INDIA-ENVIRONMENT: AsDB Ready to Lend, But Not For Narmada Dam

By Pratap Chatterjee Reprint | | Print |

Pratap Chatterjee

MANILA, Feb 22 1996 (IPS) - The Asian Development Bank (AsDB) plans to lend money to the Indian state where the much publicised Sardar Sarovar dam on the Narmada river is located, but bank officials insist the earmarked funds will not help to finance the project.

Gujarat, in western India, has been actively soliciting funds to pay for the Sardar Sarovar dam since the World Bank withdrew funding for the partly complete 130 metre-high dam three years ago.

The World Bank’s withdrawal was prompted by massive popular protests and a World Bank sponsored study which found that the project could have major negative environmental and social consequences.

Reports in Indian newspapers last month suggested the Manila- based AsDB would lend the Gujarati government roughly 570 million dollars for the energy sector, 285 million dollars for “budgetary support”, and 142 million dollars for “infrastructure development”.

AsDB officials however told IPS this week that the figures cited were “excessive”.

The AsDB has lent India a total of 5,817 billion dollars in the 30 years of its existence, but made no loans to India in 1995 and just 166 million dollars in loans in 1994. This comparatively low volume is markedly different from 1993 when the AsDB provided 878 million dollars in loans to the South Asian country.

An AsDB team has just presented its back-to-office report on a proposal to change traditional lending patterns by giving money directly to the government of Gujarat. Although the World Bank in Washington does lend directly to state governments in India, this would be a change in AsDB practice.

The new scheme is based on discussion last month between Suresh Mehta, the chief minister of Gujarat, and Noritada Morita, the director of AsDB lending for west Asia.

One AsDB official, who requested anonymity, however said the AsDB would say “categorically no” to any proposal to lend money for projects linked to the Sardar Sarovar dam scheme.

Indian activists, like Shripad Dharmadhikary, of the Narmada Bachao Andolan (Save the Narmada Movement), which has spearheaded massive protests against the dam over the last ten years, however remain concerned.

“Considering that the Sardar Sarovar Project (SSP) is the biggest single item on the State’s annual budget (this year about 100 million dollars has been allocated) and that the SSP is the biggest infrastructure development in the State, it is sure that part of this money is going to fund the SSP,” he says.

“The new loan will not only make it possible for the disastrous project to be kept alive, but will also give it a new legitimacy — and of course, adversely affect the people’s struggle,” he added in an interview.

Bindu Lohani, a senior official in the AsDB’s environment department, was cautious when asked to comment about where the earmarked money would end up. “I couldn’t say yes, I wouldn’t say no but I would have thought it was unlikely that we would lend money for Sardar Sarovar,” he said.

“Our loans to Gujarat will be an experiment. Depending on the results, we could expand this programme to other states,” he said. “Public sector reform, water supply and sanitation, urban power, perhaps some private sector loans but no forestry or education loans because the government is adequately funded in that area,” he added.

“But there was no mention of Narmada in the back-to-office report. We will only be able to make such decisions after somebody goes to the state to examine investment opportunities,” he added.

Other officials were more direct. “Absolutely not. We will not lend money for the Narmada dam. It’s far too controversial,” said one official who did not want to be named.

Manila-based environmental groups are planning to write letters expressing concern to Mitsuo Sato, the AsDB president, about the loan. The activists told IPS that they would monitor the AsDB’s lending in this area very carefully to make sure that no money goes to the Sardar Sarovar project.

Construction of the Sardar Sarovar dam began in 1985. When completed in 1997, the dam is supposed to be 130 metres high and 1,210 metres long. Designed primarily as an irrigation project it is supposed to irrigate 1.9 million hectares of land and supply domestic water to 2.3 million people.

The Indian government estimates that more than 200,000 people will have to be relocated in order to make way for the dam and the accompanying reservoir.

In the wake of major protests by people from the Narmada river valley who were to be resettled, the World Bank appointed an independent commission in 1991 led by Bradford Morse, former head of the United Nations Development Programme (UNDP), to examine the project.

When the Morse report called for the Bank to “step back” from the project, the Washington-based lending institution issued new conditions for the Indian government to meet in order to qualify for another 181.5 million dollars in loans for the dam.

Not satisfied with the Indian government’s work on meeting these conditions, the World Bank in 1993 cancelled plans to lend any more money.

Leaked internal World Bank reports last May say that though the original project “rationale” for Sardar Sarovar was sound and the construction standards high, the future is “uncertain” because India does not have a “good track record” in operations and maintenance.

In retrospect, Dennis Purcell, a World Bank official who reviewed the project, says the Bank “did not follow its own environmental guidelines” such as requirements that environmental impact studies be conducted.