India: India Infrastructure Fund-01/Dhenkanal District
Odisha Chas Parivesh Surekhsa Parishad & Delhi Forum.
Transparency, community engagement, human rights protection, and environmental sustainability.
$100m equity investment
In 2007, IFC made an equity investment in India Infrastructure Fund (IIF, the Fund), a private equity fund. IIF has made equity investments in energy and utilities, transport infrastructure, telecommunications, and other infrastructure solely in India.
A portfolio investment of IIF is GMR Kamalanga Energy Limited (GKEL). 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 voiced concern about disclosure of project information and transparency about potential environmental and social risks and impacts of Kamalanga Energy in Odisha, as well as more broad concerns about IFC's financing role.
During CAO’s Assessment 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. However, this process did not lead to a resolution between the parties, and the case was transferred to CAO’s compliance function in March 2013.
In January 2016 CAO released a compliance investigation report along with IFC’s official response. CAO’s investigation report identified a number of shortcomings in IFC’s review and supervision of the Fund. Specifically, CAO’s investigation report makes non-compliance findings in relation to IFC’s pre-investment E&S due diligence, its structure for management of E&S risk, as well as IFC’s supervision and disclosure. CAO also noted that IFC’s approach of supporting the Fund to develop its own social and environmental management systems for 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 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.
In March 2019, CAO completed a monitoring report of IFC’s response to the CAO’s investigation report and its supervision of the Fund thereafter. CAO noted that IFC has actively monitored the Fund’s implementation of the IFC-IIF E&S Action Plan. Positively, IFC has negotiated additional supervision access rights and has conducted site supervision visits to three portfolio companies to verify Performance Standards implementation. Notwithstanding IFC’s active supervision of the Fund and noting IFC’s view that the Fund’s E&S performance is rated as unsatisfactory since 2012, CAO is concerned that IFC’s investments have potentially had adverse E&S project impacts which have yet to be resolved.
With regard to the Kamalanga project, CAO noted IFC’s active supervision of the implementation of the IIF-GKEL E&S Action Plan. While this action plan has led to the development of additional assessments and plans to resolve project impacts, further supervision by IFC is necessary to assure itself of project-level compliance in relation to issues identified in CAO’s investigation report. Specifically, these include the adequacy of (a) livelihood restoration measures for households impacted by land acquisition; (b) consultation around the livelihood restoration plan; (c) disclosure of project E&S documentation in local languages; (d) the methodology used to determine PS7 applicability; (e) community health impact assessment and risk mitigation framework; and (f) monitoring of project compliance with IFC air quality requirements.
CAO released a compliance monitoring report on April 3, 2019. The case remains open in CAO’s monitoring function.
Status as of April 05, 2019