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May 01, 2014

Tata Mundra: The newest World Bank coal project disaster

image from http://s3.amazonaws.com/hires.aviary.com/k/mr6i2hifk4wxt1dp/14050115/86b0e240-ebec-45c3-89c3-346ecba37563.png
Tata Mundra coal-burning power plant serves as the backdrop for this local community in India. Photo courtesy of Joe Athialy.

The World Bank President Dr. Jim Yong Kim and the bank’s International Finance Corporation (IFC) are at a crossroads -- they can either choose to to be on the right side of human rights and the environment, or they can continue ignoring the facts.

In 2009, the IFC loaned $15 million to a Honduran palm oil company -- Corporation Dinant (Dinant) -- despite public allegations of violence and intimidation. In that same year, a coup, allegedly backed by Dinant’s owner Miguel Facussé, overthrew president Manuel Zelaya and set off a wave of violence, causing Honduras to be labeled the most murderous country in the world. Since 2010, over 100 leaders from the rural farming communities have been murdered, including 40 linked to Dinant and the company’s forcible eviction of families in a campaign of terror against farmers.

But instead of responding to the growing crisis, the IFC dug in deeper, approving a $70 million loan to one of Dinant's biggest creditors, Banco Financiera Comercial Hondureña.

In response to growing complaints, Compliance Adviser Ombudsman (CAO) --  the independent investigative mechanism of the IFC -- reviewed the IFC’s involvement and issued a damning report, citing the IFC for failing to follow its own Integrity Due Diligence Procedure. This procedure is used “for identifying and documenting the potential risks associated with unethical and illegal activities which include environmental, social, governance and financial crime issues such as child labor, corruption, fraud, and money laundering.”

The IFC, however, appeared not to care. In a response signed-off on by President Kim, the IFC largely dismissed the CAO findings rather than taking meaningful action to correct the harm that had been done. This sparked a wave of protests from civil society groups in Honduras and overseas, forcing the IFC to make a U-turn only weeks later, admitting its failings and promising to draft a real action plan to address Dinant’s violent practices.

Unfortunately, Dinant is not an isolated case.

The CAO also upheld the complaints of fishing communities in Gujarat, India that were facing severe health effects and loss of livelihood as a result of the 4,000-megawatt coal-burning power plant, Tata Mundra. Tata Mundra has already received a $450 million loan from the IFC.

And just as with Dinant, the IFC appeared not to care about the CAO’s finding. The weak IFC response sparked outrage amongst environmental and human rights activists, promoting a series of scathing open letters to President Kim, one from over 100 groups in India and a second from over 68 groups in 28 countries.

However, unlike in the case with Dinant, the IFC is refusing to back down on Tata Mundra.

Tata Mundra’s backers in the IFC claimed the project would improve energy access in India, despite the dangerous local health and environmental effects. But realistically, generating more power from centralized coal projects like Tata Mundra rarely helps the rural poor, who cannot access the electricity without costly grid extensions -- extensions that may never happen. Despite any notion that Tata Mundra would help alleviate energy poverty, that idea was thrown out the window when the coal plant’s costs skyrocketed, and the Tata corporation requested a bailout from the government in the form of higher rates for consumers -- well beyond what India’s unelectrified population can afford to pay.

This situation would have been avoided had financiers like the IFC conducted adequate financial analysis that would have revealed these ‘too good to be true’ cost estimates. Furthermore, the crisis could become even more dire, with plans underfoot to add an additional 1,600-megawatts of generating capacity to the Tata Mundra, putting even more strain on local communities.

Earlier this month, Bharat Patel, general secretary of Machimar Adhikar Sangharsh Sangathan (MASS) – or the Association for the Struggle for Fishworkers' Rights -- delivered over 24,000 signatures to President Kim during the World Bank spring meetings. The petitioners were calling on the IFC to recognize the mistakes it had made with Tata Mundra and put forward an action plan to address the lasting effects caused by the massive coal-burning power plant. Specifically, the petitioners demanded the World Bank :

  • Recognize the IFC policy violations and the serious impacts Tata Mundra has had on local communities, as confirmed by the CAO audit;

  • Develop a remedial action plan that has a clear timeline, specific targets, and measurable indicators to address restoration and reparation needs;

  • Withdraw IFC funding immediately from the Tata coal plant and rule out funding for project expansion.

It is not too late for Dr. Kim and the World Bank to make the right choice. In recent meetings with Bank Information Center (BIC), MASS, and the Sierra Club, the IFC pledged to reject any proposal to fund Tata Mundra’s expansion -- but this is not enough.

The IFC must publicly recognize the harm they’ve already caused to the people and environment of Gujarat and develop a meaningful action plan that addresses the damage. Furthermore, the World Bank and President Kim must ensure that Dinant and Tata Mundra are the last projects to flagrantly disregard local environmental and health effects, and are not the beginning of a new wave of dangerous and deadly ventures.

--Nicole Ghio, Sierra Club International Climate Program

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