A fresh report by the authoritative Compliance Advisor Ombudsman (CAO) has found that the World Bank arm, International Finance Corporation (IFC), involved in funding the Tatas’ Coastal Gujarat Power Limited (CGPL), Mundra, Kutch, has failed to ensure compliance from its client, CGPL, on complaints of loss of livelihood and pollution raised by the Machimar Adhikar Sangharsh Sangathan (MASS). CAO is an independent monitoring mechanism meant to review complaints from communities affected by projects funded by the World Bank Group, and reports directly to its President. The CAO’s critical observation has been made following a review of the IFC’s response to its earlier report, “Audit of IFC Investment in Coastal Gujarat Power Limited, India”, finalized in August 2013 and released publicly in October 2013. Excerpts from the report:
The audit relates to IFC’s investment in Coastal Gujarat Power Limited (CGPL or the client), a subsidiary of Tata Power, which began development of a 4,150 MW coal-fired power plant near the port town of Mundra, in the Kutch district of Gujarat, India in 2007. The plant is located approximately 3km from the Gulf of Kutch and uses seawater for cooling. IFC provided $450 million in financing for the project in the form of a loan.
The audit was triggered in response to a complaint from Machimar Adhikar Sangharsh Sangathan (MASS), the Association for the Struggle for Fishworkers’ Rights, representing fisher people living in the vicinity of the project (the complainants).
The audit made a number of non-compliance findings in relation to IFC’s review and supervision of environmental and social (E&S) aspects of the project. These are summarized below:
Consultation with fishing communities.
* IFC failed to assure itself that the client’s E&S assessments were based on “effective consultation” with directly affected fishing communities.
* This lack of effective consultation with fishing communities early in the project cycle resulted in missed opportunities to assess, avoid and reduce potential adverse impacts of the project and to examine technically and financially feasible alternatives to the sources of adverse impacts in accordance with IFC Performance Standard 1 (PS 1) (Assessment and Management of Environmental and Social Risks and Impacts)
* Shortcomings in the consultation and disclosure process hindered efforts to build and maintain over time a constructive relationship with project affected communities.
Environmental and Social (E&S) Assessment.
* IFC’s E&S review was not commensurate to risk. In particular, it did not ensure that project E&S risks and impacts vis-a-vis the complainants were assessed based on “appropriate social baseline data.”
* IFC did not take the steps necessary to ensure that the application of Performance Standard 5 (PS 5) (Land Acquisition and Involuntary Resettlement) in relation to the complainants was properly assessed.
Air quality requirements.
* IFC failed to ensure that its client correctly applied the World Bank Group Thermal Power Guidelines (1998) to an airshed that should have been classified as degraded.
* The application of the Thermal Power Guidelines (1998) would have required stricter emissions limits of the client.
* IFC’s review of its client’s marine impact assessments was not commensurate to risk.
* As a result important opportunities were missed to: (a) request more detailed baseline information about the marine environment of the affected area; (b) incorporate appropriate analysis of the potential marine (and associated social) impact of the project into design considerations and the client’s E&S management system; and (c) develop a framework to support adequate marine impact monitoring.
* IFC did not ensure that the marine impact of the project was assessed taking into account “the differing values attached to biodiversity by specific stakeholders” as required by Performance Standard 6 (PS 6) (Biodiversity Conservation and Sustainable Management of Living Natural Resources).
* Cumulative non-lethal (but potentially harmful) effects of submarine noise, light, heat, and other aquatic disturbance from the project on the local marine environment were not adequately considered in marine impact assessment process.
* IFC did not adequately assure itself that the thermal plume from the client’s seawater outfall would comply with the relevant 3°C criterion at the edge of a scientifically defined mixing zone.
* Cumulative impact and 3rd E&S risk emerging from the project’s association with Mundra Port and Special Economic Zone (MPSEZ) needed to be better assessed, with mitigation measures developed commensurate to the client’s level of influence.
* A framework for managing E&S impact that can be effectively monitored or audited has yet to be established.
* IFC is not in a position to demonstrate either that its client’s monitoring is commensurate to risk (as required by PS 1) or that its supervision allows it to meet the stated purposes of supervision as set out in the ESRPs: namely, the development and retention of information needed to assess the status of E&S compliance.
In November 2013 IFC published an action plan in response to the audit. Following up on this action plan IFC has reported a number of steps taken by its client. These are articulated by IFC as addressing key findings from the CAO audit and include:
- Completion of a socio-economic survey of villages and seasonal settlements within the Project’s area of influence, and commissioning of a report on socio-economic changes in these villages;
- Ongoing consultation and community engagement with project-affected peoples, including a June 2014 meeting with representatives of the complainants;
- Community development activities in nearby fishing communities including the provision of drinking water, the purchase of fishing nets and support for education;
- Monitoring of ambient air quality and of coal and ash dust deposits in neighboring communities;
- Completion of phase two of a sea turtle monitoring initiative;
- The commissioning of a model confirmation study in relation to the marine impact of the project; and
- Cumulative assessment of the project’s impact on air quality in the context of plans for future expansion.
While acknowledging the actions reported by IFC, CAO does not find them sufficient to address the findings of the audit at this stage. In particular, CAO notes that a number of its findings suggest the need for a rapid, participatory and expressly remedial approach to assessing and addressing project impacts raised by the complainants. Such measures are not well developed in IFC’s reporting which focuses on the commissioning of technical studies as well as corporate social responsibility measures implemented by the client.
CAO also notes technical non-compliance findings regarding the application of pollution control standards that have not yet been addressed. Specifically, CAO refers here to the World Bank’s Environmental, Health and Safety Guidelines in relation to: (a) new power stations in areas with degraded airsheds; and (b) the thermal emissions of the project’s cooling system which releases warm water into the sea.
CAO will keep this audit open for monitoring. CAO plans to issue a follow up monitoring report in relation to this audit no later than November 2015.