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September 05, 2014

No Greenlight for Expansion of IFC-Funded Tata Mundra Coal Plant

image from http://s3.amazonaws.com/hires.aviary.com/k/mr6i2hifk4wxt1dp/14090518/d2d773e0-73a1-49a2-b7b5-0297f675f713.png
Photo of Tata Mundra, courtesy of Joe Athialy.

India’s king coal is well on its way to being dethroned.

First, the World Bank Group’s International Finance Corporation (IFC) refused to finance an expansion of the dirty, destructive Tata Mundra coal-fired power plant back in May. Now it seems Indian courts  have agreed that the wide-reaching effects of this coal project are too controversial to move forward with the proposed expansion.

Last week, the Indian Supreme Court delivered a one-two punch to the Indian coal industry in a series of landmark rulings that further call into question the viability of the nation’s faltering coal industry. In particular, the Tata Group received a major setback when the Supreme Court stayed a planned rate hike for its economically struggling 4,000-megawatt Tata Mundra Ultra-Mega Power Plant.

This week didn’t start off any better for Tata or its Mundra coal plant.

The recently released minutes from the July 31-Aug. 1 meeting of the Ministry of Environment and Forests’ (MoEF) Expert Appraisal Committee (EAC) reveal that the EAC refused to greenlight an expansion of Tata Mundra, citing the company’s failure to meet the conditions set in the existing Environmental Clearance (EC) for the project. This includes  providing for mangrove preservation and the establishment of a greenbelt. Instead, the EAC tabled the decision, pending the development of a detailed action plan to bring the coal plant into compliance with the EC, the creation of an action plan with budgetary information for public hearings, and a recommended site visit by an EAC subcommittee.

It’s clear that Tata Mundra has become the poster child for poorly thought out coal projects. Tata initially low-balled its bid for construction costs  in order to win the contract for the project, using estimates for imported coal that allowed no room for increase. That rate increase is exactly what happened when Indonesia decided to link the price of its exported coal to the price on the international market. This led to the Tata CEO calling the Mundra project “financially unviable” and the company asking the Indian government for a bailout in the form of higher rates, which would have allowed Tata to pass on the cost of its mistakes to consumers.

It is this rate-hike that the Supreme Court stayed last week, and it is another plan to save the failing Mundra coal project -- the proposed 1,660-megawatt expansion -- that the MoEF refused to clear this week.

Meanwhile, Tata Mundra has been rocked by allegations of environmental and human rights violations. After initially receiving support from the IFC, a damning report issued by the Compliance Advisor/Ombudsman (CAO) – the independent investigative body of the IFC -- upheld complaints from local fishing communities facing severe health effects and the loss of their livelihoods due to the project. The report found that the IFC failed to follow its own due diligence procedures when approving the project, which led to an internal conflict within the World Bank as the IFC refused to take meaningful action to address the findings.

On top of that, last week, the Supreme Court ruled on the now infamous “coal gate” scandal -- where private companies were given sweetheart deals by the government -- and found that an astounding 218 coal mining leases issued between 1993 and 2010 were illegal.

With all of these verdicts taken together,  it is clear that coal is not just a danger to nearby communities, it is a dangerous industry for investors.

-- Nicole Ghio, Sierra Club International Climate Program


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