Dr. Jim Yong Kim’s Dilemma: International Finance Corporation and the Tata Mundra Power Plant

This case is the Winner of the 2015 oikos Global Case Writing Competition (Sustainable Finance track), organized by oikos International, Switzerland.




Case Details Case Introduction 1 Case Introduction 2 Case Excerpts

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Excerpts

INVESTMENT SERVICE OF THE IFC

The IFC Investment Service offered a wide range of financial products only to private sector projects located in developing countries.

The various financial products offered by IFC were loans, syndicated loans, equity finance, structured finance, risk management products, local currency financing, private equity & investment funds, and trade finance. In addition to this, it provided funds only to environmentally, socially, and technically sound projects which were beneficial to the local economy and fulfilled the environmental and social standards of IFC and the host country....

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ELECTRICITY CRISIS IN INDIA

As on March 31, 2014, India had the third largest power generation capacity in the world with installed capacity of 243,029 Megawatt (MW). More than 68% of India’s power was contributed by thermal plants, while around 18% came from hydropower...

ULTRA MEGA POWER PROJECTS: HOPE FOR MILLIONS

In 2005-06, the Ministry of Power (MoP) under the Government of India (GoI), Central Electricity Authority (CEA), and Power Finance Corporation Ltd. (PFC) worked together and came up with Ultra Mega Power Projects (UMPPs) with the social objective of providing ‘Power For All by 2012’ at the minimum possible cost through economies of scale and supercritical and environment friendly technology...

THE TATA MUNDRA PROJECT

A shell company, Coastal Gujarat Power Limited (CGPL), came into existence on February 10, 2006, as a wholly-owned subsidiary of PFC under the Indian Company Act, 1956. The CGPL was formed to execute a coal-fired UMPP in Mundra in Gujarat, a state in the Western part of India...

INTERNATIONAL FINANCE CORPORATION AND THE PROJECT

The Indian government requested IFC to support the first UMPP of the country. IFC had participated in the pre-bid consultation to improve the bankability of the project. The project was significantly larger than any previous project of Tata Power and it increased the power generation capacity of Tata Power by three times....

ENVIRONMENTAL ISSUES

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....

SOCIAL ISSUES

The fact-finding team mentioned in its report that CGPL and various government organizations including the MoEF and the Pollution Control Board were unable to recognize or willfully ignored the pre-project situation that existed in the project area...

COAL PRICE HIKE ISSUE

Tata Power had a long-term supply agreement with Indonesian companies as well as a 30% stake in two coal mines in Indonesia which Tata Power had purchased in 2007 to ensure low input cost for the Tata Mundra project...

COMPLAINT OF MASS

In June 2011, Machimar Adhikar Sangharsh Sangathan (MASS) filed a complaintagainst the IFC investment in CGPL to the ‘Office of the Compliance Advisor/Ombudsman’ (CAO)...

FINDINGS OF CAO

On MASS’s complaint, the CAO did an extensive investigation and came out with a 55-page report on the audit of IFC investment in CGPL’s Tata Mundra project, on August 22, 2013...

IFC'S RESPONSE

On September 12, 2013, IFC had given an 11-page response to the CAO which was written by Anita George, Director for Infrastructure and Natural Resources of IFC’s Asia-Pacific, and Willian Balmer, Director for Environment and Social Governance of IFC...

LOOKING AHEAD

In April 2014, Patel gave a petition to Kim on behalf of the communities affected by the Tata Mundra project...

EXHIBITS

Exhibit I : IFC Project Cycle

Exhibit II : IFC's Performance Standards

Exhibit III : Map of CGPL (Tata Mundra Power Plant) – Power Plant and Outfall Channel

Exhibit IV : Fund Provider of Tata Mundra Project

Exhibit V : Comparison of CGPL Imported Coal with others

Exhibit VI : Loss of Fishes and others (in tons)

Exhibit VII : Tata Mundra – Inlet and Outfall Channel Water Test

Exhibit VIII : Fall in Income of Fishermen of Saleiha Village

Exhibit IX : Some Specific Community Outreach Initiatives of CGPL