Dr. Jim Yong Kim's Dilemma: International Finance Corporation and the Tata Mundra Power Plant
| Case Code: FINC097 Case Length: 21 Pages Period: 2012-2015 Pub Date: 2015 Teaching Note: Available |
Price: Rs.600 Organization: International Finance Corporation Industry: Banking Countries: India Themes: Sustainable Finance, Sustainability, Banking |
Abstract Case Intro 1 Case Intro 2 Excerpts
Abstract
The case study is about the dilemma faced by Dr. Jim Yong Kim (Kim), President of the World Bank Group, related to International Finance Corporation’s (IFC) funding of the Tata Mundra Project in India. The Mundra plant was one of the Ultra Mega Power Projects (UMPPs) conceived with the objective of providing cheap electricity to power-starved states of India. Coastal Gujarat Power Limited (CGPL), a wholly-owned subsidiary of Tata Power, implemented the project with funds from various organizations including a funding of US$450 million from IFC. Before the Tata Mundra power project went on stream, everyone related to the project claimed that it would be beneficial for infrastructure development, economic growth, as well as for the poor communities living in areas near the power plant site, but the project soon started facing some serious criticism on the environmental and social fronts. Critics alleged that the project had a severe impact on the environment, sea water, water level, soil, air, natural habitats, marine life, fish population, livelihood, and health and society as a whole. IFC's 'Office of the Compliance Advisor/Ombudsman' (CAO) did an extensive investigation and found evidence which validated the main aspects of the Machimar Adhikar Sangharsh Sangathan (MASS) complaint. The management of IFC largely rejected the findings of the CAO, and Kim faced a lot of criticism for toeing the management line. Kim was caught in a dilemma as the criticism grew more strident over the following months. If he still did not accept the findings of the CAO, then he as well as IFC risked being viewed as not doing enough for the environment and communities that were allegedly affected by the Tata Mundra power plant. On the other hand, if he did a U-turn and accepted the finding of the CAO, then he would have to stop the sustainable financing of US$450 million to the Tata Mundra project, which was established with the objective of providing cheap and reliable electricity to millions of people of developing India.
Issues
The case is structured to achieve the following teaching objectives:
- Understand the significance of sustainable finance and the issues and challenges faced by banks and financial institutions related to this
- Understand the issues and challenges faced by banks and financial institutions in relation to funding energy projects
- Discuss and debate whether IFC did the right thing in financing the Tata Mundra project, and then maintaining the stand despite mounting criticism from various stakeholders
- Understand the challenges faced by IFC going forward and explore the ways in which it can overcome the challenges
Contents
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Introduction
World Bank Group and International Finance Corporation
Investment Service of the IFC
Electricity Crises in India
Ultra Mega Power Projects: Hope for Millions
The Tata Mundra Project
International Finance Corporation and the Project
Environmental Issues
Social Issues
Coal Price Hike Issue
Complaint of Mass
Finding of CAO
IFC's Response
Looking Ahead
Exhibits
Keywords
Sustainable Finance, Sustainability for banks and financial institutions, Banks and the Energy sector, Project finance, Coal financing, Human rights as a Management issue; Human rights and sustainability, Businesses as human rights advocates, Business-government-society relationship, Financial Institution's Stakeholder Constituency, Stakeholder management, Stakeholder tension, Corporate Sustainability, Business Ethics, Corporate Social Responsibility
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