National Highways Authority of India (NHAI) member Manoj Kumar on February 24 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 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.

Also read: IRDAI issues guidelines on surety insurance product: Key things to know

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 percent 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 obligation to complete the insured project, corporate bonds refer to the financial obligation to repay the debts or loans. Kumar said surety bonds can help in the infrastructure development of the country.

He said NHAI has been working with the Insurance Regulatory and Development Authority (IRDA) for the past two years and finally the surety bonds guidelines are in place.