Complaints panel report finds social problems in Coal India mines

23 December 2002

A new official report has found that villagers in Jharkhand state, Eastern India, have suffered harm to their livelihoods as a result of a Bank-backed coal mining project. The report, written by the Bank’s Inspection Panel – a unit with powers to conduct investigations that reports directly to the Bank’s Board – concludes that World Bank staff multiply violated the Bank’s own policies on resettlement, indigenous peoples environmental assessment and project supervision. The report vindicates the allegations made by local NGO which in June 2001 made a claim to the Panel on behalf of project affected people (PAPs) who had been or were facing displacement by the opencast coalmines.

The allegations by the NGO, Chotanagpur Adivasi Sewa Simiti (CASS), were made about 2 inter-connected World Bank projects. The first was explicitly intended to increase the focus and capacity of Coal India – the parastatal company in charge of the mines – on social and environmental issues. The second was a major capital investment in new machinery and materials. This combination of loans, with cross-conditionalities between them to incentivise Coal India to perform, would prevent the problems which have plagued resettlement in so many Bank projects in India, the Bank suggested. The new panel report – submitted to Bank senior management in late November, but not yet made public – exposes this as largely another example of Bank wishful thinking.

The Panel found that there were a number of problems in the overall resettlement policy adopted by Coal India as well as with the specific plan for the East Parej mine. Its report argues that “management’s failure to ensure that the original Resettlement Action Plan (RAP) reflected reality on the ground resulted in many problems (13)*”. “Many of the displaced Project-affected persons have not been and are not being compensated at full replacement cost, with the result that many have suffered and continue to suffer harm (14)”. The Panel finds that this suffering and harm comes as a result of a failure to:

  • be transparent in how existing land and housing was measured,
  • realistically value existing the land and housing,
  • offer a choice of resettlement sites,
  • provide jobs or effective income generation schemes.

It further criticises the more recent (August 2000) move by Coal India to abandon land-based compensation and move to a system of one off cash payments. The Panel notes “presenting a poor oustee, whose previous source of survival included a small patch of land, with a check may be a legal way of getting them to move on, but it should not be confused with development (20)”.

On transparency and consultation the Panel notes that many of the villagers participated in a baseline survey. “But beyond these interviews, there is nothing to indicate that the PAPs in Parej East were ‘systematically informed and consulted during preparation of the resettlement plan about their options and rights” (as is called for in the Bank’s Involuntary Resettlement policy). The Panel found “no evidence” that documents such as the Sectoral Environmental Impact Assessment were available to local NGOs for their review. The Bank claimed that the report of the mid-term review of the project could not be released unless authorised by Coal India.

A local Public Information Center was established, but suffers from a number of flaws. Documents can only be consulted when supervisory (Coal India) staff are present and it is not possible to study documents in private or photocopy them. The Panel expresses surprise that “despite the low levels of literacy among PAPs, all information in the Center is in technical written documents. The Panel was surprised tosee no pamphlets, or simplified informational materials, or sketches, photographs or visial materials to depict the Project, its sequence and effect on people (403)”. It also notes that “the location of the Center in the office of the Resettlement and Rehabilitation Officer, in the gated CCL mine Headquarters’ compound, does nothing to facilitate information being provided ‘in a timely manner and in a form that is meaningful for, and accessible to, the groups being consulted”, as required by the Bank’s Environmental Assessment Operational Directive. On the contrary, for poor, vulnerable and now dependent people, it is clearly intimidating to approach an office in that location, let alone walk in and freely request information, register complaints and engage in dialogue.(408)”

The Panel recorded that this project was one of the most-supervised World Bank projects ever. The Bank undertook 21 supervision missions between 1996 and 2001. However, the Panel found that: “the supervision team’s knowledge of ground realities was limited, and for that reason, their efforts to resolve problems had virtually no impact on the ground” (458). People have long argued that the Bank indulges in ‘check-box’ appraisal and supervision of its loans, adding lists of new criteria but not following through to ensure that they are rigorously adopted and enforced. Many Bank-watchers will be particularly concerned by the Panel’s findings on documents which were not grounded in fact whatsoever. One example is the claim in the Environmental Management Plan for the Parej East mine. This suggested that only about half of the 253 hectare mine area would be reclaimed for agricultural land after mining, while the rest would be left to fill up with water. This water, it was argued, “will help the local population, as a source for irrigation, drinking or industrial demand”. The Panel concluded, however, that the water would be inaccessible, as it would be “tens of meters below the surrounding countryside and separated from it by vertical quarry rock faces” (357). It would be very costly to pump it for irrigation, and impossible to use for drinking as it would be poisoned by contact with coal seams.

Follow-up for Coal India

The Panel recommends that the Bank make good its promise to continue monitoring the social issues after the project closes. It also suggests establishing an Independent Monitoring Committee. In the case of the similarly controversial Singrauli National Thermal Power Corporation loan such a committee, composed of three well-respected Indian nationals produced some useful recommendations.

Panel recommendations are not binding, however. Because of this CASS has drawn up its own Action Plan which it wants to have supported by Bank management. The Action Plan, agreed with the displaced communities sets out ways to address the livelihood restoration of the project affected people. They are asking the Bank’s Executive Board to agree to fund and secure its full implementation when it considers the Panel’s report in mid-January.

Lessons for the Bank

These findings confirm what many people knew or suspected about the World Bank’s ability to and interest in taking seriously the social and environmental aspects of its loans. NGOs had lobbied against the approval of the projects in 1995 and 1996, warning that the projects were being “done without the PAPs’ consent, are usurping their resources and transferring their wealth to the mainstream economy” (JJS-CASS Feb 96 report). Bank staff argued that this project was being done in a new way which made the environmental and social objectives the focus of a separate loan, thus ensuring that these would be adequately supervised, and not traded off against the main capital investment/mine expansion loan.

CASS claim that the Bank “oversold” the project, “appearing to exaggerate the value of the project so that it would be approved by the Board” and mining could go ahead. The Bank’s Staff Appraisal Report of April 1996 stated that “implementation of the Environmental and Social Mitigation Project will safeguard the rehabilitation of 9,260 people and the proper resettlement of about 10,000 people. The implementation of the Indigenous Peoples Development Plans will improve the lives of about 186,000 people, of which 56,900 would be tribals.”

The Bank’s funding of 24 large opencast coalmines has led to the retrenchment of 87,000 mine workers, and new jobs on the mines in Orissa have been contracted-out with less job security. Despite Bank claims to have introduced best international practices, it made no efforts to press the Government of India to ratify the ILO convention on health and safety in mines (Frontline July 01).

The joint IBRDJBIC Coal Sector Rehabilitation $1 billion loan was controversially cancelled in 2000. Its almost 50% undisbursement was recently explained in the Implementation Completion Report as attributable to the reduced coal demand caused by “the slow pace of power sector reforms”, the slow down of industrial demand and displacement by Indonesian imports.

Many of the Panel’s findings are uncomfortably similar to the conclusions of previous Bank reports – for example the independent review of the Sardar Sarovar project (1992) and the Bank-wide resettlement review (1994).

*Note numbers in brackets refer to paragraph numbers in the Inspection Panel report, India: Coal Sector Environmental and Social Mitigation Project, 3 December, 2002. This is not yet publicly available.


Inspection Panel claim, CASS, Bank Management response and Inspection Panel eligibility statement

India Project Shows Risks of Intervening, Despite Sound Goals, The Wall Street Journal, August 14, 2000

Mining: Blood on Coal, Frontline vol 18, issue 13, Jun. 23 – Jul. 06, 2001

Mainstreaming Sustainability, Berne Declaration, 1996 (attached is also JJS-CASS February 1996 report)

Minewatch paper on Coal India environmental mitigation issues, February 2002

The India Coal Sector Reform Project, Project Information Document, World Bank

Coal Sector Environmental & Social Mitigation Project, Project Information Document, World Bank