of the contract value under the Finance ministry’s order dated November 12, 2020.
The Finance Ministry order on performance security reduction shall apply to all the existing contracts/tenders concluded until December 31, 2021. Also, the reduced percentage of the performance security shall continue for the contract’s entire duration and shall not increase beyond December 31, 2021.
The MNRE also asked the state-owned counterparties to remove the provisions for the bid security and additional security deposit (required in case of abnormally low bids) from contracts, as stipulated by the Finance ministry order. In place of bid security, only the bid security declaration provisions should be kept in the future bid documents, it said.
The move came after the lobby group National Solar Energy Federation of India (NSEFI) wrote to the MNRE to direct SECI and the Power Grid Corporation of India Limited (PGCIL) to comply with the order and return the balance to the solar power developers for the existing under-construction projects.
In its letter to MNRE, NSEFI wrote, “As per the provisions of the bidding documents and contract, solar power developers have submitted a performance security of INR 20 lakh/MW to SECI, which is approximately 5% of the contract value/project cost in the existing under-construction projects.”
“PGCIL, vide its office circular dated 03.12.2020, has provided relief to the EPC contractors for reduction of CPGs to 3% of the contract price. The solar power developers are also bound in contract with PGCIL for connectivity wherein they provide various BGs including transmission BGs, application BGs, etc,” it added.
The Finance ministry order on security deposit reduction provides relief to bidders who may be deterred from bidding in projects that require a high bid security amount. The auction, meanwhile, can see an increase in the bidding response and yield better tariffs. The move would also ease the liquidity concerns of developers and help bring their under-construction projects to completion.
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