NHAI has been working closely with Highway Operators Association of India (HOAI), SBI General Insurance and AON India Insurance to implement this initiative
Insurance surety bond has been issued for NHAI monetization bid of TOT bundle 14 @ 0.25% by the insurer without any margin money
State-owned National Highways Authority of India (NHAI) on Friday said it has accepted first insurance surety bond for the monetization program of the upcoming bid of Toll Operate Transfer (TOT) Bundle 14 to boost liquidity and capacity of bidders.
In a statement NHAI said, this will be the first time this innovative instrument is being utilized as a Bank Guarantee (BG) in the road infrastructure sector for monetisation of bids.
Insurance surety bonds are instruments where insurance companies act as ‘surety’ and provide the financial guarantee that the contractor will fulfil its obligation as per the agreed terms.
The Ministry of Finance has made e-BG and Insurance Surety Bonds at par with bank guarantees for all government procurement.
According to the statement, NHAI has been working closely with Highway Operators Association of India (HOAI), SBI General Insurance and AON India Insurance to implement this initiative.
“Insurance surety bond has been issued for NHAI monetization bid of TOT bundle 14 @ 0.25% by the insurer without any margin money,” the statement said.
This will translate into big savings for concessionaires, which will further enhance liquidity in the market, thereby fostering an environment conducive to the growth and development of the road sector.
NHAI has urged insurance companies and contractors to use insurance surety bonds as an additional mode of submitting Bid Security and /or Performance Security.
The statement noted that issuance of insurance surety bonds will set a new benchmark for the industry, highlighting the importance of innovative financial solutions in the evolving landscape of road infrastructure development.
It will encourage private participation in the highway sector and will be a significant step towards facilitating ‘Ease of Doing Business’, the statement added.
Since 2022, NHAI has received 1,665 BGs amounting to Rs 15,000 crore. This large volume of BGs offers a huge scope for insurance companies and wider adoption of surety bonds will boost availability of capital for road projects.