World Bank-funded energy project in India fails to meet agreed social standards - Press release

World Bank-funded energy project in India fails to meet agreed social standards - Press release

A recent independent NGO report on the World Bank-funded Lanco Power Station project in Chhattisgarh, India shows serious negative consequences for local communities, including loss of land, polluted rivers and receding water levels. The project is funded by the private sector arm of the World Bank, the International Finance Corporation (IFC), which adopted in 2006 a new set of social and environmental safeguards, which the report finds have not been properly applied.

The project was given a 'Category A' rating by the IFC due to potential significant adverse social or environmental impacts. In four affected villages where people depend on small-scale agriculture as the main basis of their livelihoods, local families lost a third of their land to the project.

The first phase of land acquisition in 2005 was deeply flawed. It occurred without sufficient consultation or provision of appropriate information to the affected peoples. Despite this the IFC approved an $8 million equity Lanco investment in June 2007 and in May 2008 approved a further $100 million investment for a long-term IFC-Lanco partnership that will impact on communities across India.

The 'Category A' rating, and the fact that the project impacts on indigenous peoples, imposes strict responsibilities on both Lanco and the IFC. This report found serious failures to adhere to these.

Through discussions with affected communities, the study found that Lanco failed to provide adequate information to local communities and made promises about jobs and compensation that the communities say have not been delivered; the company published inaccurate social and environmental assessments two years after the start of construction. The flawed social assessment stated, for example, that indigenous adivasis in the local villages have no spiritual or cultural ties to the land. The report shows that this is categorically wrong as several adivasi groups and households maintain ceremonial relations with land acquired for the project.

The IFC failed to adequately verify the existence of community support by accepting 'No Objection' certificates (a measure of consent in the villages) that were obtained when only 10-15% of the villages' voting population were present. It also failed to apply the special requirements triggered when projects affect the traditional or customary lands of indigenous peoples. This raises serious questions about when and how the IFC standards are triggered.

Despite the concerns described in this study, Lanco is currently identifying land to be acquired as part of a further 600MW expansion project.

Devjit Nandi, one of the authors of the report, said:

'Very little has changed since the field research was conducted for this report earlier in 2008. Lanco has cheated by promising many things to the local communities that they have failed to deliver. The IFC is hand in hand with Lanco. They have visited, but it is not clear if they are really listening to the communities.

During the recent election in Chhattisgarh, neither of the political parties addressed the violations of peoples' rights by the Factory. The desperation of people, particularly of youths, is high. Villagers have started to bribe the local administration so that they can gain employment in the factory, so affected people have lost out twice. First they lost their livelihoods through the acquisition of land and now they are paying to get jobs.'

Liam Taylor, co-author of the report, said:

'This study finds serious shortcomings in the assessments conducted by Lanco, both before the project began, and since. This resulted in the flawed application of IFC's safeguard measures. This case demonstrates the vital need for robust and credible social assessments independently scrutinised by affected communities and qualified third parties, before they are accepted by the IFC. In this case most of the communities were completely unaware of any assessments having been published.'

Tom Griffiths, Forest Peoples Programme, said:

'This report is part of a wider FPP review of projects where IFC's Performance Standard on Indigenous Peoples has been applied. The IFC's sustainability policy requires that its staff ensure that there is Broad Community Support before a project is financed, but this case shows that the IFC is making such judgements based on flimsy evidence. The Lanco case shows that much more rigorous implementation procedures are required to ensure full compliance with IFC social policies and its new Performance Standards. Careful and continuous monitoring is also vital, as is the knowledge of communities about the rules that should govern the behaviour of the IFC and the companies that borrow its money.'

With the IFC's own review of its Sustainability Policy due to begin soon, to report in June 2009, the timing of this critical NGO report is important. The report makes clear that the IFC must do considerably more to ensure that it adheres to the standards that it has set itself.

Also recently launched is a new community guide on the IFC's Performance Standards relevant to indigenous peoples that has been developed by Forest Peoples Programme. This guide informs indigenous peoples about their rights and about the IFC's policy commitments, so enabling them to negotiate if an IFC funded company plans to develop on or near their lands.

- Ends - For further information or to arrange an interview please contact:In the UK:Amarantha Pike: +44 (0)1608 652893   amarantha@forestpeoples.orgIn India:Devjit Nandi: 0091-6678244478   devjeetn@hotmail.comNotes to Editors:

  1. Link to the full report Sustainable development or business as usual? A critical evaluation of the IFC-funded Lanco Amarkantak Thermal Power Station Project in Chhattisgarh (India)
  2. Link to A Community Guide to the International Finance Corporation's Performance Standard 7 on Indigenous Peoples (PS7)
  3. Chhattisgarh is one of the poorest states in India. The Lanco project is part of the State government's focus on industrial and infrastructure development to make it 'the Power Hub of India'. Korba, the location for this project, is at the centre of this strategy. The Indian economy grows at a rate of 9% per year, increasing demand for electricity, and causing power shortages.
  4. In the drive for economic growth the rights and needs of people are often disregarded. Nearly 80% of Chhattisgarh's 20.8 million people live in rural areas, including 32% who are 'Scheduled Tribes' under India's constitution. The acquisition of land has caused the physical and economic displacement of thousands of people.
  5. Lanco Amarkantak Private Power Limited (LAPPL) is part of Lanco Infratech Limited (LITL), an Indian infrastructure development company with interests in power, construction and property development. It currently has six operational power plants with nine further projects under implementation, giving it a presence in 10 states. It plans a 22-fold expansion in its energy portfolio by 2013. It is one of the fastest growing companies in India.
  6. The International Finance Corporation (IFC) is part of the private sector lending arm of the World Bank. Its new Policy on Social and Environmental Sustainability and its Performances Standards came into effect in May 2006.
  7. Forest Peoples Programme (FPP) is an international NGO, founded in 1990 to promote forest peoples' rights. FPP supports forest peoples in their efforts to secure and sustainably manage their forests, lands and livelihoods. For further information visit the website at