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
Introduction
In April 2014, Dr. Jim Yong Kim (Kim), the twelfth President of the World Bank Group, received a petition signed by about 24,000 people from all over the world urging him to publicly recognize the alleged harm International Finance Corporation (IFC) had already caused to the people and environment of Gujarat, India, by funding the Tata Mundra power project, and to develop a meaningful action plan that addressed the damage.
Just nine months earlier, Kim had received kudos for his leadership as the World Bank had placed severe restrictions on coal finance, but a lot had changed since then. In November 2013, he received scathing open letters, one from more than 100 groups in India, another from 68 groups in 28 countries, and one from Machimar Adhikar Sangharsh Sangathan (MASS). All these letters criticized him for rejecting the findings of the 'Office of the Compliance Advisor/Ombudsman (CAO) against IFC's long-term loan to the Tata Mundra power project run by Coastal Gujarat Power Limited(CGPL). Dr. Soumya Dutta (Dutta), National Convener of Bharat Jan Vigyan Jatha, a science group in India, said, "Kim's endorsement of the management line indicates his real position that coal does not kill and he will continue supporting the deadly coal plants like Tata (Mundra project) that are not only disastrous but also facing serious financial issues. It then contradicts the President's energy directions paper and pronouncements on moving the institution away from coal financing. His tall talk on climate change is proving to be a charade."
Kim was caught in a dilemma as the criticism grew more strident over the following months and culminated in the new petition. If he still did not accept the finding 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 in five states of developing India. Pulling the plug on the project would exacerbate the problems in a power-deprived India, where the supply and demand gap was very high and per capita power consumption was low. Also, it would affect the economic growth of the country.
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