The Indian government recently said clean energy developers can furnish letter of undertaking issued by IREDA, PFC or REC in lieu of bank guarantees under state auctions for renewable power projects.
IREDA (Indian Renewable Energy Development Agency Ltd), PFC (Power Finance Corporation) and REC are the three non-banking financial institutions under MNRE/Ministry of Power.
The move will further improve ease of doing business for companies.
In a statement, the Ministry of New and Renewable Energy (MNRE) said that it has approved a proposal for acceptance of Letter of Undertaking issued by IREDA, PFC and REC in lieu of bank guarantees for Earnest Money Deposit (EMD) by SECI (Solar Energy Corporation of India), NTPC and NHPC in the case of tenders/bidding’s for developing renewable energy (RE) projects in the country.
In a letter to the agencies, MNRE said SECI, NTPC, NHPC or any other implementing agency on behalf of the ministry may accept EMD, in the form of bank guarantees or ‘Payment on Order instrument’.
“‘Payment on Order instrument’ means Letter of IREDA or PFC or REC Ltd… to pay in case situation of default of RE power generator in terms of tender conditions and/or Power Purchase Agreement (PPA) arises,” it said.
The communication further said “the above decisions may be treated as amendments to the respective Standard Bidding Guidelines (SBG) (solar/ wind) and notified accordingly.”
Reference- Economic Times, MNRE website & PR, Mercom India, Financial Express
