Eminent Indian panel finds Tata Mundra poses high social, environmental, economic risks

Published by MAC on 2012-07-11
Source: Bank Informaton Centre

Tata Mundra: Eminent Panel finds serious social and environmental violations

Recommends immediate suspension of financing and calls for full project review

Bank Informaton Centre Media Release

New Delhi

3 July 2012

New Delhi: "The (Tata Mundra Ultra Mega) project has disproportionately high social, environmental, and economic costs. The company, the licensing agencies of the Government of Gujarat and India, and the national and international financial institutions have either ignored or willfully neglected the high social and environmental costs and did little to mitigate them" a report released by an independent fact finding team said here today.

The report adds: "The Social Impact Assessment and Environmental Impact Assessment are misleading and erroneous, having excluded a large number of communities whose loss of livelihood was overlooked. Cumulative impact studies required to understand the overall impacts were not done. The governments and the IFIs are equally complicit in the violations by the company."

Coming at a time when India is facing its worst coal crisis with rising prices and supply shortage, the report signifies yet another body blow to the 4000 MW Tata Mundra project.

The panel recommends that "International Financial Institutions should undertake an immediate review of the project to examine adherence of their safeguard polices; until such a review is done, their financial assistance to the project should be suspended." Among the banks in question are the International Finance Corporation (IFC) and the Asian Development Bank (ADB).

The report was authored by a team led by retired Chief Justice of Sikkim, S N Bhargava. Other members include Dr. Varadarajan Sampath (former Ministry of Earth Sciences Advisor of the Government of India); distinguished journalist and author Praful Bidwai; Jarjum Ete (former Chairperson of Commission for Women in Arunachal Pradesh), and Soumya Dutta (National Convener of the Bharat Jan Vigyan Jatha). The team visited Mundra in April and May 2012, met senior company staff including its CEO Mr. KK Sharma, held meetings with affected communities and perused voluminous documents to inform its findings.

The fact finding was carried out at the request of communities impacted by the Tata Mundra Ultra Mega Power Project (UMPP). The report found that the concerns communities raised about India's first UMPP are complex, disturbing, and require comprehensive investigation, which should cover not just environmental and social harms but also economic impacts and destruction of livelihoods. The reported policy violations, including breaches of applicable IFC Performance Standards and ADB Safeguards - a key project financier - are significant and can be irreversible, warranting an independent and objective probe.

Located in an ecologically-fragile area of Kutch and sited within the vicinity of the Mundra Special Economic Zone, the Tata UMPP is one of several large-scale energy projects within a 70-km stretch that are projected to produce a total of 22,000 MW of power.

"The findings of this report was revealing to us. What was most shocking was that the licensing agencies, the concerned Ministries at the Center and state, and the international financial institutions failed to monitor the project closely and did almost nothing to prevent the enormous damage it is causing to flora and fauna, and the people. We hope the concerned authorities will take appropriate actions immediately" said Justice Bhargava who headed the fact-finding team.

The US$ 4 billion Tata plant is financed by a consortium of banks including the IFC, ADB, the Export-Import Bank of Korea, and the Korea Export Insurance Corporation. Local financiers include BNP Paribas and Indian sources such as the State Bank of India, 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 of Travancore, and the State Bank of Indore.

What the panel finds

1. The Environmental and Social Impact Assessments filed by the company were deficient. The company failed to account for significant social, economic, and environmental damages caused by the project in its EIA and SIA, and even neglected to identify certain communities as project affected.

2. The IFC and ADB failed to require the company to conduct a cumulative impact study. The project, sited in the vicinity of several other large-scale polluting industries, will have significant cumulative impacts on the local population and environment, yet no cumulative impact assessment has been performed.

3. The IFC and ADB failed to require the company to conduct and/or disclose chemical pollution studies. The fact-finding team confirmed high chemical content and increasing acidity in the outlet water from the project, which is detrimental to fish eggs and larvae. This harm warrants further, in-depth investigation.

4. The IFC and ADB failed to require the company to conduct adequate, meaningful, and informed consultations with the affected communities. The communities repeatedly complained about the lack of consultation before the project started and failure to share key information about the impacts and mitigation plans.

5. The project violated its environmental clearance by destroying inland ecosystems. Large stretches of mangroves, dry-land forests, and biodiversity-rich creeks were destroyed for the construction of the inlet and outfall channels and other associated activities of the project. The team could not find the required forest clearance for this destruction, which the company refuses to own up to.

6. The project violated its environmental clearance by adopting a one-through cooling system. The project was permitted for a closed-cycle cooling system, but installed a cheaper, more environmentally-destructive one-through cooling system.

7. The project blocked access to fishing and grazing grounds. Access roads for the fisher-folk and the pastoralists to fishing and grazing grounds have either been blocked or diverted, forcing villagers to take an unusually long route and pay more for their transport, and resulting in considerable delay for women returning from the markets after selling fish.

8. The project has caused drastic reduction in fish catches, destroying the livelihoods of local fisher-folk. Available fish-catch data indicate considerable reduction in fish catch in the past three years since the adjacent Adani plant was commissioned, which has been exacerbated by the partial commissioning of Tata Mundra. Communities fear total loss of aquatic wealth when the project is fully operational, along with their livelihoods as fisher-folk-a clear violation of IFC policies.

9. The project failed to thoroughly examine or adequately address the health and environmental impacts of ash contamination from the project. The partially-operational plant is already contaminating drying fish, salt, and animal fodder in the area, causing significant health concerns. Salt contamination has been demonstrated to cause an increase of diseases and abnormal abortions in cattle. Further, heavy metals contained in toxic coal ash-such as cadmium, lead, selenium, and mercury-are known to bio-accumulate in animal and human bodies.

10. The project ignored the potential impacts of radioactivity from the coal ash pond. Independent readings taken as far as 400 meters away from the ash pond recorded radiation levels that were double those found in the villages. While this reading is about half the permissible limit, the project is only one-fifth operational, with four more units planned. None of the impact assessments have addressed this.

11. The company significantly underestimated its bid, resulting in cost overruns and increased energy tariffs for customers. In its bid for the Mundra UMPP, Tata Power significantly underestimated the material cost of plant construction and the operational cost of fuel-namely imported coal-resulting in significant cost overruns. With the project only one-fifth completed, the company is already seeking to be released from its negotiated Power Purchase Agreement with five states, asking for an increase of the agreed-upon electricity tariff by 35% for average individual consumers.

What the panel recommends

The company is urged to compute and monetize all the social and environmental costs and add these to the project costs; compensate all local people for their livelihood losses; create a fund for the restoration of mangroves destroyed; restore people's access to fishing and grazing grounds, and to salt-pans unconditionally; and employ all possible pollution control measures on a war footing, to save this fragile zone from further damage.

The Governments of India and Gujarat are urged to put a moratorium on permission to any more industry/power plants in Mundra/Kutch; issue show cause notice to the CGPL/Tata Mundra for multiple violations of clearance conditions; form independent expert committee(s) to thoroughly investigate all pollution, contamination, and radioactivity hazards within a reasonable time frame; and direct all national banks/financial institutions to adopt and enforce mandatory social and environmental safeguard policies at a reasonable timeframe.

The international financial institutions are urged to undertake an immediate review of the project to examine adherence of their safeguard polices; suspend financial assistance until such a review is done; putting in place an independent monitoring mechanism to ensure strict compliance of their safeguard policies. Meanwhile, the national financial institutions should adopt social and environmental policies and implement them scrupulously in this project. The implementation should be monitored by independent agencies, which include the affected people's representatives.

For more information and interviews with the Fact Finding team contact:
Soumya Dutta
Cell: +91.9213763756