A STORY OF VIOLATIONS,

NON-COMPLIANCE &
IMPUNITY
OVERVIEW
The Tata Mundra Ultra Mega Power Project India is part of an ambitious plan, which saw the
building of several coal-based thermal power stations to meet India’s energy needs. Located
on the western coast of India, in Gujarat, spanning 72 kilometres covering 10 coastal
settlements, it is strategically located near the Mundra Port and within the Special Economic
Zone. This coast is also home to fishing communities who have lived there for generations and
who reside on the coast for almost nine months out of every year.

Coastal Gujarat Power Limited (CGPL), 100% owned by Tata Power Limited, will build, own
and operate a 4,000 MW (5 units of 800 MW each) ultra-mega supercritical technology-based
power plant at the port city of Mundra in the Kutch district of Gujarat, India (the project).
The plant was fully operational in 2013.

The total project

p cost is estimated at about US$4.14 billion. IFC invested $450 million of its own
capital in this project, which IFC has classified as a category A project, signifying that IFC
believes there are potentially significant adverse social and environmental impacts that may be
diverse or irreversible.

FINANCIERS
A consortium of Banks including multilateral agencies and Exim Banks invests in this project
which costs the US $4.14billion. Financing comprises of the equity of INR 42.50 billion,
External Commercial Borrowings (ECB) of up to USD 1.8 billion and Rupee Loans of up to INR
55.50 billion. The ECBs include the International Finance Corporation, the Export Import Bank
of Korea, Korea Export Insurance Corporation, the Asian Development Bank and BNP Paribas.
National financial institutions (FIs) involved are SBI, the India Infrastructure Finance
Company Ltd., Housing and Urban Development Corporation Ltd., Oriental Bank of
Commerce, Vijaya Bank, State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank
Comme
of Travancore and State Bank of Indore.
Today, the project has been operational for over five years. Damage to the marine environment
has been immense and has resulted in drastic decline in fish catch; hot water discharges into the
sea from the plant’s outfall channel and the destruction of mangroves which has impacted the
marine environment. The project has displaced people, snatched their livelihoods and failed to
carry out any genuine consultation. Making matters worse, the plant is operating at a financial
loss following rises in the price of imported coal. Now the private company is looking to sell the
plant and owing to the PPP set-up, the government will take most of the liability.

COMPLIANCE ADVISOR OMBUDSMAN [(CAO)

In 2011 a complaint was filed by Machimar Adhikar Sangharsh Sangathan (MASS – Association
for the Struggle for Fishworkers’ Rights) and affected community to CAO, the accountability
mechanism of IFC regarding the environmental and social impacts of the Tata Mundra Project.
Subsequent to the complaint, an audit was done which reinforced the serious environmental and
social impacts of the project. The major findings of the CAO audit were :

w IFC failed to ensure that its client’s (Tata) Environmental and Social (E&S) assessments
adequately considered the risks and impacts of the project on these fisher people.
w IFC paid inadequate attention to the requirement of biodiversity conservation.
w There were serious lapses in IFC’s review and supervision of the impacts of the project on
the airshed and marine environment.
w IFC had not ensured that its client correctly applied the World Bank’s Thermal Power
Guidelines (1998) in that the project airshed has not been defined as a degraded airshed.
w 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 (of IFC).
w IFC has not assured itself that the plant’s seawater cooling system will comply with
applicable IFC Environmental, Health and Safety (EHS) Guidelines.
w IFC’s E&S review paid inadequate attention to ensuring that the project’s risks and impacts
were “analyzed in the context of [its] area of influence,” as required by Performance Standard 1
(of IFC), including “areas potentially impacted by cumulative impacts…from project-related
developments that are realistically defined at the time the E&S assessment is undertaken.”
w IFC should have advised its client that third-party E&S risk emerging from the project’s
proximity and relationship with Mundra Port and Special Economic Zone needed to be better
assessed, with mitigation measures developed.
IFC’S (NON)RESPONSE
The response of the IFC management to these findings was rebutting all the findings of CAO and
going out of the way to defend its client, CGPL and its parent company, Tata Power and put it's
own credibility and the credibility of its own accountability mechanism at risk. The action plan
devised by the IFC, nowhere reflected the seriousness of the CAO audit report and was limited to
bandage work. The action plan merely commissioning of studies on marine impact, ambient air
quality, health status and need survey, household level socio-economic survey of 21
villages/hamlets including seasonal settlements in CGPL’s influence area and undertaking the
environment and social impact assessment for the expansion project. Today, seven years after the
envi
initiation of the process the action plan has yet not been properly implemented.

CAO’S SECOND MONITORING REPORT

CAO published its second monitoring report of the action plan in February, 2017. CAO in its
second monitoring report has categorically mentioned that it remains concerned that the actions
reported by IFC do not suffice to address the findings of the audit. In addition, the monitoring
report that there is an outstanding need for a rapid, participatory and expressly remedial
approach to assessing and addressing project impacts raised by the complainants. CAO has kept
this audit open for monitoring. The next monitoring report was supposed to be out not later than
January 2018 but, has not come out yet. Significantly,

On Consultations: CAO was not able to establish whether the action plan or the road map had
been prepared in consultation with affected communities, whether the road map had been
disclosed by CGPL, or whether the actions were being implemented impacts on fisher people
seasonally resident on the bunder, and to develop remedial action plans to address any impacts
identified.

On Livelihood issues: CAO during previous monitoring periods had said that in the absence of
reliable baseline data, a participatory approach to identifying and addressing impacts on
vulnerable communities is required. CAO expected that IFC will work with its client to carry out
a participatory assessment of project impacts on fisher people seasonally resident on the bunder,
and to develop remedial action plans to address any impacts identified.

On Air quality: CAO expressed concerns that the monitoring is undertaken is inadequate in terms
of technique, quality and reporting. Further, IFC supervision has not identified these
inadequacies, CAO monitoring report said.
On Marine impact assessment: CAO noted that the National Institute of Oceanography’s thermal
dispersion study does not address CAO’s findings regarding gaps in IFC’s review of the original
marine impact assessment nor does it address the requirement for establishment of a
“scientifically defined mixing zone” for the outfall water.

In its first monitoring report which was released in January 2015, CAO noted 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. But, the second
monitoring report clearly shows a lack of sense of urgency in the completion of the action plan.
The situation after the second monitoring report is still focusing on pending studies that should
have been completed before the project was even built in the first place. It is also the first time
ever that the CAO is keeping the case open after five years of its first report.

SECOND COMPLAINT WITH CAO

In April 2016, a complaint was filed with CAO by local residents of Tragadi village and
members of the Tragadi Sea Shore Development Committee raising concerns about the outfall
channel connected to the Tata Mundra project. The complaint raised concerns about the impacts
of the channel on the environment and local fishermen’s livelihoods, including limited access to
water resources, coastal erosion, and damage to fish stocks and natural habitats. The
complainants also raised issues regarding the use of security forces and their interaction with
local populations, as well as unfulfilled social and environmental commitments. As the project
became operational

These complainants from Tragadi village was in favour of the power plant initially for they were
receiving some monetory benefits from the company. This was particularly when the CAO
process was on and this village was showcased to establish that everything is fine with the
project and people around are happy and content with the project. Post CAO, and staring at a
huge financial loss, the company withdrew each and every service it extended to the village,
leaving the people high and dry, making it tough for them to meet their daily needs with the
meagre fish catch.

The complaint was accepted by CAO. CAO identified concerns regarding environmental and
social outcomes that would ordinarily merit a CAO compliance investigation but decided to
merge the compliance of this case with the previous complaint and consider the issues raised in
this complaint as part of its on going monitoring of IFC’s response to the audit findings of the
previous case.
COMPLIANCE REVIEW PANEL (CRP)
A complaint was filed with CRP regarding the environmental and social impacts of Tata
Mundra Project in December 2013 demanding a compliance review of the project. The issues
raised in the complaint were regarding failure to adequately disclose information and conduct
consultations; loss of livelihood of fisherfolk; access restrictions to fishing grounds; coal dust
and fly ash pollution and its impact; ambient air quality; ground water impacts; horticulture
impacts and labour issues and human stress. The Compliance review report released in March
2015 confirmed the violations of ADB’s environmental and social safegaurds, action plan was
formulated. The CRP
CR found several noncompliance areas with ADB operational policies and
procedures, which resulted in harm. The single biggest area of concern mentioned the failure
to conduct adequate and comprehensive consultations with fisherfolk early in the project
design phase and to consider their views to assess project impacts. This failure had numerous
consequences. Despite this report, the remedial action plan that was devised was done only in
consultation with the company and as expected only focuses on conducting studies and
limited consultation with affected fishworkers for a livelihood improvement plan. The second
monitoring report of the remedial action plan was published it just went on to reconfirm that
much had not changed on the ground.

The second monitoring report of the remedial action plan was just a brutal reminder of the
lack of seriousness ADB has shown to the findings of CRP’s compliance report. The remedial
action plan has been made fait accompli on the people, and cosmetic remedial actions are
being focused merely to claim that the project is compliant with ADB’s operational policies.
The very fact that the second report mentions that, “CRP finds that since the first monitoring
report, limited progress has been made in disclosing information and conducting
consultations” goes on to show the seriousness that has been associated with the process. The
findings include:

On Consultations: Consultations with the affected community are a prerequisite for any social
and environmental assessment of a project. The remedial action plan mentions, as part of this
consultative process, the affected foot fisherfolk will be identified; information on their
livelihoods will be collected, and impacts will be assessed; and measures to address livelihood
impacts will be established in a Livelihood Improvement Plan, as detailed in this Action Plan.
CRP’s final report on compliance came out in 2015 since then, ADB has not even been able to
monitor the most primary prerequisite of conducting a well informed public consultation. This
situation is nothing less than a travesty of justice that despite not following the basic requisites
of consultation a project was constructed, is operational now.
On Marine Impacts: Even the superficial remedial actions have still not been fully complied. The
NIO (National Institute of Oceanography) study conducted on the impact on marine biology due
to the project (about which CRP had expressed its reservations regarding incorrect methodology)
has still not been completed. CGPL outrightly has rejected any further action on the report and
considers the NIO study conclusive and showing enough evidence that there are no impacts on
marine biology.

On identifying the affected and livelihood concerns: The report also, mentions that “the 24 pagadiyas
(on foot fishing) have been identified as a part of the NIO study and the actually affected
pagadiyas could me much larger than assumed in the study”. To add insult to injury, it also adds
that the Livelihood Improvement Plan does not provide for a long-term development support
activity which would enable pagadiyas to earn incomes comparable to income foregone from
lower yields of pagadiya fishing resulting from impacts of the discharge channel. This just
reflects the apathetic attitude of CGPL and ADB toward the affected people. On one hand, they
have not even identified all affected
a people in the last 5 years and on top of that, the ones
identified have also not been rehabilitated.

On Air Quality: Moreover, even on issues of ambient air quality impact studies, the CRP report
states that the quality of data collected is of poor quality. It is of the view that such quantitative
correlation impact assessment carried out with data where there are large data gaps, is unlikely
to produce reliable results. The studies have still not been translated and shared with
communities. Even with the Baseline Health Profile with Respect to Air Quality in Airshed of the
CGPL Power Plant, the CRP notes that they have expressed concern about the insufficient
sample size, particularly with respect to respiratory diseases of children.

Recentl the third monitoring report was released on 8th September 2018. The report clearly
Recently,
states that since, the completion of the second annual monitoring report, very limited progress
has been made in the implementation of the action plan. This just goes on to establish the
seriousness associated to the process when people on ground continue to suffer the disastrous
impacts of the project.
LEGAL TROUBLES FOR TATA MUNDRA UMPP
1. Supreme Court set aside tribunals ruling that allowed the power producer to charge
compensatory tariff from consumers:

The Tata Mundra project was set to run on coal from Indonesia, but in 2010, the Indonesian
government decreed that coal exports could be done only at prices linked to international rates. In
spite of this, they went ahead, with the confidence that they would be able to rework the tariff
under the PPA with the public distribution companies. Tata Power Company Limited and Adani
Power then approached the Central Electricity Regulatory Commission (CERC) that ruled in 2013
that both companies could claim a higher tariff to compensate for an increase in coal prices . The
Appellate Tribunal for Electricity (APTEL) upheld CERC’s decision in 2016.

Several state-owned power distribution companies then challenged the decision in the Supreme
Sup
Court of India. The argument was that power producers cannot be allowed to charge higher
compensatory tariffs for changes on import prices of coal, a risk inherent to the business. The
two-judge bench set aside the initial rulings. The Supreme Court in April 2017, ruled that power
companies couldn’t raise tariffs if fuel becomes costlier due to changes in laws overseas, setting
aside rulings by regulators.

2. With Tata Power reporting a loss of a net loss of Rs 1,719 crore (INR 17.19 bn) in the fiscal year
2017, the company had written to the Union Government proposing to sell 51 per cent equity of
the ailing asset Tata Mundra UMPP, for a nominal fee of 1 rupee. Machimar Adhikar Sangharsh
Sangathan (MASS) from the very inception of this project has been stating that the project is
neither socially and environmentally viable but also makes no economic sense. The project ever
since it's operations began has been loss generating, due to poor planning, unrealistic projection
and flouting of rules. The Supreme Court declined their plea for tariff revision. If the colossal
social and environmental
envi impacts of this project, and particularly the impacts on the livelihood
loss would have been properly assessed, it would have pointed towards the unavailability of this
project.

3. Recently, the Gujarat state government has formed a High Powered Committee that will offer
solutions for imported coal-fired power plants that are underutilized due to viability issues. The
committee is chaired by former Supreme Court judge Justice R. K. Agrawal. Apart from him,
former Reserve Bank of India Deputy Governor S. S. Mundra and former Central Electricity
Regulatory Commission Chairman Pramod Deo are also a part of the committee, which will be
In a recent news, Tata Power Co. Ltd stated that they are working to revive its troubled 4,000
megawatts (MW) Mundra power plant and dropping previous plan to sell 51% equity of the plant
it for one rupee . It was stated by the CEO of Tata Power that they were taking initiatives to
reduce operational costs by using a higher percentage of blended coal in the plant (mixing in coal
of lower calorific value with higher quality coal). In case this is being done, there are serious
concerns that arise as to whether renewed permissions and environmental clearance have been
taken for this. Also, using a lower calorific value coal also raises the question on the ultra critical
technology.
technolog

UPDATE ON CHALLENGING IFC AT US SUPREME COURT

Fishermen adversely affected by the Mundra project; farmers from Navinal village who are
affected by the increasing salinity of the groundwater and farmland damaged by the ash and dust
from the project, Machimar Adhikar Sangharsh Sangathan (Association for the Struggle for
Fisherworkers’ Rights) and the Navinal Panchayat (village), a local government entity also
affected by the Mundra Project represented by EarthRights International (ERI) filed suit against
the International Finance Corporation in federal court in Washington, D.C..

The contention being that IFC caused the loss of their livelihoods, destroyed
dest their lands and
water and created threats to their health by funding the Tata Mundra coal-fired power plant in
Gujarat, India. The plea was rejected by the Court on the basis that IFC, the private lending arm
of the World Bank Group, has absolute immunity and thus cannot be sued in the United States.

An appeal was filed in the court of Appeals for the District of Columbia Circuit in June 2017, a
three-judge panel of, in the case Budha Ismail Jam v. IFC, had ruled that the International Finance
Corporation (IFC), the private-lending arm of the World Bank Group, could not be sued for its
role in the controversial Tata Mundra coal-fired power plant, which has devastated fishing and
farming communities in Gujarat.

But, one the positive notes of the judgement was Justice Nina Pillard’s
Pilla observations. She noted
that there is an inherent bias in the judgement towards IFC and the complainants should
approach the higher Court to seek justice. This kept a window open for the community to appeal
to the higher court.
In January 2018 an appeal was filed by petitioners to the Supreme Court of the United States
challenging the immunity to IFC. The Supreme Court agreed to consider reviving a lawsuit.
The Supreme Court stated that, it would decide whether the IFC enjoyed immunity under the
1945 International Organisations Immunity Act. Strengthening the arms of the people, U.S.
Government urged the Supreme Court to reverse a lower court decision holding that
international organizations like the World Bank Group are entitled to “absolute immunity”
from lawsuits in U.S. Courts. The final hearing is scheduled for October 31, 2018.

CURRENT SITUATION
It has been almost a decade when the construction
const of the Mundra Power Project started and
has been fully operational since 2013. The one thing that has been well established time and
again through investigations of independent fact-finding teams, accountability mechanisms
of financial institutions is the fact that the project has irreversibly damaged the marine
ecology resulting in the destruction of livelihoods of thousands of fish workers who used to
fish on the harbours which are now impacted by the project. From the violation of national
laws to the failure of to apply the environmental and social safeguards, Multilateral
Development Banks (MDBs) funding the project, p the company and the financial institutions
have shown complete indifference to the plight of the affected community. The MDBs have
gone ahead and rejected the findings of their own accountability mechanisms.

This has led to a situation of complete inaction on the part of company and financiers leaving
the affected community in a worse situation today. There is no accountability on the part of
the financial institutions who fund such disastrous projects which are worsened by the fact
they enjoy absolute immunity in countries they operate. This absolute immunity has
emboldened these institutions to undermine accountability and responsibility for the kind of
projects they funds and also indifferent to the impact that these projects have on the ground.

In supporting the fishworkers of Mundra to hold IFC accountable for the destruction
dest they
have caused by funding the Mundra power project and by challenging the immunity enjoyed
by IFC in the United States, ERI has given a hope to communities across the globe who are
fighting the destructive development funded by MDBs. The fact that the case has reached the
Supreme Court of United States is a testimony of community’s and ERI’s commitment and
perseverance. The community and ERI need our support and solidarity as they prepare for
the final hearing end of October.
RESOURCES
Complaint, audit report and monitoring reports of IFC’s Compliance Advisor
Ombudsman: https://tinyurl.com/o5mnxcq

Complaint, audit report and monitoring reports of ADB’s Compliance Review Panel:
https://tinyurl.com/y7m7ua5a

Documents related to the case challenging immunity of IFC

https://tinyurl.com/y9fr48tv

More about Tata Mundra: https://tinyurl.com/yao966hj

Images: https://tinyurl.com/y8fj9oks