Press Statement | October 24, 2013
CAO found IFC made serious lapses in funding Tata coal plant; President Kim rejects expert findings, thwarts further action
The International Finance Corporation (IFC) broke its own social and environmental rules, says the Compliance Advisor Ombudsman (CAO) which released an investigation report yesterday. A recourse mechanism for communities affected by private sector projects that the World Bank Group supports, CAO found that IFC committed serious violations of its mandatory safeguards in financing its client, the Coastal Gujarat Power Ltd. (CGPL), which manages the 4,000 megawatt Tata Mundra Ultra Mega Power Project in Kutch, Gujarat.
Stopping short of calling for IFC’s withdrawal from financing the project, the CAO finds that the ‘IFC weaknesses in reviewing the client’s risk assessment and mitigation did not support the formation of a robust view that the project met the IFC’s policy requirements, that IFC did not consider alternative project design to avoid or minimize impacts, and that IFC has not treated complainants’ concerns as compliance issues.’
Machimar Adhikar Sangharsh Sangathan (MASS – Association for the Struggle for Fishworkers’ Rights), the organization of fishing families that filed the complaint at the CAO in June 2011, welcomes the report. “The findings reconfirm the concerns we raised since project construction started,” Dr. Bharat Patel, General Secretary of MASS said. “CAO’s expert findings help bolster our fight to regain the damaged livelihoods of thousands of fishing families in Kutch coast.”
MASS asserted that IFC failed to account fisher people as project-affected people, to adequately assess and mitigate environmental and livelihood impacts, and to comply with mandatory performance standards and national regulations, among others. Dispute resolution attempts did not work, leading CAO in 2012 to do a compliance appraisal, which concluded that MASS complaint merited a full investigation.
In more than one year, CAO embarked on an extensive compliance audit process by hiring external experts, conducting field visits, reviewing relevant reports, and crosschecking with the IFC.
CAO validated major MASS complaints. It found the IFC committed serious supervision failures and significant policy breaches.
CAO confirmed that IFC did not adequately consider in its risk assessments seasonally resident fishing community and religious minority population to be affected by the project, which excluded them from the application of land acquisition standard, biodiversity conservation and other relevant policies to protect them.
CAO confirmed that that IFC committed major shortcomings in fulfilling requirements to manage impacts on airshed and the marine environment. Specifically, the investigation found that IFC did not ensure that its client correctly applied the 1998 WB guidelines for thermal power that restrict a net increase on emissions of particulates or sulfur dioxide within the airshed. On marine environment, CAO found the IFC to have no robust baseline data on project impacts to marine resources, which constrained it from monitoring marine impacts.
CAO also found that IFC has not assured itself that the plant’s seawater cooling system complied with applicable IFC Environmental, Health and Safety (EHS) Guidelines. This compliance failure risks that thermal plume from the project’s outfall channel will extend into shallow waters and estuaries that pose significant ecological risks on marine resources.
CAO also confirmed the failure of the IFC to conduct an adequate cumulative impact assessment. CAO stressed that IFC should have advised its client that environmental and social risks emerging from the project’s proximity and relationship with Mundra Port and Special Economic Zone should have been assessed by a third party, with mitigation measures developed.
CAO concluded that IFC’s review and adoption of its client’s reports are not robust to ensure the Performance Standards and supervision requirements are met.
IFC rejects findings, backs up the client
An eleven-page response written by Anita George and Willian Balmer, IFC’s Asia-Pacific Director for Infrastructure and Natural Resources and Director for Environment and Social Governance, respectively dismissed CAO findings. Essentially, they rejected expert findings, defended their project decision and their client and issued no remedial action. After a month of silence, World Bank President Kim cleared management response.
Dr. Kim, a physician by trade, was known for championing public health before joining the Bank. Yet, his approval on the IFC response presents a severe diversion from his typical advocacy. With the decision, thousands of fishing and fishworker families will continue to suffer from air pollution, contaminated water and destroyed marine resources that CAO found to be directly linked with the construction and operation of Tata coal plant. CAO found that this wide range of problems is attributed to IFC. Kim, instead of addressing the findings, stood by his IFC staff and their client, Coastal Gujarat Power Limited (CGPL), ignoring the plight of fishing communities adversely impacted by the deadly investment.
“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 Dr. Patel.
President Kim contradicts Bank’s energy strategy and undermines CAO mandate
“By flatly rejecting the findings of independent audit body, Kim simply revealed a highest form of hypocrisy in his climate stance,” says Soumya Dutta, a member of India Climate Justice and coordinator of the Independent Fact Finding Mission that produced the 2012 Real Cost of Power report that documented the violations of the company.
Dutta adds: “Kim’s endorsement of the management line indicates his real position that coal does not kill and he will continue supporting the deadly coal plants like Tata that are not only disastrous but also facing serious financial issues. It then contradicts the President’s energy directions paper and pronouncements on moving the institution away from coal financing. His tall talk on climate change is proving to be a charade.”
“That Kim approved management’s dismissive reaction reconfirms the lack of public accountability within the IFC,” observes Madhuresh Kumar of National Alliance of People’s Movements that supports MASS. “Kim sends a damaging signal that the World Bank Group’s internal watchdogs like the CAO and the Inspection Panel are more for namesake; and that despite their findings, it is business as usual for the Bank,” adds Madhuresh. “Kim simply undermined all the findings of the CAO in favor of their client. The President’s clearance smacks of arrogance, refusal to learn lessons and disregard to people and their rights.”
“We wonder why an institution like CAO exists if their findings are not given any value and no action is taken upon it,” said Soumya Dutta. “If President Kim is serious about the accountability that he talks about, and about learning from the Bank’s mistakes to prevent them from occurring again, he should take bold decisions based on the findings.’
Communities demand the World Bank President to stop his charade that he can take people for a ride and take bold actions based on the CAO findings. “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,” Dr. Patel said.
IFC Response to CAO Audit report: http://www.cao-ombudsman.org/cases/document-links/documents/IFCresponsetoCAOAudit-CoastalGujaratPowerLimited.pdf
Key Observations and Findings of CAO Audit: http://www.bicusa.org/wp-content/uploads/2013/10/Key-Observations-and-Findings.pdf
Contacts / For Interviews:
Bharat Patel (Mundra, Gujarat): +91-9426469803; Soumya Dutta (Delhi): +91-9213763756; Justin Guay (US): +1-202-664-6460; Jelson Garcia (US): +1-202-802-2995
South Asia Coordinator | Bank Information Center; Post Box No 4659, New Delhi – 110016; +91.9871153775 | jathialy [@] bicusa.org | http://www.bicusa.org; Skype: joeathialy | Twitter: joeathialy
Seeking more time for developing projects and surrendering them reflects lack of enthusiasm in the tax-free enclaves
New Delhi, July 15 (PTI) The government has given more time to 33 special economic zone developers, including Uttam Galva Steels Ltd, Unitech Infracon and GMR Hyderabad International Airport Ltd, to execute their projects. At a meeting on July 6, the Board of Approval (BoA), headed by Commerce Secretary S R Rao, also allowed three SEZ developers to surrender their projects. The BoA is a 19-member inter-ministerial body that deals with Special Economic Zones (SEZs) and the issues related to them. http://www.business-standard.com/india/news/govt-gives-time-to-33-sez-developers-for-executing-projects/178729/on
OPG Power Gujarat Private Limited, a subsidiary of London-based power player, OPG Power Ventures PLC has received the in-principle approval to set up a sector-specific special economic zone (SEZ) for power at Bhadreshwar, Mundra in Kutch district in Gujarat. The SEZ board of approval (BoA) has granted the in-principle approval to the company at its meeting held earlier this month. http://www.business-standard.com/india/news/opg-power-gets-in-principle-nod-for-sez-in-mundra/480342/
The state government has finally gave an approval to what can be termed as the highest-ever compensation for project affected persons (PAPs) in the state. The Maharashtra Airport Development Company (MADC) has got the green signal to go ahead with disbursal of Rs1.5 crore per hectare to ousters in Jaitala and Bhamti villages. The figure comes to around Rs60 lakh an acre, equivalent to what MADC itself charges investors buying land in Mihan-SEZ. http://timesofindia.indiatimes.com/city/nagpur/Mihan-ousters-to-get-Rs-1-5cr-per-hectare/articleshow/14682251.cms?
Justice MB Shah commission that looks into 14 graft cases has got another participant earlier this week. A litigant in the Gujarat high court against the alleged violation of norms in the Adani Port Special Economic Zone (APSEZ) – Naran Gadhvi has filed an affidavit before the Shah commission. Gadhvi claimed that he could throw light on one of the land allotment issues that are being probed by the inquiry commission. He has even provided some documents related to land allotment to APSEZ in Mundra block in southern part of Kutch. http://articles.timesofindia.indiatimes.com/2012-06-30/ahmedabad/32483280_1_land-scam-land-allotment-throwaway-price
A ban has been proposed on the setting up of special economic zones (SEZ) on land in tribal areas and agricultural land. A meeting today between rural development minister Jairam Ramesh and unofficial members of the National Council of Land Reforms (NCLR) also suggested that homeless rural people should be given homestead land. http://www.telegraphindia.com/1120627/jsp/nation/story_15662405.jsp#.T-roxhce764
“The company has received a show cause notice recently for new SEZ of 1840 hectares and is in the process of replying the same,” an Adani spokesperson said in a statement. The ministry had issued a show cause notice to APSEZ last week as to why a formal approval granted to it for its new 1840-hectare SEZ should not be withdrawn immediately. The department of commerce, in its notice had alleged that several material facts were not brought to the notice of the department by the company in its proposal for setting up a multi product SEZ at Mundra in Kutch, Gujarat.
The ministry’s notice said, “From the observations, it is prima facie apparent that APSEZ has deliberately concealed and falsified material facts, which have a direct bearing on the grant of approval and subsequent notification, as also misled the department by furnishing incorrect particulars of land and other related facts leading to wrongful approval and notification of the land measuring 1840 hectares as an SEZ.” The proposed SEZ was in addition to APSEZ’s existing SEZ at Mundra. http://www.business-standard.com/india/news/adani-to-file-reply-to-show-cause-notice-/477614/
Mangalore Special Economic Zone Limited (MSEZL), a notified sector-specific petrochemical SEZ in Karnataka, is setting up a 10-km direct pipeline-cum-road corridor connecting MSEZL units to the New Mangalore Port, said a press release issued on Monday by Rajiv Banga, MD and CEO, MSEZL. http://www.thehindu.com/news/cities/Mangalore/article3519024.ece
The ministry of commerce and industry would soon announce relaxed land-related norms for special economic zones to arrest the slackening pace of growth in these tax-free zones by making certain changes in the SEZ policy. In a major amendment to the policy, enacted in 2006, for the first time the government will change the minimum land requirement across all sectors. It will reduce the threshold limit for each sector-specific SEZ, in the wake of severe constraints faced by the developers in acquiring huge tracts of contiguous land. At present, the minimum land required for multi-product, multi-service, information technology and gem & jewellery SEZs is 1,000 hectares (ha), 100 ha and 10 ha each, respectively. http://www.rediff.com/business/report/sez-govt-to-relax-sez-land-norms-soon/20120611.htm
A series of negative news about Adani Ports and Special Economic Zone Ltd (ADSEZ), as well as last month’s Gujarat High Court’s directive to stop construction work at its SEZ, impacted the company’s share prices. The stock, around Rs 130 at the start of this financial year, slipped to Rs 111 in mid-May—it fell from Rs 121 to Rs 114.45 in a trading session after the March quarter results were announced (on May 14). The results were below expectations and reflected the lower volume growth, mainly in coal due to the lower off-take by the utilities. http://www.business-standard.com/india/news/near-term-pain/476665/