JBIC divests from controversial coal-fired power plant project in India

Wednesday, April 10, 2019

Fair Finance Guide Japan

The problem

For over four decades, the National Thermal Power Corporation (NTPC) of India has played a pivotal role in India’s quest for development. However, its development model has resulted in a wide range of negative impacts on local communities, the environment and sustainable development.

The Japanese Bank for International Cooperation (JBIC), one of the major financial institutions of Japan, planned to loan large amounts of money to finance two of NTPC’s coal-fired power projects: one in Darlipali village in the state of Odisha; and the other in Tanda, in the state of Uttar Pradesh. However, in both projects there were reports of numerous cases of human rights violations and environmental destruction. As a development bank that should be taking the lead with regard to ESG policies and practices, such violations were very much at odds with JBIC’s investment policies.

In the case of the Darlipali village power station, in December 2017 NTPC was warned by the Odisha State Pollution Control Board (OSPCB) to immediately stop water pollution, after it was found that a contractual agency was channelling contaminated water to a canal. The local community have also complained about various skin and allergy ailments related to the pollution coming from the coal-power plants.[1] In the case of the Tanda plant, alternative options were not considered in its environmental impact assessment, and it is unclear whether information on alternative options was provided at the public consultations.

Influencing activities

The Fair Finance Guide in Japan (FFG Japan) held various meetings with JBIC officials in charge of these projects and urged them to withdraw funding, given that the projects did not meet the requirements of JBIC’s own social and environmental guidelines nor of the Equator Principles[2] for private banks. The Japanese coalition also sent a letter to the CEO of JBIC,[3] explicitly outlining how the two projects fail to comply with JBIC’s Guidelines for Confirmation of Environmental and Social Considerations.

Both power plant projects were also closely scrutinized in FFG Japan’s 2017 case study on banks’ investments in coal-fired power projects.[4]

Change in financial institutions

Following its engagement with FFG Japan, JBIC admitted that the projects did not meet its required economic and environmental conditions. In March 2018, in a meeting with NGOs, JBIC announced that it had suspended its two investment proposals, causing a major setback to the NTPC and bringing financial complications for the two projects.[5]

Impact on the ground

Unfortunately, despite JBIC pulling out, work on the projects has continued and Prime Minister Narendra Modi has inaugurated the project for NTPC Darlipali, which will now receive loans from various national banks in India, the Indian government and a Chinese bank. Both power plants should be functional in 2019.[6]

The affected Indigenous people’s communities in Darlipali have not been provided with any relief or compensation for the pollution and its adverse effects on their health and livelihoods, nor have they been compensated for the land and houses which were forcefully grabbed from them. Their protests, which began in May 2017, have been completely ignored by the NTPC.[7]

 

As Indian national banks have started to invest in these controversial power stations, and given that the Fair Finance Guide is expanding to India in the coming year, this case should certainly be reassigned and followed up by the new coalition in 2019.

 

Read the full report here

 

 

[1] Ramesh Pokhriyal ‘Nishank’. (2018). ‘The Dark Side of NTPC: A Critical Look at the Social and Environmental Footprints of NTPC’, New Delhi: Centre for Financial Accountability, page 15. http://www.cenfa.org/wp-content/uploads/2018/10/The-Dark-Side-of-NTPC.pdf (last accessed December 6, 2018).

[2] The Equator Principles are a risk management framework adopted by financial institutions for determining, assessing and managing environmental and social risk in projects. See: https://equator-principles.com/

[3] Letter (September 7, 2015) to JBIC from FFG Japan coalition: https://sekitan.jp/jbic/wp-content/uploads/2015/09/Letter-on-Darlipali-and-Tanda.pdf

[4] FFG Japan. (2017). ‘Coal Fired Power Sector’. https://fairfinanceguide.org/ffg-international/case-studies/2017/coal-fired-power-sector/ (last accessed December 6, 2018)

[5] End Corporate Abuse. (2018). ‘JBIC suspends two coal based power projects in India’. http://endcorporateabuse.org/jbic-suspends-two-coal-based-power-projects-in-india/ (last accessed December 6, 2018)

[6] PTI (2018) ‘PM Modi dedicates NTPC's Odisha coal mine to the nation’, Energy World from The Economic Times, September 22, 2018. https://energy.economictimes.indiatimes.com/news/coal/pm-modi-dedicates-ntpcs-odisha-coal-mine-to-the-nation/65914013 (last accessed December 6, 2018).

[7] Odisha TV. (2017). ‘Persons displaced by NTPC super thermal power plant launch protest’. https://www.youtube.com/watch?v=g7IgXqWYs2w (last accessed December 6, 2018).

 

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