Gadkari recently launched India’s first surety bond insurance product for highway contractors, from Bajaj Allianz Insurance.
Seeking rapid growth for the product, Gadkari said he would approach the finance ministry to make surety bonds a prerequisite for infrastructure projects, instead of a bank guarantee.
Surety bonds are guarantees of payment issued by general insurers that protect the principal from losses in case the contractor fails to meet its obligations under the contract. However, they’re different from bank guarantees, which require a certain percentage of project funds to be locked in as collateral, thus eating into the working capital of the contractor.
