New Delhi: The Ministry of New and Renewable Energy (MNRE) has directed the Solar Energy Corporation of India (SECI), NTPC Ltd and NHPC Ltd and state governments to comply with the circular issued by the Department of Expenditure (DoE) and provide relaxation in security deposits for renewable energy (RE) projects being implemented by them. The three PSUs serve as MNRE's implementing agencies for renewable energy projects. The order comes in the backdrop of several RE projects remaining stuck due to the slowdown unleashed by the Covid-19 pandemic.
In view of the representations received by the Ministry of Finance from the industry, the DoE had issued three office memorandums in November, suggesting various ministries and departments to reduce performance security and remove provisions for bid security and additional security deposit (in case of abnormally low bids) from contracts. In a letter dated December 22, the MNRE has forwarded these notifications to SECI, NTPC and NHPC, asking them to comply with it.
In the memo, the DoE had said that the Centre had received representations from contractors who claimed that financial crunch in the economy was affecting the execution of projects and the provision for various kinds of security deposits in government tenders was putting off potential bidders. "The government is in receipt of many representations that on account of slowdown in economy due to the pandemic, there is acute financial crunch among many commercial entities and contractors, which in turn is affecting timely execution of the contracts. It has also been represented that this may affect the ability of contractors to bid in tenders and hence reduce competition. Requests are being received for reduction in quantum of Security Deposits in the Government contracts," said the DoE in its order.
In view of these requests, the Ministry of Finance had decided to reduce performance security from 5-10 percent to 3 percent of the value of the contract for all existing contracts. "In all contracts where Performance Security has been reduced to 3 percent in view of above stipulations, the reduced percentage of Performance Security shall continue for the entire duration of the contract and there should be no subsequent increase of Performance Security even beyond 31.12.2021," said the order.
"Similarly, in all contracts entered into with the reduced percentage of Performance Security of 3 percent, there will be no subsequent increase in Performance Security even beyond 31.12.2021," it added.
In addition, the Department had asked ministries to remove the provision for bid security and instead replace it with bid security declaration and to do away with the provision for additional security deposit or bank guarantee in case of abnormally low bids. The order will be applicable for tenders floated until December 31, 2021.
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