India: Mahindra Farm Services–01,02,03,04/Confidential
The Mahindra ShubhLabh Services Ltd (MSSL) project was intended to be an agricultural services project in multiple states of India. IFC held $2.2 million in equity in MSSL, a subsidiary of Mahindra & Mahindra Ltd., India’s largest farm equipment company. Between October 2006 and February 2007, CAO received four complaints regarding the project and requesting confidentiality. The complaints asserted that the business practices of MSSL caused a loss of livelihood for franchisees of the company’s Agricultural Service Centers (ASC) and to loss of income for the farmers the ASC’s were intended to serve.
Despite extensive negotiations undertaken by the CAO Ombudsman between the company and the individual complainants, it was determined that the complaint was not amenable to resolution. This impasse centered on a divergence of opinion as to how the case ought to be closed- arbitration or mediation. As such, the case was transferred to CAO Compliance for appraisal in March 2008. CAO Compliance conducted an appraisal for audit of the project, which concluded that the case did not merit an audit. MSSL in fact shifted its business from ASCs to the retail sale of agrichemicals, which the complainants believe are environmentally hazardous rather than eco friendly, as the original IFC-supported project committed.
The Appraisal Report for Audit, completed in June 2008, determined that non-deliverance of potential positive financial outcomes for the ASCs could not be deemed a loss of livelihood. Nevertheless, the Report highlighted that the question as to whether small businesses that signed the franchise agreement were misled by projections or whether they fully understood the commercial implications of the project could not be answered through an audit of social and environmental outcomes. The complaint was closed in June 2008.