INDIA: World Bank postpones coal loan in wake of political crisis

By Pratap Chatterjee Reprint | | Print |

Pratap Chatterjee

WASHINGTON, Jun 25 1995 (IPS) - The World Bank has decided to delay a 425-million-dollar loan to expand India’s coal mines until after the next national elections, according to IPS sources.

The loan is the second in a new series of loans intended to add 16,000 megawatts to the Indian power sector. Indian planners say the country needs 150,000 MW of electricity-generating capacity over the next 15 years, in addition to the 80,000 in existence today.

The first loan, for 400 million dollars, was approved in June 1993 for the National Thermal Power Corporation (NTPC) to expand superthermal power plants in Singrauli, central India, by 2,000 megawatts.

Calcutta-based Coal India Limited requested the second loan to expand 33 coal mines across India to supply NTPC plants. Several Bank missions have met with Coal India executives, but a date for approving the loan, originally set for March, has already been put off twice, first to April and then to September.

This month, the approval date was postponed yet again at the request of the Indian government. One of the reasons, say Bank officials, is that the current Congress Party-led government in New Delhi could be unseated in elections which must be held by June, 1996.

Congress’ hold on power is anything but certain. In recent months, the party has been defeated in several state-level elections by the right-wing Bharatiya Janata Party (BJP) and other opposition parties.

The BJP swept the western state of Maharashtra where it has put into question decisions made by previous Congress-led governments.

The Hindu-nationalist party, for example, is now challenging a three-billion-dollar power project led by Texas-based Enron Corporation on the grounds that the project is too expensive and was awarded without competitive bidding.

“The Indian government wants us to wait until after the elections,” said an official who works in the India country department in the Bank’s Washington headquarters. “That probably means about a year,” said the official, who asked not to be named.

The loan request states that Coal India intends to make the coal industry commercially viable and eliminate its dependence on the government budget.

Apart from the political problems faced by the Congress Party, the Coal India project could have significant social effects. Twenty of the 33 mine expansions will involve the resettlement of 18,257 people, according to Bank estimates.