World Bank loan to India leads to water-polluting projects


The report notes that the World Bank is a generation back after withdrawing large loans for hydropower projects with indirect funding.

The Sardar Sarovar Dam on the Indian Narmada River has been a source of civil conflict for decades.

By Keith Schneider

Circle of blue

In the pantheon of public campaigns against large hydropower projects worldwide, the fight against the Sardar Sarovar Dam in India belongs in the hall of fame. The hydropower and water supply project, proposed by the Indian government in the late 1970s and funded in part by a US $ 450 million World Bank loan, envisaged the construction of an 80-meter-high concrete curtain over the Narmada River. India’s fifth longest.

The dam’s design was high enough to flood 37,000 acres of farmland. It was robust enough to install 1,450 megawatts of electricity generating capacity. And it was bold enough to force tens of thousands of subsistence farmers and an international coalition of human rights and environmental groups to fight the government against the confiscation of private land. The resistance was so strong that the World Bank withdrew its support in 1993, one of the first cases of public pressure to change the lending practices of a major international development bank.

A new study of the World Bank’s lending practices in India, released this week by Inclusive Development International and four other stakeholders, concludes that while the bank has abandoned the Sardar Sarovar project, it has set up a separate World Bank entity called the International Finance Corporation ( IFC) indirectly funded two recent dam projects on the Narmada River that damaged the environment and drove small farmers off the land. The indirect lending strategy is not just limited to India, the report concludes.

“IFC’s investments in India’s financial sector are part of a global pattern,” the research groups said in a statement. “Over the past decade, IFC has increasingly outsourced its development funds to third parties in the financial sector such as banks, private equity funds and insurance companies. After years of lending mainly to companies and projects, this represents a fundamental change in the operations of the member of the World Bank Group. However, as this portfolio has grown, the IFC has always been unwilling to take responsibility for the negative effects. “

Pressure mounts on lenders

The report, Fund India’s Dirty Dozen, is the latest investigation into development bank lending practices and their ruinous consequences for water, air, land, climate and communities around the world. In November, research by Columbia University researchers found that the U.S. Export-Import Bank, a loan division of the federal government, corporations, and overseas governments, has provided nearly $ 34 billion in low-interest loans and guarantees for construction and construction since 2009 Expansion has granted and promoting fossil fuel projects around the world. Investigators found that the projects’ carbon emissions are so large that they undo the emissions reductions achieved during the Obama administration’s years.

An investigation by the Rainforest Action Network earlier this month, the Dutch consulting company Profundo, and the Indonesian NGO The TuK found that large investment banks, including Credit Suisse and Bank of America, poured out $ 43 billion in loans and underwriting to companies related to deforestation and forest fires in Southeast Asia. More than a third of this amount comes from American, European and Japanese banks that have developed sustainability promises to protect the rainforest.

Last summer Food and Water Watch identified the 17 banks that borrowed most of the money to fund the $ 3.8 billion Dakota Access Pipeline in North Dakota. Investigations of this kind, which are intended to shine a light on lenders involved in resource-damaging projects, are changing investment behavior.

The Food and Water Watch releases prompted three lenders to sell their holdings in Energy Transfer Partners, the main manager of the pipeline. At the end of the year, the city of Seattle began considering a proposal to withdraw the $ 3 billion it holds in accounts with Wells Fargo, a bank that provided a $ 125 million loan to build the pipeline .

Arabella Advisors said in a report this month that the movement of banks and investors to withdraw their investments from fossil fuel companies has accelerated and broadened. The institutions committed to divesting carbon-based projects currently hold $ 5 trillion in assets.

World Bank is the focus of interest

Much of the interest in lending practices is directed towards the World Bank, the second largest international development bank. Fund India’s Dirty Dozen is the second report in Inclusive Development’s Outsourcing development Project to document the environmental and social impact of World Bank loans. The first report, published in October, found that toohe World Bank-influenced loans supported 91 very large, environmentally harmful onesand politically divisive energy, mining and agriculture projects around the world.

In their most recent research, Inclusive Development and its four associates found that the World Bank’s International Finance Corporation invested $ 520 million in IDFC, an Indian infrastructure finance bank, and five Indian commercial banks from 2005 to 2014: ICICI, HDFC, Kotak Mahindra, Yes and axis.

As recipients of IFC funds, According to Inclusive Development, “the six Indian banks are contractually bound to apply the performance standards, the rules designed to ensure that IFC investments do not cause unlimited harm to people or the environment. The banks should essentially act as mini IFCs and encourage socially responsible and environmentally sustainable investments. This is one of the IFC’s main justifications for lending to financial intermediaries: that it helps raise the bar for environmental, social and risk management across the financial sector. “

However, the bar for environmental performance has not been raised. Investigators found that the IFC loans leveraged tens of billions of dollars in spending by 12 industrial companies that Inclusive Development labeled “socially irresponsible”. These companies built new mines, power plants, dams and other infrastructure in and outside India that damaged water resources, forests and communities, the North Carolina-based group said. The study identified 56 other Indian companies or projects “linked to serious adverse environmental impacts or abusive human rights practices and funded by IFC intermediaries”.

“These results are not just a moral outrage,” said David Pred, managing director of Inclusive Development. “You are proof that the IFC’s system of environmental and social risk management in its $ 50 billion portfolio of financial institutions is failing.”

In response to the results of Inclusive Development, IFC spokesman Frederick Jones made this statement to Circle of Blue: “IFC is committed to working with financial intermediaries in India to help the private sector create opportunities by creating jobs, income increased and reached more than 100 million people who still do not have sustainable access to basic financial services. We are reviewing the IDI report and will work with our customers to address the concerns raised in related projects involving our environmental and social standards. ”

Two other large dams on the Narmada River

Projects along the Narmada River, which flows east to west from its headwaters in Madhya Pradesh, received special attention in the study. After World War II, the Indian government proposed converting the free flowing river into a mammoth water and electricity system to supply three Indian states with electricity and 17.8 million acres of irrigated farmland with fresh water. The heart of the project was the Sardar Sarovar Dam.

The sheer size of the dam and the new era of water and electricity it was to herald terrified tens of thousands of smallholders and their families, leading to one of the most passionate environmental and human rights campaigns in modern Indian history. Large demonstrations against the dam after construction began in the late 1980s attracted international attention not only because of its size and energy, but also because of the great pressure it put on the World Bank to withdraw its loans.

In 1993 the bank canceled its financial commitment to the Sardar Sarovar Dam. But the World Bank has not given up on the Narmada River.

Indian banks, backed by International Finance Corporation, have invested $ 3.19 billion to finance the construction of hydropower projects in India. Two of them were built on the Narmada. In 2007, the 520 megawatt Omkareshwar dam was completed. It submerged about 30 villages, displaced about 50,000 people, and flooded thousands of acres of natural forests. In 2015, Omkareshwar’s water level rose two meters, flooding more land and homes.

Upstream from Omkareshwar, India’s dam construction company, NHPC, built the Indira Sagar Dam. The company “instituted a reign of terror by using special armed forces to remove people from their homes. The company flooded villages without notice, forcing residents to flee for their lives, ”said Inclusive Development.


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