GMR Kamalanga Energy Limited - Centre for Financial Accountability

GMR Kamalanga Energy Limited is 1050 MW (with an additional 350 MW) coal-based thermal power project located at Kamalanga village, Odapada Block, Dhenkanal district, Odisha.

Financiers: The Infrastructure Development Finance Company (IDFC), one of India’s largest local financial institutions, has provided a rupee term loan of INR 50.5 billion for the project using money from the India Infrastructure Fund (IIF). International Finance Corporation (IFC) has an equity investment of $100 million (total target fund of the project is $ 1 billion) in India Infrastructure Fund (IIF).

Concerns regarding GMR Kamalanga Energy Limited- Thermal Power Project:

No Information available: There is no information regarding the environmental impact assessment or the social impact assessment publicly available. There is neither disclosure of who the affected people are, nor information about the risks and impacts of the project. Even after repeated complaints and requests with the government departments and the company, none of the documents were made available.
Pollution: There is no information available on the pollution emissions about the sub-project nor disclosure about the pollution mitigation plan. The area where the project is located in a zone already critically contaminated by industrial wastes going into the water streams. The fluorine content in water is very high. People in the area commonly suffer from fluorosis and joint pains. Industrial wastes also severely affect the animal health; skeletal fluorosis and diseases in sole can eventually make them incapable of walking. This sub-project worsens the pollution people are already suffering from.The cumulative impacts of the project along with the industries already functioning in the areas of Talcher, Angul, and Meramandali industrial belt, which could be adverse as identified by the Ministry of Environment and Forests, were neither disclosed nor presented for the public hearing. It only exacerbates the pollution caused by the existing operations of the following companies.
The project is located close to the Bhramani River and is the source of raw water for the project. Pollution of River Bhramani is well documented by now. The industrial waste and dust together pollute the river, which is the lifeline of the district, to a hazardous level. People on the banks use this water for domestic use, including cooking, and for livestock. Dependency on this water source for their basic needs causes several diseases to the people and livestock living around.
Community Health, Safety and Security have been compromised
Due to the dynamite blasting at the project site, a number of houses and even the nearby primary school building have developed cracks. With hundreds of students, the school still functions but in a damaged condition. Risk of building collapse is high, endangering lives of students, if dynamite blasting continues or if a natural disaster were to happen.Security guards, dogs are present within the compound if the project area. The alternate route has not been constructed and people need to use the project area to access the connecting road. Presence of massive dogs, a number of police posts with police who keeps checking unnecessarily is intimidating especially to children who use the same road to reach their school.

The company has been using groundwater for the project. There is still no official information if the company has been permitted to use groundwater for the project. Only water from River Bhramini has been allowed to be taken for the project under environmental clearance. A deep bore well (approximately 300 feet deep) is being used to pump groundwater, which results in a considerable drop of groundwater level in the area. The bore wells in the villages have very scarce water now, negatively affecting people’s water consumption.

The company has never demonstrated consideration for community health. They use agricultural land and farms which are adjacent to the project area as dumping ground for their garbage. It continues to ignore villagers’ requests to not dump their garbage.

Land Acquisition and Involuntary Resettlement: violations of mandatory requirements:
Bad consultation process: Public hearing is a prerequisite to any kind of land acquisition process in India was not conducted by the company before acquiring the land. A meeting held after repeated requests from people was later treated as a public hearing.Land acquisition and acquiring process is deeply flawed: The total area d acquired by GMR for the sub-project is 1200 acres. It is divided into 900 acres of private land and around 300 acres of government land. The private land is mostly agricultural had been well irrigated by the Rengali Canal System. This private land has affected almost 1,300 families in 4 villages, who have lost their land, crops, trees and other properties. They are now economically displaced; so are the agricultural labourers and sharecroppers. Roughly, thirty-five percent (35%) of the land belongs to the Dalits and twenty-five (25%) of the scheduled tribes. Most of the farmers are small cultivators and small sharecroppers. Of the 1200 acres of land acquired, 180 acres belonged to approximately 300 families who are members of the scheduled tribe, Kharia. “Scheduled Tribes” are indigenous peoples with the formal recognition by Indian Constitution and relevant national laws.

The company has acquired irrigated land and is now forcibly acquiring the remaining private land. Nine families went to the local court demanding appropriate compensation and job in the project in lieu of their land and livelihood dispossessions. In 2010, however, the District Court passed a judgment in favour of the company. They appealed to the High Court seeking to reverse the district court’s verdict. The case remains at the High Court.
Community Resources misused/destroyed: Almost 300 acres of government land acquired includes cremation ground, grazing land (100 acres), small forest (70-80 acres comprising of perennial and social forestry), 6 ponds and a perennial stream. The company assigned an alternate land for cremation ground while an alternative grazing land offered is 50 kilometres away from the sub-project site. It is practically impossible for people to take their cattle for grazing to the new site.Community resources like water (ponds, groundwater) have been misused by the company. Using ground water has not been allowed for industrial purposes in the area. Trees on the land acquired were destroyed. Last produce from the agricultural lands was not allowed to be harvested and was raised without informing the affected people.
Exacerbating poverty and economic displacement: Right compensation for losing both lands and the livelihood was not given to people affected (those who had lost their land). Still, a number of affected people have not received their compensation. Yet others have filed court cases against the company for undervaluing the cost of land that the company has acquired.

Harassment and intimidation: One of the major concerns has been that use of force and power to intimidate people. People were framed under false charges and false cases were registered. Women and men were randomly arrested and implicated in false cases. These people were falsely charged with attacking the GMR office at the project site. Women and men were harassed beaten up by police. People were tortured and beaten in prison before releasing them. Even after the release, threats and highhandedness of police have followed and still continue to create an atmosphere of fear amongst the villagers. The 46 people who were arrested ever since the time they were released have to go to the Police station every Monday to sign police registers. Most of them still unaware of the charges have been harassed and threatened and forced not to ask for their basic rights.

Grievances of the affected villagers:

Denied the affected people of their right to pass through the project area to get to their work or homestead.
Denied the affected people (whose land has been acquired) to work on the project, in spite of earlier promise by the company to provide them jobs. Residents of Durgapur village lost the land, received inadequate compensation and have no work at the project site.
Provided no information about livelihood restoration plan in spite of repeated requests and complaints.
Showed no compliance with established laws and procedures on land acquisition;
The pump house that is being built on the banks of River Bhramini for the project is being built on the land that belongs to the Kamalang High School. 14 acres of school land has been acquired. The company has acquired land for grazing, which had been earlier assigned to upper primary schools at the villages of Achalkut, Barasahi and Kaliatod.
The company has also identified few influential people from the company by giving them special privileges and money, who engineered conflict within the community.
Harassment and highhandedness of the police.

More on the case registered at IFC’s grievance redressal mechanism, the Office of the Compliance Advisor/Ombudsman: http://www.caoombudsman.org/cases/case_detail.aspx?id=165

Ombudsman Complaint Letter of Complaint from Odisha Chas Parivesh Surekhsa Parishad and the Delhi Forum, April 15, 2011.

Assessment Report(s): Complaint Regarding IFC’s Investment in the India Infrastructure Fund (#26237), February 2013 English Odiya

IFC Management Response to the CAO Assessment Report dated February 2013 regarding IFC’s India Infrastructure Fund in India (#26237), February 26, 2013

Close-out Report(s): CAO Conclusion Report: India Infrastructure Fund-01/Dhenkanal District, March 2013 English Odiya

Appraisal Report(s): CAO Appraisal for Compliance Investigation of IFC: India Infrastructure Fund, India – Case of Odisha Chas Parivesh Surekhsa Parishad and the Delhi Forum, June 26, 2013

Audit Report(s): Terms of Reference for Compliance Investigation of IFC investment in India Infrastructure Fund

CAO Compliance Investigation Report: India Infrastructure Fund, January 2016

English Odiya (Executive Summary) Odiya (Full Report)

IFC’s Response to CAO Compliance Investigation Report: India Infrastructure Fund

CAO Communique: India Infrastructure Fund, January 2016

Ombudsman accepts complaint:

Complaint Raises Serious Concerns with the Project Funded by IFC’s Financial Intermediary.

Three weeks after lodging a complaint, the Compliance Advisor Ombudsman (CAO), the independent audit body of the World Bank’s private sector lending arm, International Finance Corporation (IFC), deemed the case eligible for investigation. The complaint raises social and environmental concerns by affected communities over the GMR Kamalanga Energy Limited (GKEL) project, a 1050 MW (stepped up with an additional 350 MW) coal-based thermal power plant located at Kamalanga village, Dhenkanal district, in Odisha.

This is the first time a sub-project, financed under the financial intermediary (FI) lending instrument of the IFC, has come under formal inspection. This public scrutiny came at a time when about half of all IFC financing is now channelled through FIs. In India, some of the key FIs accessing IFC money are the Infrastructure Development Finance Corporation (IDFC), India Infrastructure Fund and Macquarie SBI Infrastructure Trust, which in turn invest their borrowing in large, yet risky energy and infrastructure projects.

A ‘concealed’ lending operation

The IFC has an equity investment of $100 million to India Infrastructure Fund (IIF), a financial intermediary (FI), which then sub-lends the money to various companies engaged in energy generation, oil and gas pipelines, and other power infrastructure. GKEL is one of the companies identified to have accessed this loan to construct a thermal power project in one of the most polluted regions.

The challenge with this lending arrangement is that project development is done in an opaque, almost invisible and unregulated manner, which precludes information disclosure to affected communities, and accountability. Safeguards, check and risk mitigation, and accountability that applies to IFC’s direct investment loans are not required in FI loans.

Pitfalls of FI lending

After months of independent research and connecting the dots, complainants discovered a can of worms that IFC and its client are concealing.

One, IFC does not want the public to know that its FI investment is located in a Revenue Block that the Ministry of the Environment classifies as 7th of the 88 most polluted hot spots in the country.[1] The project site is highly uninhabitable as industrial wastes that run into the water streams contain high deadly fluorine. In 2010, the Environmental Ministry issued a moratorium for constructing new projects in the area [2].

Had this been a direct IFC investment, safeguards, check and risk mitigation such as environmental impact assessment, pollution abatement and community health and safety, should have applied. But by concealing the basic information from the public, IFC is seen to be perpetuating the disasters now engulfing the agricultural and water resources of tribal, Dalit and poor farming communities.

Amulya Nayak, Convenor of the Odisha Chas Parivesh Surekhsa Parishad (Parishad) and complainant to CAO revealed: “The company never shows any regard for community health. It ignores villagers’ requests to not dump its garbage to adjacent agricultural lands. GKEL employs dynamite blasting at the project site, which causes cracks in nearby houses and primary school building. The project also extracts huge water volume and we witness in our bore wells the depleting water level, which is the main source of drinking, cooking and washing for thousands of families.” [Odisha Chas Parivesh Surekhsa Parishad (Odisha Agriculture and Environment Protection Council) is a grassroots organization, which deals with the social and environmental issues of people affected by industrial projects in the Dhenkanal and Angul districts of Odisha state. Parishad works on environmental sustainability, farmers’ and agricultural security and development project issues through peoples’ organizing and public education. Since 2007, Parishad has been working with the people affected by the GMR project].

Two, the IFC holds back facts about the economic displacement resulting from this FI loan. Although public hearing is legally mandated for any kind of land acquisition process in India, the company did not comply with it prior to constructing the plant. GKEL acquired 1200 acres of mostly prime agricultural land irrigated by the Rengali Canal System.

The 900 acres private land acquired used to feed and employ nearly 1,300 families in 4 villages. With no livelihood restoration plan in place and with many affect families getting no proper land compensation until today, hundreds have lost their land, crops, trees and other properties. Those economically displaced include the agricultural labourers and sharecroppers, the Khaira tribe and the Dalits.

The company, in collusion with the administration, uses force and other tactics to intimidate people. Women and men are randomly arrested and implicated in false cases. Some were beaten, tortured and intimidated by the police before their release. A climate of fear now engulfs the community as Police continue with its random arrest, threats and high-handedness.

Risks are risks

The clear and present dangers uncovered demonstrate the major flaws of IFC’s assumption that by protecting its client companies from public scrutiny and transferring responsibility to borrowers do their due diligence, development objectives will be met.

In fact, isolating the project information from public eye creates more havoc than the solution, because there are no strong disclosure and safeguards standards that the company is bound to follow. It then spares the company from any accountability and engenders more livelihood, precipitates insecurities and violence.

The complaint signifies that there could possibly be similar risks in other FI sub-projects in India, which now constitutes about a third of its current and proposed lending portfolio. Risks indirect investments are no different from risks in FI loans.

While some of the previous experiences of communities in India with CAO have not been promising, we expect the CAO to be impartial and forthright with the investigations and the conclusion in this case. This complaint pertains to the financing of the project. We will continue with our struggle with the company and the State on all other issues, as in the past.

[1] Comprehensive Environmental Assessment of Industrial Clusters (2009) Central Pollution Control Board Pg 24

[2] Office Memorandum J-110113/5/2010-IA.II(I), Ministry of Environment and Forests; dated January 13, 2010