Calcutta, Dec. 7: Faced with tough performance specifications from the domestic power utilities, power equipment manufacturers have now begun scouting for insurance cover against potential liabilities.
Insurance industry sources said almost all equipment manufacturers, including public-sector Bharat Heavy Electricals Ltd, are in the market seeking insurance cover, primarily against liquidated damages.
A liquidated damage is the amount needed to compensate for a loss resulting from a breach of contract. Liquidated damages insurance covers the penalties and liquidated damages that can occur when one or more parties in a contract do not meet their contractual performance target.
Industry sources said some manufacturers had already asked the general insurance companies to incorporate liquidated damages covers as part of the overall corporate and directorsí liability policies for companies.
Liquidated damages covers are aimed at restricting the financial impact in the event of these performance guarantee clauses being invoked, sources in the industry said.
Globally, such covers are already available. Most manufacturers participating in international competitive bidding take such risk products once the contracts are awarded. The search for these risk cover products in the domestic market coincides with the entry of international equipment suppliers into the country.
Sources said such contracts were being insisted upon by private-sector power generating companies in an attempt to restrict financial liabilities being imposed on them by distribution companies.