CAO Cases

Arne Hoel, The World Bank

South Asia

India / India Infrastructure Fund-01/Dhenkanal District

Complainant
Odisha Chas Parivesh Surekhsa Parishad & Delhi Forum
Date Filed
April 15, 2011
Concerns
Transparency, community engagement, human rights protection, and environmental sustainability
Case Status
Open - Compliance
 

Synopsis

Complaint
The IFC-supported India Infrastructure Fund (IIF) is managed by the Infrastructure Development and Finance Company Limited (IDFC)’s Project Equity Company, a wholly owned subsidiary of IDFC.  The IIF is based in Mumbai and makes equity investments in energy and utilities, transport infrastructure, telecommunications, and other infrastructure solely in India. The target size of the Fund is US$1 billion and IFC's equity investment is $100 million (2007).

 

A portfolio investment of the IIF is GMR Kamalanga Energy Limited (GKEL), a part of the GMR Group.  Kamalanga Energy is a special purpose vehicle set up by GMR Energy Limited to develop and operate a 1400 MW coal based power plant near Kamalanga village in Dhenkanal, a district of Odisha state.

 

In April 2011, Odisha Chas Parivesh Surekhsa Parishad (Odisha Agriculture and Environmental Protection Council), a grassroots organization, together with the Delhi Forum, a Delhi-based advocacy and research organization, filed a complaint with the CAO on behalf of people affected by the project.  The complaint voices concerns about disclosure of project information and transparency about potential environmental and social risks and impacts of Kamalanga Energy in Odisha, and more broadly, IFC's financing role. 

 

CAO Action

The CAO found the complaint eligible for further assessment in May 2011 and conducted several field visits to meet the parties and discuss options for addressing the issues raised in the complaint. The assessment period was extended for this case beyond the original 120 days. 

 

In May 2012, the complainants and the company expressed their commitment to addressing the concerns in the complaint through a dialogue process facilitated by CAO.  CAO trained community and company representatives in dispute resolution skills, discussed the parameters for the dialogue process, and worked with the parties to design a dialogue process. A first meeting between the parties was convened in January 2013 at which the parties did not find mutually-acceptable parameters for dialogue going forward. The Assessment Report and Conclusion Report documenting the dispute resolution process are available under "View Documents" below in English and Odia, alongside IFC's response.

 

The case was formally transferred to CAO’s compliance function in March 2013. CAO's Operational Guidelines provide for a compliance appraisal in order to decide whether the complaint warranted an investigation of IFC's role in the project.  

 

In this instance, CAO concluded that an investigation was warranted. The compliance investigation focused on whether IFC's investment in the Fund (in the context of the Fund’s investment in GMR Kamalanga Energy Limited) was appraised, structured, and supervised in accordance with applicable IFC policies, procedures and standards. It also considered whether IFC's Policy and Performance Standards on Environmental and Social Sustainability (2006) and Policy on Disclosure of Information (2006) provide adequate levels of protection in relation to the issues raised in the complaint.

 

CAO’s compliance investigation was released on January 11, 2016 and identified a number of shortcomings in IFC’s review and supervision of the Fund. CAO notes that IFC’s approach of supporting the Fund to develop its own social and environmental management systems for ensuring compliance with IFC’s Performance Standards did not deliver the intended outcomes in this case. Further, more than five years since approving the Fund’s first disbursement for the GKEL project and four years since a complaint was received by CAO, IFC has only recently concluded that key concerns regarding the impacts of the project, as raised by the complainants, have not been addressed in accordance with the Performance Standards. 

 

Specifically, CAO’s investigation report makes non-compliance findings in relation to:

 

IFC’s Pre-Investment E&S Due Diligence
CAO finds that IFC’s pre-investment E&S review was not robust. The shortcomings identified by CAO in IFC’s pre-investment due diligence indicated that IFC lacked a basis to conclude that its investment in the Fund could meet the requirements of the Performance Standards over a reasonable period of time.

Structure for Management of E&S Risk
Given the level of risk identified by IFC in relation to this investment, CAO finds that the agreements that governed IFC’s investment in the Fund were not sufficient to support IFC’s stated objective of ensuring that the “projects it finances are operated in accordance with the requirements of the Performance Standards” (Sustainability Policy, para. 5). 

Supervision
CAO finds that IFC’s supervision of its investment in the Fund was inadequate to establish a reasonable expectation that the project would meet the requirements of the Performance Standards. CAO also finds that IFC’s management response during the course of the investment in relation to the serious, longstanding and well-documented E&S concerns was inadequate. In the meantime, the project has transitioned from the construction to the operational phase, increasing the risk of irreversible adverse impacts on the complainants.

Disclosure
While IFC complied with the requirements of the Disclosure Policy (2006) in disclosing its investment in the Fund, CAO finds that IFC did not adequately supervise the Fund’s compliance with these disclosure requirements under the Performance Standards, either in relation to its own operations or those of the GKEL project.

 

Status 

CAO released its Investigation Report and IFC’s formal response on January 11, 2016. CAO is currently monitoring IFC’s actions in response to the investigation findings and will issue a monitoring report in line with CAO’s Operational Guidelines.

CAO's Investigation Report and a communiqué regarding the case is available in English,  together with IFC's Response, under 'View Documents' below. 


Status as of August 25, 2017

Project information

Institution
IFC
Project Name & Number
India Infrastructure Fund 26237
Department
Global Financial Markets
Company
India Infrastructure Fund
Sector
Finance & Insurance
Region
South Asia
Country
India
Environmental Category
FI
Commitment
$100m equity investment

Case Tracker

Ombudsman

  • Eligible: Completed
  • Assessment Period: Completed
  • Facilitating Settlement: Transferred

Compliance

  • Under Appraisal: Completed
  • Under Audit: Completed
  • Monitoring: In Process