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, resettlement 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 Defense 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 worldwide 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 co-ordinated 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 anti-dam 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 arrested 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. Similarly, 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."