New Delhi: The Ministry of Coal has permitted coal block allocatees to furnish Insurance Surety Bonds (ISBs) in place of Performance Bank Guarantees (PBGs) towards their performance security obligations, through the Coal Blocks Allocation (Amendment) Rules, 2026, in a move aimed at easing financial burdens and strengthening ease of doing business in the sector. The ministry announced the reform in a statement on Thursday.
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The change applies to coal blocks allocated under the Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act).
Under the amended framework, allocatees can opt for either a Performance Bank Guarantee or an Insurance Surety Bond to meet their performance security obligations. The ministry said the measure would lower the financial strain of conventional bank guarantee arrangements and allow allocatees to channel capital more efficiently towards mine development and operations.
The ministry added that the reform would also widen access to financial instruments without diluting safeguards. "It will also help improve access to financial instruments while ensuring that the Government's interests remain fully protected through appropriate performance security mechanisms," the Ministry of Coal said in its statement.
The flexibility extends to existing allocatees as well, who may replace Performance Bank Guarantees already submitted with Insurance Surety Bonds, subject to the prescribed conditions. The Coal Blocks Allocation (Amendment) Rules, 2026 have been published in the Gazette of India vide G.S.R 508(E) dated June 22.
The Insurance Surety Bond facility will be rolled out initially for coal blocks allocated under the MMDR Act. The ministry said it would also take steps to extend the provision to coal blocks allocated under the Coal Mines (Special Provisions) Act, 2015.
Describing the intent behind the change, the ministry said, "This initiative reflects the Ministry of Coal's continued focus on regulatory reforms that encourage investment, support the timely operationalisation of coal blocks and create a more transparent, efficient and investor-friendly ecosystem for commercial coal mining in the country."
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The move brings the coal sector in line with a broader Central government effort to promote Insurance Surety Bonds as an alternative to bank guarantees. The instrument was enabled after the insurance regulator IRDAI issued its Surety Insurance Contracts Guidelines in 2022, and the government subsequently placed ISBs at par with bank guarantees for government procurement. Unlike bank guarantees, surety bonds are underwritten by insurers and do not lock up a company's cash collateral or bank credit lines.