Insurance Surety Bonds for BSNL, FCI and AIIMS Tenders: What Contractors Need to Know
- Rajeev Chari
- Jul 31
- 11 min read
TL;DR
BSNL's BharatNet Phase III USOF tender explicitly accepts insurance surety bonds for both EMD (clause 6.1c, 180-day validity, payable to DGM (MMT) BSNL) and performance security (clause 4.3, Section IX-A proforma). Contractors on BharatNet projects can replace bank guarantees entirely, freeing up banking limits for active deployment.
AIIMS campuses procure infrastructure and O&M works on CPWD standard forms, which now embed insurance surety bonds as an accepted instrument following the February 2022 GFR amendment. Both bid security and performance guarantee can be submitted as insurance surety bonds, confirmed from AIIMS Vijaypur NIT (May 2025) and AIIMS Jammu tender (February 2024).
FCI is a Central Government statutory corporation covered by GFR Rule 170(i)/171(i) and the DFS September 2024 directive, but specific FCI tender document language confirming insurance surety bond acceptance was not reviewed as part of this article. Contractors must verify the bid security clause in the specific FCI NIT before submitting an insurance surety bond.
Across all three sectors, only IRDAI-approved general insurers can issue valid insurance surety bonds. The bond must be drawn in favour of the exact beneficiary named in the tender, with validity covering the full bid period plus any required extension.
Three Government Sectors, One Compliance Shift
For contractors in telecom, food infrastructure and healthcare, three Central Government organisations drive some of the most active tender pipelines in India. BSNL's BharatNet programme is laying optical fibre across hundreds of rural districts. FCI runs godown construction and depot upgrade tenders in every state. AIIMS campuses issue works and service contracts from Delhi to Jammu to Bhubaneswar.
For most of the last decade, participating in any of these tenders meant locking capital into bank guarantees. EMD requirements alone could run from Rs. 15 lakh to several crore, sitting idle from bid submission through contract completion. For MSMEs, this was often the practical barrier to bidding, independent of technical eligibility or execution capacity.
The February 2022 amendment to GFR Rules 170(i) and 171(i) changed that. Insurance surety bonds issued by IRDAI-approved insurers are now acceptable at par with bank guarantees for bid security and performance security across all Central Government procurement. The DFS directive of September 2024 went further, mandating acceptance at all central departments and CPSEs and removing any room for entity-level refusal.
This article covers what that means in practice for BSNL, FCI and AIIMS tenders: which clauses confirm acceptance, what the submission rules are, and what your insurance surety bond must contain to be compliant.
The Regulatory Baseline All Three Entities Follow
Before going sector-by-sector, three regulatory instruments establish the framework that applies to BSNL, FCI and AIIMS equally.
GFR Rule 170(i): Bid Security. The February 2022 amendment to the General Financial Rules 2017 made insurance surety bonds an accepted form of bid security across Central Government procurement, at par with bank guarantees. Rule 171(i), amended at the same time, extended the same acceptance to performance security.
DFS September 2024 Directive. The Department of Financial Services issued a circular mandating that all central government departments and PSUs accept insurance surety bonds without exception. Before this directive, acceptance was legally permissible but operationally inconsistent.
IRDAI Surety Insurance Contracts Guidelines 2022: Effective April 2022, these guidelines authorise licensed Indian general insurers to issue insurance surety bonds. Only IRDAI-approved insurers can issue valid bonds for use in government tenders. A bond from an unlicensed entity is not compliant regardless of its format or wording.
These three instruments together mean that any Central Government organisation, including BSNL, FCI and AIIMS, is legally required to accept a valid insurance surety bond from an IRDAI-approved insurer as a substitute for a bank guarantee.
At a Glance: ISB Acceptance Across BSNL, FCI and AIIMS
Parameter | BSNL BharatNet | FCI | AIIMS (CPWD tenders) |
ISB accepted for EMD | Yes (clause 6.1c) | Regulatory mandate; verify in specific NIT | Yes (clause 9) |
ISB accepted for performance security | Yes (clause 4.3) | Regulatory mandate; verify in specific NIT | Yes (clause 11) |
EMD validity | 180 days from tender opening | As specified in NIT | 225 days |
Performance security rate | 5% of AWO; 10% if APO is Rs. 50 crore or more | As specified in NIT | Per Schedule E |
Performance security validity | 3.5 years | As specified in NIT | Per Schedule F |
PBG submission deadline | Within 14 days of APO | As specified in NIT | Per Schedule F |
MSE bid security exemption | Yes | Per MSME procurement policy | Per MSME procurement policy |
Upload portal | eprocure.gov.in (CPPP) | eprocure.gov.in (CPPP) | eprocure.gov.in (CPPP) |
Original submission deadline | Within 5 days after bid close | As specified in NIT | Before bid close |
Published ISB proforma | Yes (Section IX-A) | Not confirmed | As per CPWD form |
Primary source | BharatNet USOF tender, February 2024 | GFR/DFS mandate only | AIIMS Vijaypur NIT, May 2025 |
BSNL and BharatNet Tenders
BSNL is a Central Public Sector Enterprise under the Department of Telecommunications (DoT). Its BharatNet programme, funded through the Universal Service Obligation Fund (USOF), involves large EPC contracts for optical fibre deployment across rural India. Phase III packages typically run from Rs. 50 crore to several hundred crore each.
Parameter | EMD (Bid Security) | Performance Security |
ISB accepted | Yes | Yes |
Clause reference | Clause 6.1c | Clause 4.3 |
Amount | As specified in NIT | 5% of AWO; 10% if APO is Rs. 50 crore or more |
Validity | 180 days from tender opening | 3.5 years |
Payable to | DGM (MMT), Bharat Sanchar Nigam Limited, Corporate Office, New Delhi | Per Section IX-A proforma |
Portal upload | Scanned copy on eprocure.gov.in during bid window | As per contract award |
Original submission | To BSNL office within 5 days of bid submission close | Within 14 days of APO |
MSE exemption | Yes | Not applicable |
Source | Same source |
EMD and Bid Security
The BharatNet Phase III USOF tender (February 2024) explicitly accepts insurance surety bonds for EMD under clause 6.1c. The clause specifies an "Insurance Surety Bond issued by an Insurance Company, approved by IRDAI, drawn in favour of 'DGM (MMT), Bharat Sanchar Nigam Limited, Corporate Office, New Delhi'." The EMD must remain valid for 180 days from the date of tender opening.
MSE (Micro and Small Enterprise) bidders are exempt from bid security requirements under MSME procurement policy. All other bidders must submit the EMD in one of the accepted forms: insurance surety bond, demand draft, FDR, banker's cheque or bank guarantee.
Performance Security
Clause 4.3 specifies that the performance security "shall be in the form of Bank Guarantee or insurance security bond...in the form provided in 'Section IX-A'." Section IX-A of the BharatNet Phase III tender is the published proforma for ISB-format performance security.
The applicable rates:
5% of the Annual Work Order (AWO) value in standard cases
10% of the Annual Purchase Order (APO) value when APO is Rs. 50 crore or more
The performance guarantee must be submitted within 14 days of APO issue and must remain valid for 3.5 years.
How to Submit
BSNL BharatNet tenders follow a two-stage submission process. Upload a scanned copy of the insurance surety bond to the eProcurement portal during the bid submission window. Submit the original instrument to the BSNL office within 5 days after the bid submission end date. Failure to deliver the original within this window is grounds for rejection.
The bid bond and performance security can both be structured as insurance surety bonds, meaning contractors can replace EMD with an insurance surety bond and avoid locking capital at both stages of the contract.
FCI Tenders
FCI (Food Corporation of India) is a statutory corporation established under the Food Corporations Act 1964, under the Ministry of Consumer Affairs, Food and Public Distribution. It operates procurement and storage infrastructure across the country, issuing tenders for godown construction, depot upgrades, road and drain works on FCI land, and foodgrain logistics contracts.
Parameter | Status |
Regulatory mandate for ISB acceptance | Yes: GFR Rule 170(i)/171(i) (February 2022) and DFS September 2024 directive |
ISB acceptance confirmed in FCI tender document | Not reviewed. No specific FCI NIT was reviewed for this article. |
Recommended contractor action | Read the bid security clause in the specific NIT; raise a pre-bid query citing GFR Rule 170(i) if ISBs are not listed |
As a Central Government statutory corporation, FCI is covered by GFR Rule 170(i)/171(i) and the DFS September 2024 directive. The regulatory mandate for insurance surety bond acceptance applies at the entity level.
That said, no specific FCI tender document was reviewed as part of this article that verbatim lists insurance surety bonds as an accepted EMD or performance security instrument. Contractors working on FCI tenders should take the following steps before submitting an insurance surety bond:
Read the bid security clause in the specific NIT carefully. Look for language that lists accepted instruments for EMD and performance security. If the tender lists "Bank Guarantee" without explicitly naming insurance surety bonds, raise a pre-bid query citing GFR Rule 170(i) and the DFS September 2024 directive. The regulatory basis for acceptance is unambiguous. Keep copies of the GFR amendment and DFS directive ready to support any compliance discussion with the tender authority.
The framework is in place. Confirming acceptance language in the specific FCI tender document before submission is the right operational step.
AIIMS Tenders
AIIMS institutions are autonomous bodies under the Ministry of Health and Family Welfare, established by Acts of Parliament. Each campus issues tenders for construction, O&M works, equipment supply and services. Infrastructure and civil works tenders at AIIMS campuses are administered using CPWD procurement formats, which CPWD updated following the February 2022 GFR amendment.
As a result, insurance surety bonds appear as an accepted instrument by default in CPWD Form 7 and Form 8 contracts. Most AIIMS civil and O&M works fall under these forms, making ISB acceptance structural rather than campus-by-campus discretionary.
Parameter | EMD (Bid Security) | Performance Guarantee |
ISB accepted | Yes | Yes |
Clause reference | Clause 9 (AIIMS Vijaypur NIT, May 2025) | Clause 11 (AIIMS Vijaypur NIT, May 2025) |
Confirmed sources | AIIMS Jammu NIT, February 2024; AIIMS Vijaypur NIT, May 2025 | AIIMS Vijaypur NIT, May 2025 |
Validity | 225 days (180-day bid validity + 45-day extension) | Per Schedule F |
Payable to | ED & CEO, AIIMS [campus name], as named in specific tender | As prescribed in tender |
Portal upload | Scanned copy on eprocure.gov.in during bid window | On contract award |
Original submission | To Executive Engineer (Civil), AIIMS campus, before bid close | Per Schedule F timeline |
Procurement format | CPWD Form 7 / Form 8 | CPWD Form 7 / Form 8 |
EMD and Bid Security
The AIIMS Jammu manpower outsourcing tender (February 2024) confirms acceptance in its EMD clause: "Earnest Money Deposit to be deposited in the form of Insurance Surety Bonds/Account Payee Demand Draft/FDR/Banker's Cheque." The bond is payable to "The ED & CEO, AIIMS, Jammu." EMD validity must cover 225 days (180-day bid validity plus a 45-day extension). Tenders submitted without EMD are summarily rejected.
The AIIMS Vijaypur O&M NIT (May 2025, NIT No. AIIMS/JMU/Engg-Wing/O&M/2025/18) repeats the same acceptance for a Rs. 36.35 crore works contract under clause 9: "Earnest Money in the form of Insurance Surety Bonds, Account Payee Demand Draft, Fixed Deposit Receipt, Banker's Cheque or Bank Guarantee from any of the Commercial Banks (drawn in favour ED and CEO AIIMS, Vijaypur, Jammu) shall be scanned and uploaded to the e-Tendering website within the period of bid submission."
Performance Guarantee
Clause 11 of the same AIIMS Vijaypur NIT confirms insurance surety bonds for performance guarantee: "This guarantee shall be in the form of Insurance Surety Bonds, Account Payee Demand Draft, Fixed Deposit Receipt or Bank Guarantee from any of the Commercial Banks in accordance with the prescribed form."
The performance guarantee percentage and validity are specified in Schedule E and Schedule F of each tender. The contractor must furnish the performance guarantee within the period stated in Schedule F; failure to do so results in automatic forfeiture of the EMD.
How to Submit
AIIMS tenders follow the CPPP two-stage process. Upload the scanned copy of the insurance surety bond to eprocure.gov.in during the bid submission window. Submit the original instrument at the office of the Executive Engineer (Civil) of the relevant AIIMS campus before bid submission closes. Both steps are mandatory. A bid without the physical original delivered on time is treated as incomplete.
For MSME contractors, replacing the bank guarantee with an insurance surety bond at AIIMS frees up banking limits that would otherwise be blocked for the full duration of the contract. On a 24-month O&M contract worth Rs. 36 crore, the hidden cost of a bank guarantee including cash margin, processing fees and opportunity cost can run to several lakh. The insurance surety bond eliminates that cost.
What Your Insurance Surety Bond Must Contain
Regardless of sector, every insurance surety bond submitted for a Central Government tender must meet these requirements.
Requirement | Detail |
Issuer | An IRDAI-approved general insurer. Confirm authorisation before bond issuance. |
Beneficiary | Exact entity named in tender, including designation and office. BSNL: "DGM (MMT), Bharat Sanchar Nigam Limited, Corporate Office, New Delhi." AIIMS: ED & CEO of the specific campus. Any mismatch is grounds for rejection. |
Amount | Exact bid security or performance security amount in Indian Rupees, as specified in the NIT. |
Validity | Full bid validity period plus required extension. BSNL EMD: 180 days from tender opening. AIIMS EMD: 225 days. Performance security: as per Schedule F. |
Upload format | PDF or JPG for CPPP portal upload (first stage). |
Original submission | Hard copy delivered to the specified office before the tender authority's stated deadline. Portal upload alone is not sufficient. |
Bond language | Unconditional and on-demand where the tender specifies this. Conditional bonds are rejected without exception. See insurance surety bond vs bank guarantee for format differences. |
For contractors new to the process, the how to apply for an insurance surety bond guide covers documentation and insurer engagement steps.
About axiTrust
axiTrust is a technology and consulting platform for insurance surety bonds in India. It provides digital underwriting workflows, issuance infrastructure and compliance support for contractors, insurers and procurement authorities navigating the shift from bank guarantees to insurance-backed instruments.
Talk to an axiTrust consultant: https://www.axitrust.com
Frequently Asked Questions
Does BSNL accept insurance surety bonds for EMD?
Yes. The BharatNet Phase III USOF tender (February 2024) confirms acceptance under clause 6.1c. The bond must be from an IRDAI-approved insurer, drawn in favour of DGM (MMT) BSNL, and valid for 180 days from tender opening.
What is the performance guarantee validity for BSNL BharatNet tenders?
The performance guarantee must remain valid for 3.5 years and must be submitted within 14 days of the Annual Purchase Order (APO). The rate is 5% of AWO value, or 10% if APO is Rs. 50 crore or more.
Can I submit an insurance surety bond for an AIIMS tender?
Yes, for campuses that procure on CPWD formats. AIIMS Vijaypur (May 2025) and AIIMS Jammu (February 2024) both confirm ISB acceptance for EMD and performance guarantee. Check whether your specific AIIMS tender uses CPWD Form 7 or Form 8 procurement.
Which AIIMS campuses accept insurance surety bonds?
Campuses that procure on CPWD standard forms accept insurance surety bonds by default, as CPWD forms now include ISBs following the February 2022 GFR amendment. Confirmed examples include AIIMS Vijaypur (Jammu) and AIIMS Jammu. Verify in the specific NIT for other campuses.
Does FCI accept insurance surety bonds?
FCI is covered by the GFR Rule 170(i)/171(i) mandate and the DFS September 2024 directive. However, specific FCI tender document language confirming ISB acceptance was not reviewed as part of this article. Verify the bid security clause in your specific FCI NIT and raise a pre-bid query if needed.
Who can issue an insurance surety bond for a BSNL or AIIMS tender?
Only IRDAI-approved general insurers are authorised to issue insurance surety bonds for use in Indian government tenders. The IRDAI Surety Insurance Contracts Guidelines 2022 specify this requirement. Confirm your insurer's authorisation before bond issuance.
Are MSE bidders exempt from bid security on BSNL BharatNet tenders?
Yes. MSE bidders are exempt from bid security requirements under MSME procurement policy on BharatNet tenders. Exemption documentation must be submitted alongside the bid in place of the EMD.
What happens if I miss the deadline for submitting the original insurance surety bond?
For BSNL BharatNet tenders, the original must reach the BSNL office within 5 days after bid submission close. For AIIMS tenders, the original must be deposited before bid submission closes. Missing either deadline results in rejection of the bid; the portal upload alone is not sufficient.
References
Ministry of Finance: GFR Rule 170(i) and 171(i) Amendment (February 2022): https://doe.gov.in/files/procurement-policy-division/Amendment_to_General_Financial_Rules_2017.pdf
IRDAI: Surety Insurance Contracts Guidelines 2022: https://taxguru.in/corporate-law/irdai-surety-insurance-contracts-guidelines-2022.html
BharatNet Phase III USOF Tender Document (February 2024): https://usof.gov.in/uploads/document_upload/1778229834_bba4748afdd221bc2f7a.pdf
AIIMS Jammu: Hospital Attendant Manpower Outsourcing NIT (February 2024): https://www.aiimsjammu.edu.in/wp-content/uploads/2024/02/Outsourcing-of-Hospital-Attendant-manpower-1-1.pdf
AIIMS Vijaypur Jammu: NIT No. AIIMS/JMU/Engg-Wing/O&M/2025/18 (May 2025): https://www.aiimsjammu.edu.in/wp-content/uploads/2025/06/NIT-1.pdf
AIIMS Vijaypur Jammu: Full Bid Document for O&M NIT (May 2025): https://www.aiimsjammu.edu.in/wp-content/uploads/2025/06/Bid-1.pdf
