Coastal Gujarat Power Limited (CGPL or the company) has built and is operating, a 4,000MW ‘ultra mega’ power plant in Mundra, in the state of Gujarat, India. The plant utilizes supercritical technology and sources imported coal from mines in Indonesia and other countries. IFC is investing in the project through an A Loan of US $450 million.

In June 2011, a complaint representing various potentially affected fishing communities was filed with the CAO. The complaint raises issues related to the project’s social and environmental impact on fishing communities, specifically: deterioration of water quality and fish populations, blocked access to fishing and drying sites, forced displacement of fishermen, community health impacts due to air emissions, and destruction of natural habitats, particularly mangroves. The complainants also believe the impacts on their fishing communities were not adequately identified and mitigated, and the cumulative impact of the project was not adequately assessed.

The complaint was deemed eligible for assessment in June 2011.  A CAO dispute resolution team visited the site in August and October 2011 to engage with the relevant parties to discuss options for the resolution of the issues raised in the complaint. After a series of meetings and discussions with the CAO, the complainants decided that they preferred that CAO refer the complaint to its compliance function.  CAO's dispute resolution team concluded their involvement in the case and released an assessment report in English and Gujarati.

The case was formally transferred to the CAO compliance function in February 2012. CAO's Operational Guidelines provide for a compliance appraisal to decide whether an audit of IFC's role in the project is warranted. 

In July 2012, CAO concluded the compliance appraisal and found that several issues raised by the Complainants merited further inquiry. CAO conducted a compliance audit, which was made public on October 22, 2013. While acknowledging much diligent work done by IFC and CGPL in relation to E&S aspects of what is a large and complex project, the CAO compliance audit validated key aspects of the complaint. Key findings from the audit include:

- The complainants, who are from a religious minority and occupy a socially marginal position given their migrant traditions, were not adequately considered at the time the project’s E&S risks and impacts were considered and addressed.

- IFC has contributed to this situation to the extent that its review of CGPL’s E&S assessments was not commensurate with project risk as required by its Sustainability Policy.

- A lack of effective consultation with fishing communities early in the project cycle process resulted in missed opportunities to assess, avoid and reduce adverse potential adverse impacts of the project in accordance with the objectives of PS1. 

- IFC failed to ensure that its client correctly applied the requirements of the World Bank Group Thermal Power Guidelines (1998), to an airshed that should be classified as degraded.

- Projections that the thermal plume from CGPL’s outfall channel would extend a distance of kilometers into the shallow waters of the gulf and surrounding estuaries suggested inadequate mixing/cooling, with significant risks of ecological impact.

- IFC did not take the steps necessary to ensure that the application of PS5 in relation to the complainants was properly assessed.

- Cumulative nonlethal (but potentially harmful) effects of submarine noise, light, heat, and other aquatic disturbances from the project on the local marine environment were not adequately considered in the marine impact assessment process.

- IFC was not in a position to demonstrate either that its client’s monitoring is commensurate to risk (as required by PS1) or that its supervision allowed it to meet the stated purposes of supervision as set out in the ESRPs: namely, the development and retention of information needed to assess the status of E&S compliance.

- Confidence among the IFC team in the client’s E&S capacity and commitment, combined with a view that the project is performing well from an E&S perspective, have meant that IFC has not treated the complainants’ concerns as compliance issues.

On November 25, 2013, IFC provided CAO with a statement including action plan items about this audit/investigation. CAO has posted this statement and action plan in the View Documents section below.

As per CAO's Operational Guidelines, this case will remain open as CAO monitors IFC's response to the findings.  CAO completed its first monitoring report about this audit in January 2015. In February 2016, CAO carried out a monitoring visit to Mundra and met with CGPL representatives and with the complainants. In January 2017, CAO released its second monitoring report in relation to this audit.

In September 2017, CAO concluded a compliance appraisal of a second complaint related to the potential impacts of the Mundra Ultra Mega Power Plant on local communities, which addresses substantially similar compliance issues. CAO decided to merge the two cases for ongoing monitoring.