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Coal Ministry on Thursday (July 2, 2026) allowed entities-accorded coal blocks to use insurance surety bonds (ISBs) instead of performance bank guarantees (PBGs) to fulfil their obligations for performance surety.
“The measure is expected to ease the financial burden associated with conventional bank guarantee arrangements and enable coal block allocates to deploy their capital more efficiently for mine development and operational activities,” the Ministry’s statement read, adding, “It will also help improve access to financial instruments while ensuring that the Government’s interests remain fully protected through appropriate performance security mechanisms.”
Performance based guarantees are included in contractual agreements to ensure the contractor or the entity assigned to provide services fulfil their obligations. Failing which, the beneficiary or the entity supposed to receive the services are assured of compensation.
On the other hand, ISBs as an alternate to the performance-based guarantees, require the insurer to compensate the owner if the obligations as per the contract are not met.
While the former holds a collateral, the latter requires the entity to pay specified premiums.
The Coal Ministry added that the latest directive would also have a retrospective effect, that is, the flexibility would be accorded to existing allottees as well adhering to prescribed conditions.
Published – July 03, 2026 03:35 am IST
