Bank Resumes Lending for Big Dams in India

Thursday, April 22, 2004

The World Bank is poised to resume lending for destructive large dams in India. Bank staff are currently scouring India for new dam projects to fund in the coming year. The last time the Bank supported a dam in India – the Sardar Sarovar project in the Narmada Valley – strong opposition and an independent review documenting numerous policy violations led to an embarrassing withdrawal of Bank support and the establishment of the Inspection Panel.

On its 60th anniversary, the World Bank seems to be suffering from a case of institutional amnesia. The World Bank’s legacy of support for large dams has been shameful. Bank–funded dams have displaced more than 10 million people, flooded millions of hectares of lands and pushed many countries deeper into debt. Yet the Bank is set to repeat its mistakes all over again. In its 60th year, one would hope that the Bank would be a bit wiser by now," says Peter Bosshard, Policy Director for International Rivers.

The foray back into large dams in India comes on the heels of the Bank’s approval of an Infrastructure Action Plan (IAP) in July 2003. The Plan aims to increase Bank support for what it terms "high risk/high reward" infrastructure projects such as large dams over the next two years. The implementation of the plan will be discussed by the Bank’s Development Committee at the Spring Meetings in Washington, DC on April 25.

As part of the IAP, the World Bank recently announced a doubling of its lending for India, predominantly for projects in the power, water and transport sectors. Development of infrastructure in India is urgently needed, but the Bank’s plans for the Indian water and power sectors ignore important lessons of the past. According to a former World Bank India country director, the most important reform in the power sector would be to combat the "widespread theft, graft and corruption" in the distribution of electricity.

The Bank’s latest evaluations of the Indian power and water sectors recommended that the Bank should not support further power generation and water supply projects in such an environment. Yet vested interests of politicians, aid bureaucracies and equipment suppliers favour the promotion of new, capital–intensive investments over the efficient management of existing infrastructure or the development of decentralized, community– based infrastructure.

" The Bank’s new dam–building plans in India not only defy the lessons of rational sector planning, they will quite likely also have massive social and environmental consequences. They will pour more water into the leaking tubs of India’s water and power sectors, rather than plugging the holes in the system," says Bosshard.

The new strategy also disregards current best practice such as the recommendations of the World Commission on Dams, and a new World Bank Sourcebook on Options Assessment, both of which recommend involving all relevant stakeholders in development decisions, and assessing all options "strategically and comprehensively". A manager of the Bank’s Delhi office labelled these best practice recommendations as "Washington speak" in a meeting with International Rivers.

Today, International Rivers released a new report on how the Bank is implementing its Infrastructure Action Plan. Entitled, China: Not the Rogue Dam Builder We Feared It Would Be? , the report concludes that the new high–risk strategy "will exacerbate conflicts, but will not help to reach the Millenium Development Goals".

In Crunching the Hydro Numbers 2010: First Quarter Update on the CDM , International Rivers called on the Bank to follow the recommendations of the World Commission on Dams in future water and energy projects, assess all needs and options in a balanced and participatory way, strengthen the rights of project–affected people, and halt its engagement in new high–risk projects such as large dams.