IFC erred in funding Tata Mundra power project, says its compliance advisor ombudsman

World Bank, IFC dismiss report findings of their own watchdog body

By Anupam Chakravartty
Published: Monday 28 October 2013

Photo courtesy Machimar Adhikar Sangharsh Sangathan, MASS, KutchInternational Finance Corporation, the financing arm of World Bank, committed serious lapses in assessing environmental and social risks while extending credit for construction of Tata's 4,150 MW Mundra ultra mega power project (UMPP) in Gujarat, says an investigation carried out by IFC's Compliance Advisor Ombudsman (CAO).

Following a complaint by Kutch-based fishworkers' rights body, Machimar Adhikar Sangram Samiti-Gujarat (MASS) in June 2011, CAO launched an investigation into the alleged violations of environmental and human rights of fishing communities residing in the region. Over the next two years, CAO probed the complaint with eight terms of references (TOR), focussing on the issues of environmental and social risks which included displacement and loss of livelihood, in particular, as well as issues related to cumulative assessment of rapid industrialisation taking place in the coastal Kutch. CAO also probed whether IFC engaged a consultant to ascertain social and environmental risks associated with the project.

World Bank president, Jim Yong Kim, has defended IFC's stand on the project by endorsing the response of IFC to the CAO report. Environmental activists and fishing community leaders have criticised World Bank for its stand in spite of revelations by its own watchdog which shows that IFC did not follow its own guidelines.  

Avoidance of accountability

Coastal Gujarat Power Limited (CGPL), a 100 per cent subsidiary of Tata Power which operates the UMPP, incurred a cost of  $ 4.14 billion on the project. IFC extended a loan of $ 415 million for the project. MASS, following an unsatisfactory meeting with IFC in January 2011, complained to CAO in June the same year. CAO visited the plant and surrounding fishing communities this February when the plant had already achieved 80 per cent of its operations.

CAO sent the report to IFC with its recommendations. In its response to CAO's report on September 12, IFC directors Anita George and William Bulmer, differed with the report's findings while asserting that some of the recommendations of CAO have already been incorporated in the form of a supervisory role played by IFC.

According to MASS, World Bank president Kim has cleared the response of the IFC. “By clearing the IFC response, president Kim sends a clear message that he supports his staff’s denial of science, of expert findings and endorses management’s avoidance of accountability,” says Bharat Patel of MASS.
CAO, during its visit to Mundra, found that the concerns of the marginalised migrant Muslim fishing communities were not being adequately addressed while assessing environmental and social risks. “CAO finds that (concerns of) the complainants, who are from a religious minority and occupy a socially marginal position given their migrant traditions, were not adequately considered. IFC has contributed to this situation to the extent that its review of CGPL’s environmental and social assessments was not commensurate with project risk as required by its sustainability policy,” states the report which was made public October 23.

No data to understand impact

Further, the project proponents, CGPL never prepared any data of the persons affected by the project. The CAO report states that there is no social baseline data of the migratory Muslim fishing community of Wagher, who depend on the natural resources for their livelihood. Preparation of social baseline data would have indicated the exact number of persons to be affected by the project.

According to the complaint filed with IFC by the fishers' forum, the fisher people mostly from Wagher community migrate from their distant home villages to the bunder (fishing harbors), where they live during a fishing season of eight to nine months per year. Two of these bunders, Tragadi and Kotadi, are situated on the coast between the plant’s cooling water intake and outfall channels, where sandbars used by the fishing communities to live and conduct their activities have been destroyed. CAO found that
 IFC was not in a position to ensure the proper application of performance standard (PS) 5, pertaining to land acquisition, despite indications that households living on the bunders have been displaced by the project. There are about eight kinds of performance standards defined by IFC which define clients' responsibilities for managing their environmental and social risks.

In response to the CAO's findings, IFC directors George and Bulmer wrote on September 12, said that these settlements are temporary, while stating the loss of the sand bars used by the fishing communities is only partial.

CAO also found that IFC paid inadequate attention to the requirement of PS6 that underlines biodiversity conservation. CAO stated that IFC did not assure itself about the impact of the thermal plume on the marine ecosystem. CAO evidenced this claim on the basis of the complaint made by MASS which states that the industrial activity has affected fish catch in the region https://www.downtoearth.org.in/content/tata-mundra-power-project-blamed-falling-fish-catch. CAO has questioned CGPL's own environment impact assessment and studies conducted by National Institute of Oceanography (NIO) on the basis of the methodology used to measure the impact on the marine ecosystem upon which many of these communities depend. IFC in its response stated that declining fish catch cannot be attributed to the project, as the trend started in 2007 before the plants were constructed in the region. 

Besides these, a host of lapses have been pointed out by the CAO, many of which have been rejected by the IFC. IFC's reluctance to review its financing of the coal project which has allegedly undermined the rights of the communities displaced by the UMPP has angered the fishing community. “Now that World Bank’s own investigations found such serious lapses, it is time for the Bank to sit up and take appropriate and immediate actions. We will not agree on anything short of IFC withdrawing financing from the project,” says Patel.

CAO Audit of IFC Investment in Coastal Gujarat Power Limited, India

CAO found IFC made serious lapses in funding Tata coal plant; President Kim rejects expert findings, thwarts further action

The real cost of power: report of the independent fact-finding team on the social, environmental, and economic impacts of Tata Mundra Ultra Mega Power Project, Kutch, Gujarat

Performance audit of Ultra Mega Power Projects under special purpose vehicles

Annual environment & social monitoring report (April 2010 to March 2011): Mundra Ultra Mega Power Project

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