IFC strongly supports Mundra UMPP

Q1. What is the Tata Mundra project?
The Tata Mundra project is a 4,150-megawatt power plant developed by Coastal Gujarat Power Limited (CGPL) at the port city of Mundra, in India’s Gujarat state. CGPL is a 100 percent subsidiary of Tata Power Limited. This is India’s first ultra-mega power project (UMPP). It generates power through five 830 MW units that use supercritical technology and imported coal. Supercritical technology saves fuel and reduces greenhouse gas emissions. The plant uses some of the most energy-efficient coal-based power generation technology available in the country. It was fully commissioned in March 2013 and has operated successfully since then. The project will benefit around 16 million rural and urban-based domestic consumers across the western states of Gujarat and Maharashtra and the northern states of Haryana, Punjab, and Rajasthan.These areas are chronically short of electricity. Reliable power will improve competitiveness of manufacturing and services industries in the region. These usually rely on expensive standby diesel generation to meet power needs. The project will also reduce subsidy payouts by the government as it reduces dependence on diesel.
Q2. What is IFC’s role in the project?IFC has played a critical role in the Tata Mundra project, both in terms of investing and in providing guidance on environment and social practices.

The Tata Mundra project is India’s first ultra-mega power project. IFC’s long-term financing helped the project get finance from other international and Indian institutions. IFC’s continued commitment to the project will help ensure its success.

The project is critical to India’s plans to achieve sufficiency in power. It will also reduce the country’s reliance on diesel-based power that increases pollution and hurts the economy.

Power projects using super-critical technology help reduce greenhouse gas emissions. This is an important impact as India has traditionally relied on conventional technologies for coal-based power generation, which have higher greenhouse gas emissions. IFC’s guidance helped the project improve environment and social practices. These are described in in greater detail in response to question #4.

Q3. Why does India need ultra-mega power projects?

India’s severe electricity shortage hampers industrial growth and competitiveness. About 400 million people in India do not have access to the electricity grid. India’s chronic power deficit and lack of new investments in the sector is one reason for its slowing economic growth.

Large parts of India (about 40 percent, according to a World Bank estimate) depend on diesel for back-up power. For industries, this means high operational costs. For the country, it creates pollution and hurts economic growth.

According to the Central Electricity Authority, India’s per-capita consumption of electricity is very low, about 779 kilowatt hours a year. This is less than a third of that of China (around 2,453 kWh) or Brazil (around 2,251 kWh). But, demand is growing rapidly.

To sustain economic growth, India needs to add about 100,000 megawatts to its existing generation capacity of about 225,793 megawatts. This needs to be done over the next five years or so.

More than 68 percent of India’s power comes from thermal plants. Hydropower accounts for about 18 percent, while the rest comes from nuclear, wind, and other renewable sources of energy. In spite of optimistic growth projections for non-thermal power generation, this situation is not expected to change in the medium term.

The addition of large-scale power-generation capacity can support large-scale job creation, not only at individual power projects but also across the economy as availability of reliable power spurs expansion of industries, agricultural growth, and increased economic activity. Given the circumstances, there is an urgent need for India to add significant generation capacity in a short timeframe.

At this stage, only large power projects can rapidly respond to this growing demand for electricity and achieve significant development impact. The Tata Mundra project has created about 800 jobs to run day-to-day plant operations. Electricity generated by the project will reach about 16 million domestic consumers across five states.

Of the four ultra-mega power projects bid out by the government of India, Mundra is the only one commissioned within agreed timeline and budget. The project has increased India’s power-generating capacity by 2 percent.

Q4. How has IFC’s involvement helped improve the project?

IFC’s Performance Standards and the World Bank Group’s Environment, Health, and Safety Guidelines represent good international industry practices. Tata Power is reputed for its sensitivity to environmental and social issues. By helping the company implement its performance standards, IFC ensured that the project’s environmental and social impacts are in line with the best international industry practices.

IFC helped the company conduct a detailed social impact assessment. This assessment was helpful to assess and mitigate the project impacts on local communities. This also helped the company plan several social development initiatives with active involvement of local communities.

Since IFC Performance Standards are more stringent than Indian emission laws, IFC’s involvement in the project has resulted in lower emissions of air pollutants, such as sulfur dioxide and particulate matter, than required by law.

Q5. Is this project aligned with IFC’s strategy for India?

Yes, it is. IFC is committed to improving access to electricity and promoting clean energy alternatives. Over the past three years, IFC transformed its power portfolio so that more than half of it is in renewable energy. IFC has been involved with several first-of-its kind renewable energy projects. The Tata Mundra project fits into IFC’s overall approach for several reasons:

  • Power from this plant reaches several industrial units previously dependent on diesel generation sets, thus reducing pollution.
  • The plant is more efficient than any other subcritical power plant in India, and will avoid discharging 3.2 million tons of CO2 emissions every year, which otherwise would be produced when using conventional sub-critical technology.
  • This is the first time that 800 MW supercritical technology has been successfully implemented in India.

Four hundred million people in India lack access to reliable electricity. The importance of electricity in ending poverty and building prosperity cannot be understated. Lack of electricity impairs opportunities for education, healthcare, clean water, freedom of movement, and jobs. By increasing India’s electricity supply by 2 percent, the project will result in fewer people depending on diesel, kerosene, and firewood.

IFC, as a development institution, needs to most effectively and efficiently address critical development issues such as access to electricity. Consequently, IFC’s promoting of innovative energy solutions—renewable where possible, cost-effective, environment-friendly, and sustainable where it is not—is consistent with its development goals.

Coal, Technology, and Pricing

Q6. Is the Tata Mundra project consistent with the World Bank Group’s approach to the energy sector?

Yes it is. Expanding access to energy, accelerating energy efficiency, and promoting renewable energy is at the core of the World Bank Group’s work in the energy sector. The Energy Sector Directions Paper, approved in July 2013, maps the direction for future World Bank Group investments and advisory activities in the energy sector, as well as privatization support that will enable investments.

The Energy Strategy Directions Paper is not a backward looking document but gives direction for our future engagements in this sector. For more on this please visit: http://www.worldbank.org/en/news/feature/2013/07/16/world-bank-group-direction-for-energy-sector

Q7. What technology does the project use, and how is it different from traditional technology?

The Tata Mundra project is the first in India to use supercritical technology on this magnitude.

This technology and choice of unit sizes help the project emit less greenhouse gases than would be produced by regular coal-fired power stations of the same capacity. This project is designed to burn 1.7 million tons less coal per year, thus avoiding carbon emissions of 3.2 million tons per year.

The project generates about 764 grams of carbon dioxide per kilowatt hour—well below the Indian national average of 1,259 grams per kilowatt hour and the OECD (Organisation for Economic Co-operation and Development) countries’ average of 888 grams per kilowatt (figures are for 2005.)

The Tata Mundra project has met appropriate World Bank Group guidelines at the time of IFC’s financing.

Q8. Why does the project use imported coal? Is India’s domestic coal production not sufficient to meet the project’s needs?

India has large coal reserves, but these do not meet the needs of large power plants. In its Integrated Energy Policy, the Indian government decided to locate some of its power plants close to ports for easy access to imported coal. Other coal-based plants will be located near mines and will have their own sources of coal. The country’s ultra mega power program is designed to allow for a combination of imported and domestic coal projects. Compared to imported coal, domestic coal contains more ash and results in higher pollution.

Q9. Why is the Tata Mundra project considered carbon-friendly even though it did not qualify for CDM benefits?

Even though Tata Mundra project did not qualify as CDM (Clean Development Mechanism), other projects based on similar technologies have been registered with the United Nations Framework Convention on Climate Change (UNFCCC) as CDM, indicating that the technology is considered carbon-friendly.

CDM is an independent mechanism governed by UNFCCC. An independent panel qualifies projects for CDM based on several factors and criteria. Although the Tata Mundra project substantially contributes to a reduction in greenhouse emissions when compared to other thermal power plants using less efficient technologies, Tata Mundra is a competitively bid out project and therefore does not meet certain CDM criteria.

The carbon efficiency of a project, on the other hand, is scientifically calculated based on factors such as coal quality and the plant’s technical efficiency. By these criteria, Tata Mundra is a carbon-friendly project. It emits 23.8 million tons of carbon dioxide per year, substantially less than the 27 million tons emitted by a plant of similar installed capacity using conventional, less efficient technologies.

Additionally, the project generates about 764 grams of carbon dioxide per kilowatt hour, well below India’s national average of 1,259 for coal-based power plants.

10. The project uses a blend that includes an alternate grade of coal. What is the environment and social impact of this?

Emissions from the alternate coal, named EcoCoal, including sulfur dioxide and particulate matter, are well within Indian regulatory and IFC requirements.

EcoCoal is low in ash and sulfur, similar to the original coal used by the plant. While there is increased ash production due to use of EcoCoal, the fly ash produced is handled in a closed system and disposed of according to the Indian government’s fly ash notification to avoid adverse environmental and social impact. Bottom ash is sent to a lined ash pond in slurry form, as was originally proposed. The environmental impact associated with blending has been assessed and Tata Power will address it in accordance with IFC Performance Standards.

Q11. Why does the project need to hike tariffs? If the government allows a hike, will the project remain cost competitive?

Yes, the project will still be cost competitive. The project uses coal imported from Indonesia. The project undertook a long-term fuel supply agreement with suppliers. As a result, Tata Power, in the power purchase agreement, committed to supply power at a levelized tariff of Indian rupees 2.26 per kilowatt hour. But an unforeseen change in law has led to the fuel supply agreement being negated with respect to price. This change, along with rise in coal prices, has adversely impacted the project.

Tata Power has petitioned the Central Electricity Regulatory Commission to decide on the issue.

The project continues to have one of the lowest fixed costs — considering the capacity charge (the fixed portion of the tariff representing compensation for non-fuel related inputs) — in India. Even after the requested tariff hike the project will remain very competitive with its cost of power much lower than average for procurers, and even lower than some recently commissioned thermal projects. The project will remain among the most cost competitive sources of power in India.

Environment and Community

Q12. Has the project supported local communities, including fishing communities, near the project site?

Yes, measures to improve quality of life of local communities, including fishing communities, are in place.

Residents of 15 villages in the Mundra and Mandvi blocks of Kutch district of Gujarat state benefit from the project’s community outreach initiatives. These initiatives aim to improve education, promote health, build infrastructure, improve access to natural resources, create livelihood opportunities, and empower women. Some specific measures include:

Residents of 15 villages in the Mundra and Mandvi blocks of Kutch district of Gujarat state benefit from the project’s community outreach initiatives. These initiatives aim to improve education, promote health, build infrastructure, improve access to natural resources, create livelihood opportunities, and empower women. Some specific measures include:

  1. Village-level development advisory committees formed to ensure wider village participation in conceiving, developing, and implementing improvement initiatives.
  2. Fodder provided to dairy cattle through the Gaushala initiative.
  3. Priority to local community members for project-related jobs or contracts.
  4. Community infrastructure through construction of modern roads, stadium, community halls, drainage lines, clean drinking water and sanitation, boat lights, and street lights.
  5. Improved health facilities through periodic medical camps.
  6. E-learning stations (computer kiosks) in schools.
  7. Microfinance opportunities and training for self-help groups.
  8. Drip irrigation, pond renovation, well recharge, and check-dam programs.
  9. Better fishing nets to fisherfolk, solar lights for fishing boats, and fishing equipment.
  10. Sagarbandhu project for development of fisherfolk in association with the Aga Khan Society for Rural Development Program (India).
  11. Addressing indebtedness and livelihood enhancement for seasonal migrant fishing communities living near the plant in association with Fisheries Management Resource Center, a non-governmental organization.

Details of measures already in place and additional measures being implemented by CGPL to benefit local fishing communities are available at http://www.tatapower.com/cgpl-mundra/home.aspx and this attached document: http://www.tatapower.com/cgpl-mundra/pdf/umpp-greener-future121015.pdf

Q13. Has the project impacted mangroves?

The project has not converted any areas under mangroves, and there are no mangroves in the thin coastal strip impacted by the project’s intake and outfall channels.

This was confirmed by a marine impact assessment study conducted by the National Institute of Oceanography as part of the plant design process.

However, in accordance with environmental clearance conditions, Tata Power has planted 1,000 hectares of mangroves in the Kantiyajal village of Bharuch district. This activity generated employment in the local community. The location and species were selected by the Gujarat Ecology Commission.

The project boundary is located 1.5 kilometers from the coast. Its only exposure to the coast and intertidal areas is through a 95 meter-wide intake channel and a 250 meter-wide outfall channel (up to retention walls). More details about the location are available at http://www.tatapower.com/cgpl-mundra/location.aspx

Compliance Advisor Ombudsman

Q14. What is the Compliance Advisor Ombudsman (CAO)?

The office of the Compliance Advisor/Ombudsman (CAO) is the independent recourse mechanism for projects supported by IFC and Multilateral Investment Guarantee Agency (MIGA), the private sector lending arms of the World Bank Group.

CAO was established in 1999 and reports directly to the president of the World Bank Group. CAO works to:

  • Address concerns of individuals or communities affected by IFC/MIGA projects
  • Enhance social and environmental outcomes of IFC/MIGA projects
  • Foster greater public accountability from IFC and MIGA.

The office of the CAO is based in Washington, D.C. More details are available here: http://www.cao-ombudsman.org/about/whoweare

Q15. What is the CAO complaint about?

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

Tata Power undertook several initiatives for the welfare of communities near the project, including fishing communities. Please refer to question #12 for more information on this.

Q16. What is the status of this complaint?

The complaint was deemed eligible for assessment in June 2011. After a series of meetings and discussions with the CAO, the complainants said they preferred that the CAO transfer the complaint to its compliance function. This was done 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. On July 27, 2012, the CAO concluded the compliance appraisal, which found that a number of issues raised by the complainants merited further enquiry.

The details of the complaint and the status of the CAO process are available on the CAO website at: http://www.cao-ombudsman.org/cases/case_detail.aspx?id=171

Q17. How will IFC ensure that the CAO findings are addressed?

IFC is working with Tata Power to make sure that the CAO findings and suggestions in areas agreed by IFC in its response to the CAO audit are implemented within a reasonable timeframe. This will be done under active supervision of the IFC project team and environment and social consultants.

Further details of the CAO’s conclusions, IFC’s response, and future course of action are detailed in questions #18 to 23 that follow.

Q18. What are the key conclusions of the CAO audit report?

The CAO audit report mentions several measures implemented by CGPL to address concerns of fishing communities within its area of influence. It provides good practice suggestions to improve environmental and social outcomes on the ground.

The report highlights certain areas where it concludes that IFC’s review and supervision of this project is not in compliance with the provisions of IFC Policies and Performance Standards on social and environmental sustainability. IFC’s view on these findings is different from that of the CAO’s.

For more details please refer to the CAO audit report at http://www.cao-ombudsman.org/cases/case_detail.aspx?id=171

Q19. What is IFC’s response to the report?

IFC has welcomed the good practice suggestions mentioned in the CAO audit report, which it will take up with CGPL as part of its ongoing project supervision. However, IFC has a different view on several conclusions listed in question #20.

For details please refer to IFC response to the CAO audit report at http://www.cao-ombudsman.org/cases/case_detail.aspx?id=171

Q20. On which CAO conclusions does IFC have a different view?

IFC’s view is at a variance from CAO’s conclusions relating to:

  1. Physical and economic displacement of fishing communities
  2. Impact on sensitive coastal and marine resources due to outfall channel and thermal discharge plume
  3. Impact on marine environment and livelihood of fishing communities
  4. Rigor of social and environmental impact assessment
  5. Avoiding negative impacts and exploring technically and financially feasible alternatives to the cause of impacts.
  6. Inadequate engagement with fishing communities in CGPL’s area of influence
  7. Compliance with WBG EHS guidelines relating to conditions at the edge of the mixing zone
  8. Classification of air shed as non-degraded; cumulative impact assessment of neighboring developments including Adani Thermal Power Plant and Mundra West Port Development
  9. Assessment of third party risks due to Mundra West Port.

Q21. On what aspects does IFC agree with the CAO findings?

IFC has noted suggestions relating to having a single document with all compliance requirements listed at one place as a good practice. This enables demonstration of compliance with requirements detailed in the loan agreement, recognizing also that this may not be possible in complex projects where several management plans are developed at different stages of the project.

For details please refer to IFC response to the CAO Audit report at http://www.cao-ombudsman.org/cases/case_detail.aspx?id=171

Q22. What additional measures is Tata Power implementing to address the concerns and expectations of the fishing communities?

Tata Power is proactively implementing several measures to address concerns expressed by the complainants and civil society organizations. These are:

  1. Commissioning a third party to undertake detailed health monitoring in neighboring communities[1]
  2. Committing to install a pipe conveyor over the three-kilometer stretch nearest to neighboring resident communities, replacing the fully enclosed belt conveyor used to convey coal from the port to the plant
  3. Planting mangroves in the inter-tidal areas as a part of pilot project to assess the feasibility of mangrove near the outfall channel
  4. Commissioning the National Institute of Oceanography to undertake model confirmation studies which will then be validated by another independent/government agency
  5. Engaging the Bombay Natural History Society to continue its turtle monitoring program
  6. Taking measures to ensure that sulfur content in the blended coal remains at a level to ensure compliance with IFC’s sulfur dioxide emission norms
  7. Working through Fisheries Management Resource Center, a non-governmental organization, to implement a program to address indebtedness and livelihood enhancement for seasonal migrant fishing communities residing near the plant
  8. Partnering with the Aga Khan Society for Rural Development Program (India) to implement the Sagarbandhu project dedicated to the development of the fishing community.

For details on these initiatives please refer to IFC response to the CAO Audit report at http://www.cao-ombudsman.org/cases/case_detail.aspx?id=171

Q23. What are IFC’s next steps now, given the CAO’s report and non-compliance with required standards?

IFC will work with the company to implement suitable corrective actions within a reasonable timeframe in areas where IFC agrees with the CAO findings.

Social and environmental aspects highlighted by CAO

Q24. Did the company identify fishing communities as project affected?

Tata Power identified fishing communities as a potentially affected community from the very outset. The company engaged with impacted communities, launched social development activities, and provided support for livelihood generation in early 2009 once the location of the outfall channel was finalized and specific fishing communities within its influence area were identified.

Q25. Can you describe Tata Power’s engagement with the fishing communities?

The company identified specific fishing communities within its area of influence and undertook extensive consultations with them from 2009 onwards. This still continues. The company also took into consideration community stakeholder consultations held by state-owned Power Finance Corporation, the agency responsible for bidding out the project, prior to Tata’s winning the bid. Further, the company also undertook consultations with the fishing communities, as part of the baseline social impact assessment process.

Key risks and impacts identified during the consultations have helped the company develop and implement relevant outreach programs and to address the fishing communities’ concerns and expectations.

Q26. Have fishing communities been physically and/or economically displaced?

There is no physical displacement of seasonal fishing communities due to the project.

Once the fishing season is over, the seasonally resident fisherfolk return to their villages. The temporary settlement is completely dismantled by them and no structure is left behind, temporary, semi-permanent or permanent. The settlement is set up afresh every year at the start of the fishing season.

The fisherfolk continue to have access to the coast and land is available for settlements and/or for fish drying.

The company has commissioned model confirmation studies that will provide insights into any impacts on the marine environment and livelihoods of the fishing communities.

Q27. Has the company addressed impacts on pastoralists?

CGPL has addressed the concerns of pastoralists by setting up a scheme to provide fodder on an ongoing basis. This scheme is managed by a trust under joint management of CGPL and representatives of the pastoralists. The scheme ensures fodder and feeding area for the needs of cattle reared by around 400 local pastoralists.

Q28. Has the company ensured that fishing communities and pastoralists can continue to access inter-tidal areas?

Yes, the company has provided alternate access to the inter-tidal areas to ensure continued access for both fishermen and pastoralists.

Q29. Is fly ash from the plant contaminating the fish being dried at Tragadi Bunder?

As already mentioned, the project has safeguards to prevent fugitive emission of ash. The company has adopted a closed system to handle fly ash and prevent its escape into the environment. Further, bottom ash is stored in slurry form in the ash pond; which prevents it from being blown into the air.

Q30. Has pollution and coal dust, emitted from the project, affected horticultural produce and residents of nearby villages?

No. The company has installed state-of-the-art pollution control equipment like electrostatic precipitators (ESPs) to meet the stringent emission norms for particulate emissions.

Particulate matter is emitted through a 275 meter stack and is within prescribed limits. The emissions get well dispersed in the air and result in minor increase in ground-level concentration. This does not impact any horticultural produce in the vicinity. Over and above government norms, the company has ensured compliance with the more stringent IFC norms. The company uses low sulfur coal, which when coupled with the 275 meter height stack, results in limited increase in ground-level concentration of sulfur di-oxide.

The company takes adequate measures to prevent coal dust emission into nearby villages. These measures include:

Dry fog dust suppression system at all coal conveying transfer points

  • Water sprinklers along the coal stock pile
  • Hood for the conveyer belt
  • Nine meter-high wind barrier wall along the periphery of the coal stockyard
  • Green belt development along the periphery of the coal stockyard.

The company will convert the three kilometers of the coal conveyor closest to residences into a pipe conveyor to address concerns relating to coal dust and to avoid fugitive coal dust blowing into nearby communities.

Q31. Has the company undertaken a cumulative impact assessment?

CGPL has, consistent with the approach defined in IFC Performance Standards, undertaken a cumulative air quality impact assessment, also taking into account proposed emissions from the neighboring Adani Power Plant.

Q32. How many persons from local communities has the company employed?

Around 210 members from the local community are employed at the project.

Q33. Have supply and/or service contracts been awarded to persons from local communities?

Till now, over 50 contracts worth Indian rupees 240 million ($4 million) have been awarded within local communities.

Q34. Have migrant workers impacted the day-to-day lives of local communities?

The company has constructed a labor accommodation complex within the plant premises, which can house up to 8000 migrant workers. The complex includes amenities like a canteen, self-cooking facilities, public call office, and a grocery/general provision store.

As part of its labor influx management plan, the company regularly interacts with representatives of local communities to keep track of any issues that may need to be addressed.

Further, the company has a community grievance redress process in place where any individual can lodge a complaint, including those related to impacts from migrant labor. Till now, no grievances against the labor have been brought to CGPL’s notice.

Q35. Did the project draw groundwater for construction?

The company did not sink any bore wells or draw groundwater at the premises for construction. In the initial phase, the company purchased water from water contractors. Subsequently, the company laid a pipeline to source Narmada water as primary construction water. All process related requirements are catered through a reverse osmosis plant set up by the company.

[1] Neighboring communities here refers to villages Tunda, Vandh, Kandagara, Nana Bhadia, Tragadi, Modhava, and the seasonal settlement of fisher folk on the coast near CGPL.

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