The ombudsman for International Finance Corporation (IFC
) has found serious lapses in the supervision of Tata Power’s ultra mega power project (UMPP) at Mundra in Kutch, Gujarat, impacting the environment and livelihoods of the local fishermen.
The Compliance Advisor Ombudsman (CAO
) held the review of the project’s environment and social assessments was not commensurate with the risk, as required by IFC’s sustainability policy.
However, IFC has denied the allegations. It also justified the decision to fund the 4,000-Mw plant of Coastal Gujarat Power
“The CAO report reflects the observations on the internal processes of IFC and thus it will only be appropriate for IFC to respond. We are yet to read through the report and would discuss with IFC if there were any issues related to CGPL,” Tata Power said in a statement.
The company further said, according to initial information available with CGPL, Machimar Adhikar Sangharsh Sangathan has certain generic issues concerning the coastline of Gujarat. Mundra UMPP is about one per cent of the Kutch coastline and we are more than responsive in our association with the community around our project. “We remain committed to working with the community at all times.”
IFC, which had classified the project as ‘Category A’, has invested $450 million (Rs 27,772.45 cr in current valuation). IFC was also considering investing up to $50 million(Rs 3,137 crore) in equity as part of its exposure to the project and syndicating up to about $300 million (Rs 18,822.33) in loans.
The CAO initiated the audit after it received a complaint from a fishermen’s group. In the complaint, the group raised questions about the quality of the environmental and social impact assessment and the company’s community consultation activities, the project’s adherence to IFC’s performance standards, as well as its compliance with the norms.
The audit found the fishermen’s concerns were valid. “Weaknesses in IFC’s environment and social (E&S) review of CGPL did not support the formation of a robust view as to whether the project could be expected to meet the requirements of the performance standards over a reasonable period of time, the threshold question in terms of IFC’s decision to invest,” the audit report observed.
“Weaknesses in IFC’s E&S review process also meant that required opportunities to consider alternative project designs to avoid or minimise E&S impact were missed,” the report added. Also, lack of an effective consultation with fishing community early in the project cycle resulted in missed opportunities to assess, avoid and reduce adverse impacts of the project.
The ombudsman also found shortcomings in the IFC’s review and supervision of the impacts on the airshed and marine environment. CAO observed: “IFC’s process of E&S review was not appropriate to the nature and scale of the project or commensurate to risk as required by the sustainability policy.”
“IFC failed to ensure that its client correctly applied the requirements of the World Bank Group Thermal Power Guidelines (1998), to an airshed that should be classified as degraded,” the report added.
Refuting the allegations, senior IFC officials said, “We do not share CAO’s view with respect to several findings, among others that we did not properly identify the complainants as project affected communities in accordance with our performance standards. IFC has a different view to the CAO in relation to its findings,” said Anita Marangoly George, director, Asia-Pacific, Infrastructure and Natural Resources, and William Bulmer, director, environment, social and governance.
“IFC does not recognise that there have been some impact on the fishing community, for example, increase of distance to access the coastal settlement to markets. However, these have been correctly addressed by CGPL in accordance to performance standard 1,” they stated.
KEY FINDING OF CAO AGAINST IFC
* The fishermen were not adequately considered as the E&S risks and impacts of the project were considered and addressed.
* IFC has contributed to this situation to the extent that its review of CGPL’s E&S assessments was not commensurate with project risk as required by its Sustainability Policy.
* A lack of effective consultation with fishing communities early in the project cycle process resulted in missed opportunities to assess, avoid and reduce adverse potential adverse impacts of the project.
* IFC failed to ensure that its client correctly applied the requirements of the World Bank Group Thermal Power Guidelines (1998)
* Projections that the thermal plume from CGPL’s outfall channel will extend a distance of kilometers into the shallow waters of the gulf and surrounding estuaries suggest inadequate mixing/cooling, with significant risks of ecological impact.
* Cumulative nonlethal (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.