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Subject: MM: Cracks in the Dam: The World Bank in India
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[From the Dec. 1992 issue of Multinational Monitor.  Subscription info below]

CRACKS IN THE DAM

THE WORLD BANK IN INDIA

By Patrick McCully

THE WORLD BANK may come to regret ever getting involved in the Sardar
Sarovar dam on the Narmada River in western India.  The Bank's
determination to continue financing the project in spite of massive
local opposition and fierce criticism from an independent review team
established by the Bank itself has activated a threat from hundreds of
citizens' groups worldwide to lobby governments to cut the Bank's funds.
This is the first time that activists from around the world have united
to demand a cut in the budget of a major aid agency.

The decision to ratchet up the pressure on the Bank was not taken
lightly.  Activists within India and abroad have been campaigning for
years against the massive Sardar Sarovar dam in Gujarat state, the
centerpiece of a water supply, irrigation and electricity-generation
project described by the World Bank as "one of the most ambitious water
resource development projects ever attempted."  After seven years'
construction, the dam has now reached around a quarter of its planned
full height of 455 feet.

The World Bank approved a loan to the Indian government of $450
million toward the $6 billion project in 1985.  A further loan of $475
million is currently being considered by the Bank.  The importance of
the Bank's contribution is much greater than would appear from its
percentage of the final cost; the Bank's involvement represents an
economic seal of approval for the project, making it easier for the
Indian authorities to obtain finance from other sources.

The lands and homes of about 150,000 villagers would be inundated by the
200 kilometer-long Sardar Sarovar reservoir, and 24,000 farming families
would lose over a quarter of their land to the 75,000 kilometers of
irrigation canals.  A planned nature sanctuary intended to compensate
for the wildlife drowned by the reservoir could forcibly displace a
further 30,000 to 40,000 people.  Thousands more stand to be affected by
"secondary displacement"--they will lose land and livelihood due to the
resettlement sites needed for the people to be moved from the
submergence zone.

Indian authorities and the World Bank argue that the staggering
potential benefits of Sardar Sarovar far outweigh any human costs.
The World Bank claims that the projects will irrigate about two million
hectares, help feed as many as 20 million people, provide drinking
water for at least 30 million people, supply electric power for
agriculture and industry, generate employment for about one million
people and control floods.  The dam promoters also argue that most of
the people to be displaced will be resettled with compensation and
helped to improve upon their previous standard of living.

Opponents of the project deride such claims, pointing to the dismal
economic, social and ecological record of the 1,500 large dams built in
India since the 1950s.  "No one who has studied these projects can
seriously believe the claims of the dam promoters," says Nicholas
Hildyard, co-author of a recently-completed three volume study of the
social and environmental effects of large dams.  "Like all the other
major dam projects in India I have studied, Sardar Sarovar has a history
of grossly exaggerated benefits and downplayed costs.  The cost-benefit
analyses used to justify the project are totally fraudulent.  The forces
driving its construction are powerful political and corporate vested
interests, not the needs of the people of India."

Ashvin Shah, a civil engineer from Gujarat who is evaluating
alternatives to the Sardar Sarovar project, calls the 40-year-old Sardar
Sarovar design poor and outdated, and says it "leaves unresolved the
fundamental problems of the degradation of the river basin and the
poverty of its people, and the water scarcity of the state of Gujarat."
Shah thinks that small-scale decentralized solutions such as rainwater
harvesting, soil and moisture conservation and the better use of water
from existing reservoirs will be a cheaper, quicker and more equitable
solution to Gujarat's water problems.

An International Human Rights Panel which visited the Narmada Valley
this August to assess the resettlement situation concluded that there
was no possibility that the vast majority of those to be displaced would
regain their previous standard of living.  Resettlement policies and
practice were leading to the "violations of the rights of tens of
thousands of people," the panel found.

Citizen opposition

The opposition to the Sardar Sarovar project has been led by the Narmada
Bachao Andolan (NBA, or Save the Narmada Movement), a coalition of
non-governmental organizations (NGOs) and individuals which includes
local people and social and environmental activists and scientists from
around India.  The NBA has built up a mass movement against the dam over
the last five years using Gandhian non-violent resistance tactics such
as rallies, marches, hunger strikes and refusal to cooperate with the
authorities.

The "strongest foundation of the struggle," says NBA activist Shripad
Dharmadhikary, "is that the villagers will not move."  Tens of thousands
of people from throughout the Sardar Sarovar submergence zone have vowed
that they will let the water rise and drown them before they leave their
homes and land.  During the 1992 monsoon season, "Save or Drown Squads"
of activists and people from submergence villages showed their
determination to face the rising waters by staying in the first two
villages behind the partially-built dam.

Medha Patkar, the best known of the NBA activists, was among the 11
people in the lowest house on the night in August when the waters
reached their highest point this year.  Just before midnight, at a time
when it was expected the waters would continue rising to the level of
the house and beyond, Patkar wrote a letter to supporters describing the
atmosphere in the house as "calm and quiet."  The farmers and activists,
Patkar wrote, "were ready in every way for whatever may have come."
Fortunately, the waters began to recede after having come within a meter
of the floor-level of the wood, bamboo and mud house.

The NBA has proved itself a formidable opponent to the authorities, who
have resorted to intimidation and violence to try and break the
movement.  A report in April 1992 by the human rights group Asia Watch
concluded that those opposing Sardar Sarovar have been subjected to
"arbitrary arrest, illegal detention, beatings and other forms of
physical abuse."  In July 1992, a tribal women was shot dead by police
in an attempt to force villagers to leave land which was slated for the
resettlement of people from the submergence zone.  So far these abuses
have only served to strengthen the resolve of the dam opposition
movement.

Denouncing the dam

The controversy surrounding Sardar Sarovar led the World Bank in 1991 to
set up an unprecedented independent review to look at the resettlement
and environmental aspects of the project (although not the economic
aspects or the alternatives to the dam).  The review team, led by former
United Nations Development Program chief Bradford Morse and his
deputy, the Canadian human rights lawyer Thomas Berger, traveled
extensively throughout the Narmada valley and met with villagers, pro-
and anti-dam NGOs, and state and central government officials.  They
interviewed World Bank staff and were given unimpeded access to Bank
files.

The Bank and the Indian authorities were horrified by the independent
review's conclusions.  In a letter to Bank President Lewis Preston
published at the beginning of their report, Morse and Berger state
that "the Sardar Sarovar Projects as they stand are flawed, re-
settlement and rehabilitation of all those displaced ... is not possible
under prevailing circumstances ...  [and] the environmental impacts of
the Projects have not been properly considered or adequately addressed.
Moreover, we believe that the Bank shares responsibility with the
borrower for the situation that has developed."  The Morse Report
accused the Bank of consistently breaking its own guidelines and its
legally-binding agreements with the Indian states.

The independent review team was asked by the Bank to recommend
improvements in project implementation.  "If essential data were
available, if impacts were known, if basic steps had been taken," Morse
and Berger wrote to Preston, "it would be possible to know what
recommendations to make.  But we cannot put together a list of
recommendations ... when in so many areas no adequate measures are being
taken on the ground or are even under consideration."

The wisest course for the Bank, in the opinion of Morse and Berger,
would be for it to "step back from the Projects and consider them
afresh," implying that the Bank should suspend its loans to the Indian
government pending a reassessment of the human and environmental
impacts of the Sardar Sarovar project.  On June 18, the day the report
was released, Preston put out a short statement claiming that "continued
support for the Narmada projects is justified."  A few days later a more
detailed response was issued by the Bank management justifying the
Bank's determination to continue with the project with the announcement
of vague "remedial measures" and the dispatch to India of yet another
mission to review the work of the independent review.

The complacency of the Bank's reaction to the Morse Report sparked off
attacks from both citizens groups and donor governments.  A letter
endorsed by 11 U.S. environmental groups including the Environment De-
fense Fund (EDF), the National Wildlife Federation, the Sierra Club and
Friends of the Earth declared that the organizations were "alarmed and
disturbed" by the Bank's response.  The environmentalists warned the
Bank that as long as it continued to fund projects such as Sardar
Sarovar they could not support the U.S. contribution to the $18 billion
replenishment of the International Development Association (IDA), the
division of the World Bank which lends to low income countries.  The
groups also warned that they would oppose U.S. support of the "Earth
Increment," a vague concept endorsed at the Earth Summit as an extra
donation to IDA so that it can increase its "environmental" lending.

The U.S.  Senate Committee on Appropriations wrote to Preston at the
same time to express its "surprise and dismay" at the Bank's behavior.
Meanwhile, the Swedish Finance Ministry issued a press release calling
the Bank's response to the Morse Report "inadequate;" the Dutch Minister
for Development Cooperation stated that construction of Sardar Sarovar
should be suspended; and the European Parliament passed a motion
calling for the Bank to withdraw from the project and pay compensation
to those who have suffered from it.

Pressure in the press

During August this year, pressure on the World Bank was stepped up by
international environmental groups in preparation for a meeting of the
Bank's Executive Directors (EDs) to discuss the Bank's response to the
Morse Report.  At the beginning of September, the English journal The
Ecologist published as an editorial an open letter to Lewis Preston
warning the Bank president that if even one person drowned as a result
of filling the reservoir behind Sardar Sarovar, he would be held
personally responsible.  If the Bank did not withdraw from the
"criminal enterprise," The Ecologist editors threatened "to call upon
NGOs and activists from both North and South to put their weight behind
a campaign to close down the World Bank once and for all."

Later that month during the World Bank's annual meeting in Washington,
D.C., a shorter open letter to Preston was published as a full-page
advertisement in the international edition of the Financial Times.  The
text of the letter, which was signed by 250 environmental, human rights
and development groups, networks and coalitions from 37 countries,
representing 676 additional groups, warned the Bank that its position
was risking a world wide campaign "to cut off funding to the Bank,"
which would start by the groups opposing the replenishment of IDA.
Other full-page advertisements in the New York Times and the Washington
Post made similar threats.  Behind the scenes, environmental groups in
Europe, North America and Japan intensely lobbied their governments to
instruct their EDs to vote against the project.

A "dishonest" Action Plan

On September 11, the Bank management produced an "Action Plan" drawn up
by the Indian authorities and Bank staff.  The Bank management hailed
the plan to put resettlement and rehabilitation "on the right track" as
"very constructive and encouraging."  The implementation of the Action
Plan would be monitored and subject to yet another review to be
completed by the end of March 1993.  If the review found that the Action
Plan had not been implemented as agreed, the Bank would then suspend
further funding.

The Action Plan is "callous and dishonest," in the opinion of Shripad
Dharmadhikary.  "After years of non-compliance and non-implementation,
and a long history of broken promises," Dharmadhikary wrote in a letter
to the EDs, "the belief that the project authorities will suddenly
change overnight is naive at best, and a deliberate misrepresentation of
reality at worst."

One of the key arguments used by the Bank to justify its position is
that if it pulled out the project would go ahead anyway, with fewer
social and environmental safeguards.  The NBA, however, does not believe
that it will be possible for the Gujarat government to obtain the
necessary financing to finish the dam if the Bank pulls out.
Dharmadhikary also says that "the continued Bank support to the project
is being interpreted by the Indian government as a carte blanche to go
ahead and do whatever it pleases."

"By continuing in the project," Dharmadhikary says, "the Bank is sending
a clear message that it is condoning a long-standing pattern of gross
violation of policies and agreements."  Dharmadhikary claims that the
Indian authorities do not take seriously threats from the Bank to
suspend funding:  since 1988 the Bank has threatened to suspend credit
at least six times if certain conditions were not met.  In almost all
cases the conditions were not met, yet the funding continues.

An "unjustifiable decision"

The planned meeting between the Bank management and the EDs to discuss
the Bank's response to the Morse Report was postponed from early
September to the beginning of October due to delays in negotiating the
Action Plan with the Indian government.  It was then postponed again to
October 15 to give the EDs more time to consult with their governments
and with the Morse team about the Action Plan.  Bradford Morse had been
seriously ill for some time and neither the EDs nor the anti-dam
campaigners were aware of his opinion of the Action Plan.

On October 13, Morse and his deputy, Thomas Berger, dropped a bombshell.
In a furious letter to Preston, Morse and Berger announced their "deep
concern" over the way in which the Bank memo introducing the Action Plan
"ignores or misrepresents the main findings of our Review."  The
letter attacks virtually every section of the memo--on resettlement, on
the people affected by the canal and on the environmental aspects of the
project.

The letter shook the Bank and delighted campaigners.  "It proves that
the India Operations Department has simply been telling lies in an
effort to keep the project going," says Lori Udall, an EDF attorney who
has coordinated the international campaign to get the Bank to pull out
of Sardar Sarovar.  The meeting of the Bank Board was delayed for yet
another week so that Preston could respond to the letter and the
Executive Directors could meet with the complete independent review
team.

When the Board finally met on October 23, the antidam lobby's hopes
were dashed:  the EDs calling for suspension--the United States, Japan,
Germany, Canada, the Nordic countries and Australia--represented just
under 42 per cent of shareholders votes.  Although a blow to
campaigners, the meeting was far from a smooth ride for the Bank.
Internal sources say that U.S.  Executive Director Patrick Coady told
the Board that continuing with the project "will signal that, no matter
how flawed the project, no matter how many policies are violated and no
matter how clear the remedies prescribed, the Bank will go forward on
its own terms."

EDs accused the management of being "reluctant and defensive," of
suppressing information and of misleading the Board.  Two of the EDs
warned that the Bank's performance could affect donors' willingness to
replenish IDA.  Coady and the Norwegian ED Jorunn Maehlum reportedly
implied that the board might regret its decision when environmental
groups put pressure on donor governments to withhold Bank funding.

After calling for the project to continue, the British ED David Peretz
issued an extraordinary four-page press release which a furious
editorial in The Ecologist described as "a hopeless attempt to justify
at length an unjustifiable decision."  The press statement, headlined
"Britain Puts World Bank on Notice," said that the Board should "give
Narmada one last chance."  Several of the EDs are thought to have
emphasized strongly that if a set of "performance benchmarks" to
evaluate the Indian authorities' progress in implementing the Action
Plan were not met by March 1993, then funding should be suspended
immediately.

The Narmada and geopolitics

Behind the politics of the dam project itself, there were other powerful
reasons to explain the determination of the highest levels of Bank
management and of some Western governments to keep Sardar Sarovar going.
The Indian government, which is by far the Bank's biggest client, is in
the process of implementing a World Bank-led package of economic
reforms.  Like most similar "structural adjustment" packages, the Indian
program is widely unpopular, and Prime Minister Narasimha Rao's minority
government is in a relatively weak position.  The Bank therefore has a
strong interest in supporting the government and encouraging it to
stay the difficult course of economic liberalization.  Bank management
and several EDs made repeated references in the weeks leading up to the
Board vote to the "impressive commitment" of the "new" Indian
administration.  Yet Rao's government has been in power for over a year,
in which time the human rights situation in the Narmada Valley has
markedly deteriorated.

Last minute lobbying by Bank staff and Indian officials is reported to
have been intense.  Prime Minister Rao is reported to have telephoned
Preston and several heads of state including Germany's Chancellor Kohl
to stress the importance of the Narmada project for his government;
senior Bank staff are reported to have bypassed normal channels within
the U.S.  Treasury and spoken directly to senior officials to try and
enlist support for the management position.

Dam opponents greeted the board decision by announcing that they would
immediately begin their campaign against IDA and the Earth Increment.
"We do not now believe that the Bank can be trusted to help the poor and
the environment," Udall declared to the press.  "Along with our
counterparts in borrower and donor countries we are launching a
worldwide campaign to reduce funding to the World Bank."

Udall also referred to the recent internal report by a top Bank
official, the "Wapenhans Report," which found that the percentage of
Bank projects which were considered "unsatisfactory" by Bank auditors
had risen from 15 percent in 1981 to nearly 40 percent in 1991.  The
Wapenhans Report revealed poor appraisal practices, a failure to
properly monitor and implement projects and the violation of almost 80
percent of its lending agreements.  "While Morse describes the
failures of a single set of projects," Udall says, "Wapenhans shows that
such failures are widespread."

The NBA also called for a cut in IDA funding.  The Indian activists are
demanding that dam construction and all other irreversible project work
be halted while the authorities attempt to implement their Action Plan,
and that an independent team be appointed to evaluate whether or not the
benchmarks are met in March 1993.  "A Bank mission alone is not
acceptable," an NBA spokesperson says.

Three weeks after the Bank Board meeting, Preston visited India.  While
staying in Bombay he agreed to meet NBA activists but, according to the
Andolan, at the last moment he sent a message to the anti-dam delegation
saying that he would not be able to meet them because he wanted to
attend a fashion show with his wife.  The activists protested Preston's
actions by blocking the road outside the luxury hotel in downtown
Bombay where Preston was staying.  Within minutes they were set upon
by police, beaten with sticks, dragged by the hair into waiting police
vans and taken into custody.  All charges against the 25 protesters ar-
rested were dropped the following day.

The "police rampage," as a Bombay newspaper described it, is a telling
indication of the genuineness of the "new" Indian governments'
commitment to improving its human rights record on the Narmada.  Simi-
larly, Preston's behavior suggests that a Bank assurance of "improved
consultation practices" with NGOs is no more meaningful than any of its
previous broken promises on participation and consultation detailed in
the Morse Report.  The Indian government and the Bank are on course to
fail their "one last chance."
---------
Patrick McCully is an editor for Ngonet, a project based in Montevideo,
Uruguay, which works to improve communications between NGOs
concentrating on environmental and social issues.
----------
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