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Despite environmental, livelihood "concerns", ombudsman refuses deterrence on Tatas' ultra mega project

By Our Representative
Despite NGO allegations of environmental and livelihood violations, the powerful ombudsman body of the International Finance Corporation (IFC), a member of the World Bank group, has refused to recommend any deterring steps against the IFC, which is part-funding the Tata Power’s ambitious 4.14 billion dollar Ultra Mega Power Project (UMPP) along the Mundra coast in Gujarat. Though the ombudsman, in its latest report, takes particular objection to the IFC’s failure to take “cumulative impact” of the UMPP, the Adani Power’s 4,620 MW plant (being implemented not far away), and the Mundra Port and Special Economic Zone (MPSEZ), it says it is “reluctant to review IFC management decisions on project selection.”
In fact, instead of recommending any punitive steps, such as suspension of loan on environmental or livelihood grounds, the ombudsman’s report rejects the view that it is not feasible to “not finance new business activity that cannot be expected to meet the Performance Standards over a reasonable period of time”. Instead, the IFC is allowed to take its own decisions on merit, and whether to “move forward with the investment”. The Office of the Compliance Advisor Ombudsman (CAO) for the IFC submitted its audit report on August 22, which was made public on October 23.
The refusal to take steps against IFC comes despite the CAO report refers to how Tata Power has overlooked the need to take a detailed view of environmental destruction of the region and adverse impact on the marginalized communities, especially fisher people. The CAO particularly states to how MPSEZ, which is “a major industrial development”, and its owners, the Adani Group, “have been the subject of multiple allegations of environmental wrongdoing in recent years, particularly in relation to the destruction of mangroves around MPSEZ”.
The CAO report states, “As well as being a neighbour, Tata Power is a significant client of MPSEZ, with a long-term contract for stevedoring services at the West Port. The cooling intake channel that Tata Power and Adani Power share was built as part of the MPSEZ”. It adds, “In discussions with CAO, IFC staff acknowledged the potential marine impact of the MPSEZ development, contrasting this with the relatively modest coastal footprint of Tata Power.”
Further, the CAO notes that Tata Power’s Annual Economic and Social (E&S) Performance Report has “flagged risks” emerging from Tata Power’s external linkages with MPSEZ since 2009-10. In fact, the Ministry of Environment and Forests (MoEF) even issued a show cause notice (regarding alleged breaches of environmental clearances) to MPSEZ. Yet, giving reason for not taking any action against IFC, the CAO indicated, the IFC team agreed to follow “the matter and would request MPSEZ to provide information on its response.” Then, the IFC team also “undertook to closely monitor developments in this regard.”
The CAO’s decision to soft-pedal on Tata Power’s project came despite the fact that a high profile NGO report submitted to it which warned of “pollution from Indian coal-fired power plants, especially fine particulate matter (PM10) and oxides of nitrogen (NOx) and oxides of sulfur (SOx)”. The study expressed concern over “environment of the region and livelihood of the local people.” The report stated that the impact of pollution will in future be felt from both the power plants, as both are coal-fired.
The CAO indicated, already there are “changes in the quality of coal being used may” by the Tata Power. And, when the plant is at full capacity, it would exceed the IFC guideline of 500 tonnes (metric) of sulfur dioxide per day. “The proposed addition of 830 MW units would require the use of coal of considerably lower sulfur content for the limit of IFC 500 tpd (tonnes per day) to be met”, the CAO says, adding, even the IFC agrees that with the proposed changes in coal quality and the proposed addition of 2x830 MW units at the UMPP site, “there is a need to carefully review measures that will be implemented by Tata Power to ensure continued adherence to IFC performance standards.”
The CAO report also quotes the NGO to say that there have been “significant health costs arising from pollution-related premature deaths, respiratory effects, and restricted working days, including 100–120 premature deaths per year in the area around the Tata Power and Adani Power plants in Gujarat.” It adds, “A more recent report submitted to CAO claims that the villages in the area of the CGPL and Adani power plants have seen an increase of roughly 20 per cent in children’s respiratory diseases over the past two years.”
Basing the review of existing literature, especially Environmental Impact Assessment (EIA) reports, the CAO says, the Adani Power, which had already implemented its 660 MW in 2007, had given “strong indications that the full expansion of the Adani Power plant to 4620MW during 2007-08. In these circumstances, the CAO adds, the IFC should have advised that the Tata Power to consider “cumulative impact” which would “go beyond that contained in the Supplementary SEIA of 2007… Appropriate measures might have included reporting on Adani Power’s cumulative impact assessment and pollution control measures and analyzing these in the light of CGPL’s E&S requirements.”
The CAO further says that the IFC should have insisted on the Tata Power to conduct “a full regional or strategic assessment covering the much larger Adani developments on the Kutch coast, and that these issues would best have been dealt under the headings of cumulative impact and third-party risk… It would have been good practice for IFC to pursue options for a regional or strategic assessment more assertively with relevant regulatory authorities, either directly, in collaboration with the World Bank, or through its client.”

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