Coal India: Rehabilitation claims linger on unaddressed

22 November 2004

The central argument put forward by proponents of the World Bank’s involvement in oil, gas and mining projects is that the Bank’s presence ensures compliance with higher environmental and social standards than would be the case without its involvement. However, the case of Coal India – an open-pit coal mine in Jharkand state – casts serious doubt on this argument.

The Bank provided two loans to the project in the mid 90s. The first was intended to increase the capacity of the 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 was supposed to prevent the resettlement problems which have plagued so many Bank projects in India.

However, an investigation by the Bank’s Inspection Panel in 2002 concluded that the project had violated Bank policies on resettlement, indigenous peoples, environmental assessment and project supervision. Over a year later, when Bank management finally responded to the report, faults were admitted in relation to land compensation, recognition of traditional land rights, loss of access to forest products, income restoration schemes and subsistence allowances. NGOs said that the management action plan to address these issues was inadequate considering the seriousness of the findings. Despite this, the Bank’s board accepted the management plan, requesting a report on progress in one year’s time.

In late August, management reported to the board on progress in the settlement of outstanding issues. The management report concludes that there has been “considerable delay” in dealing with outstanding issues: out of nine issues left unresolved “aside from the issue of water quality in the resettlement site and the payment of compensation and relocation assistance, there has been limited progress on the other outstanding issues.”

Several board members were not satisfied with either management’s problem-solving efforts or the attitude of the government of India and Coal India Ltd.. One board member asked if the Indian government was not interested in solving seemingly resolvable, small-scale problems, what response could the Bank expect when problems arise from the increased lending envisaged under the new country assistance strategy. The Bank will double lending to India to $3 billion in current fiscal year.

The latest controversy is over the commissioning of a survey of affected families who had suffered an economic loss. Local NGOs have obtained a copy of the survey and point out that under ‘previous income’, the survey fails to ask for income from forest sources. “Obviously if they omit previous important sources of income”, says Tony Herbert of the Prerana Resource Centre, “then there is no need to bring the affected peoples back up to that level.” NGOs are engaged in a process to document and monitor the implementation of the recommendations of the Inspection Panel.

Management report on progress in settlement of outstanding issues, available upon request.