New Delhi, July 2: The Indian government has approved the use of Insurance Security Bonds (ISB) in place of Performance Bank Guarantees (PBG) for allocated coal blocks. This decision aims to facilitate smoother operations in the coal sector. The announcement was made by the Ministry of Coal on Thursday.
The ministry stated, “The government has implemented a significant reform to provide coal block allottees with greater financial flexibility and to further enhance the ease of doing business in the coal sector. Through the Coal Block Allocation (Amendment) Rules, 2026, the ministry has permitted the use of ISB instead of PBG for coal blocks allocated under the Mines and Minerals (Development and Regulation) Act, 1957.”
Under the revised arrangement, coal block allottees will have the option to fulfill their performance security obligations using either PBG or ISB. This provision will also apply to current allottees, allowing them to replace previously submitted PBGs with ISBs, according to specified conditions.
The ministry further noted that this initiative is expected to reduce the financial burden associated with traditional bank guarantees. Coal block allottees will be able to utilize their capital resources more efficiently for mine development and operational activities. Additionally, this will improve their access to financial instruments while ensuring that the government’s interests remain fully protected through appropriate performance security mechanisms.
The ISB facility will initially be offered for coal blocks allocated under the MMDR Act. The ministry will also initiate the process to extend this provision to coal blocks allocated under the Coal Mines (Special Provisions) Act, 2015.
The statement emphasized that this initiative reflects the Ministry of Coal’s ongoing focus on regulatory reforms that encourage investment, support timely operations of coal blocks, and create a more transparent, efficient, and investor-friendly ecosystem for commercial coal mining in the country.
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