Huge market available for surety bonds in India: NHAI member Manoj Kumar

National Highways Authority of India (NHAI) member Manoj Kumar said a huge market is available for surety bonds in the country

National Highways Authority of India (NHAI) member Manoj Kumar on Thursday said a huge market is available for surety bonds in the country and now, the onus is on the insurance fraternity to come out with products quickly.

Addressing an event organised by industry body Assocham, Kumar further said the NHAI is working to expand the construction market because "as a country, we had a certain level of construction capability in a strategic manner by having contracts of various sizes".

"A huge market is available for surety bonds in-country and now the onus is on the insurance fraternity to come out with products quickly. We have already initiated at authority level discussions with the insurance agencies and companies," he said.

The member (project) noted that it is important for the industry to come out with the right kind of insurance products.

He pointed out that three years ago, the country had 6-7 players who were doing public-private partnership (PPP) and hybrid annuity model (HAM) projects.

"Today, in the current financial year, we have 25 players. We are now awarding nearly 50 per cent contracts to new players, which in turn has resulted in competitive bids and faster constructions," Kumar said.

He, however, added that it poses another challenge as new players often find it difficult to get bank guarantees and that's where the roles of surety bonds come in.

Surety bonds are different from corporate bonds and financial guarantees.

While surety bonds refer to the performance or delivery obligation to complete the insured project, the corporate bonds refer to financial obligation to repay the debts or loans.