Renewable project bidders can furnish letter of undertaking

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Minister for New & Renewable Energy and Power, Shri R.K. Singh gave clearance to a proposal for acceptance of letter of undertaking. Letters issued by Indian Renewable Energy Development Agency Limited (IREDA), Power Finance Corporation Limited (PFC) and Rural Electrification Corporation Limited (REC) in lieu of bank guarantees for earnest money deposit by Solar Energy Corporation of India Limited (SECI), NTPC Limited and NHPC Limited will be valid for tenders in renewable energy projects.

The ministry in its communication to SECI, NTPC and NHPC conveyed that SECI, NTPC, NHPC or any other implementing agency on behalf of the Ministry of Renewable Energy can accept earnest money deposit in the form of bank guarantees or payment on order instrument.

Payment on Order instrument is a letter of undertaking from IREDA, PFC or REC to pay if there is a default of renewable energy power generator as per terms of tender conditions or power purchase agreement.

The ministry said that such letters will have same validity and effect as that of a bank guarantee issued by a public sector bank. The terms and conditions in the letters will be similar to those mentioned by public sector banks, promising to pay the procurer on demand within the stipulated time.

RE power generators can get the letters by offering security to any of the three non-banking financial institutions under the Ministry of Renewable Energy.

Minister R.K. Singh said that his ministry’s decision will usher ease of doing business in the renewable energy sector as developers will have one more option in fulfilling tender requirements.