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November 27, 2012

Sierra Club India: Tata Mundra Coal Review Test of Dr. Kim's Commitment to Protecting Health, Environment

Tata Mundra
When Dr. Jim Yong Kim took over as President of the World Bank, there was hope amongst health advocates and environmentalists that, given his background, the Bank would reevaluate its support for deadly fossil fuel projects. Dr. Kim's assertion that a new World Bank report on global warming should "shock us into action" is a step in the right direction.

Now, however, he has an opportunity to back this rhetoric with concrete action as the International Finance Corporation (IFC) reviews the social and environmental impacts of its $450 million loan for the enormous four-gigawatt Tata Mundra coal plant in Gujarat, India.

In response to extensive work by local communities and civil society groups to document and expose the impacts of Tata Mundra (PDF), the IFC's independent Compliance Advisor Ombudsman (CAO) has formally opened an investigation. Last week the CAO released the Terms of Reference for the review which will cover the devastating health, livelihood and environmental impacts of this mammoth coal plant.

This review is an important step towards rectifying the impact the project has had on the 10,000 local villagers who rely on the land and water the plant is destroying. Dust and ash from the project is contaminating fish and salt flats, while livestock that used to roam freely can no longer access the commons for grazing. And both villagers and animals are forced to breathe air and drink water contaminated by toxic pollution. All of these are impacts from just Tata Mundra. The sad reality is cumulative impacts are much larger, as it is sited right next to the even bigger 4,620 MW Adani coal plant.

Thousands have been displaced, and those who have stayed are face drastic health and economic risks, all for electricity that they will never be able to afford (PDF). That's because Tata Corporation dramatically lowballed the price they would pay for imported coal, and used this estimate to claim they could provide power at below-market rate in order to secure approval from the Indian government and funding from the IFC. Then, after construction started, they went back to the government, acknowledged that the project would run at a 270% annual loss, and demanded that they be allowed to raise rates on average citizens, destroying any notion that the project would ever help provide energy access for the poor.

This situation is hardly unique. Across India, funding for coal projects is drying up as lenders realize that the projects are expensive, unreliable, and likely to go bankrupt.

The IFC approved funding for the project despite the clear warning signs, once again acquiescing to the long standing belief that coal is cheap, and its impacts on local communities and the environment should therefore be ignored. While the review is technically independent, how the World Bank responds to the recommendations lies entirely at Dr. Kim's feet. He will have an opportunity to take back the rubber stamp and help make right any violations the CAO finds. His decision on Tata Mundra will be a referendum on his ability to protect the health and environment of those impacted by the World Bank. We're hoping he lives up to his reputation.

-- Nicole Ghio, Sierra Club Campaign Liaison

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