Ministry of Coal Notice on Performance Bank Guarantee (PBG) Renewal Timelines
On June 1, 2026, the Nominated Authority
under the Ministry of Coal issued an official notice regarding the renewal and extension of
Performance Bank Guarantees (PBGs). The notice serves as a standing instruction
for all companies holding coal block allotments under various agreements, such
as Allotment Agreements, Coal Block Development and Production Agreements
(CBDPA) and Coal Mine Development and Production Agreements (CMDPA). Allocatees
are now required to submit renewed/extended original physical bank guarantees
at least seven working days before the existing guarantee expires.
The Regulatory Requirements
1. The notice refers to Clause 6.1.6 of the
respective project agreements. This clause mandates that the Performance
Security must remain valid until the earliest of the following milestones
occurs:
- The
expiry of the period for which the Mining Lease has been granted or will
be granted.
- The
point up to which extractable reserves remain in the coal mine.
- The
achievement of the Peak Rated Capacity of the mine, depending on the
specific terms of the agreement.
2. The Nominated Authority highlighted specific
procedural issues that led to the issuance of this notice:
- Last-Minute
Renewals: In certain instances, renewals or extensions were being
delayed until the final day of expiry, creating ambiguity about whether
the submission was completed on time.
- Digital
vs. Physical Submissions: On multiple occasions, companies submitted
only scanned copies of the renewed PBGs before the deadline, while the
original physical documents arrived after the expiry date.
- Responsibility:
The notice clarifies that the responsibility for keeping the PBG valid
rests solely with the allocatee, regardless of whether any reminder or
communication is sent by the Nominated Authority’s office.
Insights:
1. To address past delays, the Nominated Authority
has directed all allocatees to ensure their PBG remains valid at all times.
When a bank guarantee is due to expire, the allocatee must complete the renewal
process and deliver the renewed original physical document to the office
of the Nominated Authority at least seven (07) working days prior to the
expiry date of the current PBG.
2. Failure to meet the seven working day timeline or
failure to submit the original physical document will be treated as a formal
non-compliance with the agreement. This will attract penalties under the terms
of the contract, which include the 100% appropriation of the Performance
Security.
3. This notice is issued to establish uniformity and
transparency across all existing contracts. The document states that this
timeline must be treated as a standing instruction for all future renewals of
Performance Bank Guarantees.
Actionable Advice (What businesses should consider)
- Compliance
teams should immediately review the expiry dates of all active PBGs linked
to their CBDPAs, CMDPAs, or Allotment Agreements.
- Internal
corporate processing and coordination with bank timelines must be accelerated.
Because the physical original document must reach the New Delhi office
seven working days before expiry, the bank process should be initiated
several weeks in advance.
Revised guidelines do not permit renewed BGs on email or portal uploads of scanned copies on the final day, as only the physical original satisfies the requirement.