The “briefing note” on the involvement NIIF with AIIB says that the relationship between is riddled with “lack of information” on environment and social impact assessment on any of the projects that are sought to be funded in India. An expanding multilateral institution, AIIB has under its fold 70, and another 27 in the waiting in the wings. Already, it is being seen as “a potential rival” to the World Bank and the International Monetary Fund (IMF).
Pointing towards how what havoc such lack of transparency can create, the briefing note, authored by Anuradha Munshi and Kate Geary for the Centre for Financial Accountability and Bank Information Centre (BIC), Europe, respectively, gives the example of GMR Kamalanga, a coal-based power plant project, proposed in Kamalanga village of Odisha, which the World Bank’s private lending arm, Infrastructure Finance Corporation (IFC) had decided to fund.
Calling GMR Kamalanga a “disastrous project”, the briefing note points to how local project-affected communities with the support of two NGOs had to complain with IFC ombudsman saying that the project posed a threat to their health, livelihoods and human rights. In its investigation, the ombudsman found that IFC “had breached its standards”, especially IFC’s “pre-investment environment and social due diligence.”
Pointing out that the first phase of AIIB’s investment through NIIF was approved in June 2018, and yet, even after more than a year, there is “complete lack of transparency” on the details of any of the projects, the note states, this is happening despite the fact that AIIB’s core principles say that it stands for “openness, transparency, independence and accountability”, with the mode of operation being “Clean, Lean, and Green.”
Hinting that the Government of India (GoI) should primarily take the blame for such lack of transparency, the note says, NIIF has been set up “as an alternative investment fund (AIF) with a planned corpus of Rs 40,000 crore (USD 6 billion)”, with GoI deciding to “commit up to 49 per cent of NIIF’s target capitalization, with the balance 51 per cent of commitments expected to be raised from institutional investors like AIIB.
Pointing out that, already, funds worth USD 1,100 million are proposed to be invested through NIIF, the note states, of this USD 200 million are proposed to come from AIIB, but so far little is known about how the envisaged projects would comply by investment guidelines will reflect the AIIB’s Environmental and Social Exclusion List, and the Environmental and Social Standards.
According to the note, the most significant risk associated with funding NIIF projects is the mandate to restart ‘stalled’ infrastructure projects, something that Prime Minister Narendra Modi has “vowed” to do, “especially in the coal, power, petroleum, railways and road sectors. It underlines, “Raising finance to restart stalled projects brings with it high social and environmental risks. The reason many projects are stalled often relate to land, and environmental and social restrictions in place.”
Stating that it is local resistance that stalled projects these – mainly in coal mines and power plants sectors – because of their potential impacts like threat to displace and impoverish communities, destroy forests or pollute rivers, the note says, “Restarting such projects brings with it a host of risks, not least the reputational risk to any financier involved.”
The note quotes an authoritative study to say that, “Almost 80 per cent of land conflicts arise out of development and industrialisation processes, with infrastructure being the single largest cause”, adding, “Detailed investigation of 21 projects involved in disputes related to the possession and acquiring of land revealed the major reasons to be land disputes and resistance by local communities to the projects.”
Insisting that these are “these are serious concerns”, the note says, it is essential for AIIB to “publicly disclose its investments so that the affected communities and other stakeholders are aware about the projects and of their impacts. This will help affected communities to approach AIIB’s accountability mechanism or its board to ensure that the subprojects comply with its environmental and social standards.”
The note says, even renewable energy projects may become problematic, the note says, “The vast majority of solar power in India comes not from decentralised rooftop panels but expansive parks. Indian authorities have enticed developers by acquiring large tracts of land, building transmission links and offering up buyers for the new power, usually state-owned companies with low default risk.”
It adds, “These mega-projects necessitate the acquisition of enormous land areas. There are already three recorded conflicts related to land acquisition for renewable energy projects, one of them being the ultra-mega solar park, with a capacity of 500 MW in Anantapur district in western Andhra Pradesh.
“Even with renewable energy projects, there are concerns around the scale of environmental and social impacts as they resemble other mega projects in their impacts on local communities and require the same transparency and risk management”, the note says.
It continues, “It is essential that at a time when investments in the renewable energy sector are rightly being called for, we do not fall in the same trap of fossil fuel-based projects, which required massive land acquisitions, displacement resulting in land conflicts, loss of the livelihoods and destruction of ecosystems.”
Demanding that AIIB, while investing in such projects, should follow “environmental and social framework stringently”, note says, this is particularly important because AIIB is an AAA credit-rated bank, and its investment in NIIF would help make NIIF a more attractive investment vehicle for others. “This raises questions about how the AIIB can help to influence the wider portfolio of NIIF towards more sustainable infrastructure”, it wonders.
The note says, even renewable energy projects may become problematic, the note says, “The vast majority of solar power in India comes not from decentralised rooftop panels but expansive parks. Indian authorities have enticed developers by acquiring large tracts of land, building transmission links and offering up buyers for the new power, usually state-owned companies with low default risk.”
It adds, “These mega-projects necessitate the acquisition of enormous land areas. There are already three recorded conflicts related to land acquisition for renewable energy projects, one of them being the ultra-mega solar park, with a capacity of 500 MW in Anantapur district in western Andhra Pradesh.
“Even with renewable energy projects, there are concerns around the scale of environmental and social impacts as they resemble other mega projects in their impacts on local communities and require the same transparency and risk management”, the note says.
It continues, “It is essential that at a time when investments in the renewable energy sector are rightly being called for, we do not fall in the same trap of fossil fuel-based projects, which required massive land acquisitions, displacement resulting in land conflicts, loss of the livelihoods and destruction of ecosystems.”
Demanding that AIIB, while investing in such projects, should follow “environmental and social framework stringently”, note says, this is particularly important because AIIB is an AAA credit-rated bank, and its investment in NIIF would help make NIIF a more attractive investment vehicle for others. “This raises questions about how the AIIB can help to influence the wider portfolio of NIIF towards more sustainable infrastructure”, it wonders.
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