The Indian Economy Overview

The World Bank and India

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The World Bank and Sardar Sarovar Project :
A Story of Unacceptable Means Towards Unacceptable Ends

On September 16, 1992, I invited Mr Ernest

Stern, Managing Director, World Bank, along with his senior officials and spend the monsoon of 1993 in the lowest hut in Manibeli. The Bank's response to the Morse Report's severe indictment of the resettlement in the Sardar Sarovar Project, which the Bank had brought out just a few days earlier, had glibly stated that "expressions of alarm" regarding submergence of tribals by activists were "completely misplaced". If this was really the case, I told Mr Stern, then why not send a senior representative of the Bank to spend the monsoon there? Incensed, Mr Stern got up and walked out of the meeting!

This incident was typical of the way the Bank works. It dictates policies, influences and makes decisions, imposes its ways on the project—and yet, refuses to take responsibility for them or their consequences. This was also the hallmark of the Bank's involvement with the SSP.

Bank's Involvement in SSP

The Bank involvement with the SSP began in the early 80s when the Bank sent its first appraisal mission. It had also sanctioned a small amount for the initial project planning activities. While the basic parameters of the project had been decided by the NWDT (Narmada Water Dispute Tribunal), it was clear that it is not possible for India to go ahead with such a gigantic project without help from the World Bank. In fact, the Bank was also aware of this. In its Staff Appraisal Report of the Project, it wrote (under the heading "Rationale of Bank involvement in SSP") that it was not possible for India to go ahead with this project without the Bank involvement, and, that this project offered the best opportunity for modernization of India's irrigation in the direction desired by the Bank!

From the beginning, the Bank's intention to shape and control Indian irrigation sector and, as is now clear—its complete economy—was clear.

In 1985, the World Bank approved and agreements were signed for two loans to the project totaling 450 million US dollars. It was, and is, largely believed that the Bank provides aid to a project only after thoroughly studying the cost benefit aspects, its technological aspects, and, also the environmental and R & R aspects. So it was assumed to the case of SSP. Yet, the shocking fact was that when the credit agreements were signed in 1985, the SSP had not yet been cleared by our Central Government. The Ministry of Environment and Forest (MOEF) was refusing to clear it because crucial studies and plans were absent including the plans for R & R! And even the Planning Commission had not cleared the project! Clearly, the Bank did not have much use for the country's monitoring and clearing agencies. Its own stamp of approval was sufficient. And so pervasive was the Bank's influence, that officials in our own country started pushing for the clearance from the MOEF, giving the reason that "even the World Bank" had now approved the project.

When the Government agencies themselves were bypassed, there was hardly any chance that the affected people would in anyway have been consulted by the Bank.

It was because of all this that the NBA started criticizing and later opposing the Bank's role in the SSP.

People's Response to Bank

Contrary to what the government projects, the NBA never saw the World Bank as a "grievance cell" where it would take up complaints against the Indian Government. The basic stand was that while the Bank was clearly influencing and being party to major decisions. And when the project could not go ahead without the credibility and finance brought to it by the Bank, it was in no way accountable to anybody—neither the Government, nor the affected people.

The Bank involvement with the SSP began in the early 80s when the bank sent the first appraisal mission. From the beginning, the Bank intention to shape and control irrigation sector and, as is now clear--its complete economy--was clear.

On the other hand, people saw that the World Bank a party to the project, equally responsible for it and its consequences a la the government. And as the people's struggle challenged the government, it also started challenging the Bank. While the challenge on the field came from the affected people, in the national and international forums the groups supporting the struggle started challenging it. Whenever the Bank officials visited the field, the affected people would "gherao" them, confronting them with questions. These questions ranged from the issues of R&R to project benefits, and to the role of the Bank itself in the project.

Emergence of Global Alliance

At the international level, more and more organizations started maintaining regular touch with the happenings in the Narmada Valley, and started questioning and challenging the Bank at regular intervals and at every available forum. This soon evolved into an informal but highly organized group—the Narmada Action Committee. The members of the Narmada Action Committee would receive infor-mation from the valley (and elsewhere), and would act as a nodal center for disseminating and powerfully using this in their own coun-tries to challenge their own Governments. In many cases, their basic stand was - we would not like our tax money to be used to finance destructions. In many cases this exercise also led these groups to challenge the general conditions and policies relating to the 'official aid' from these countries. An interesting case is that of Japan, where the Narmada struggle led to large changes in the policies related to the Official Development Aid (ODA).

The Bank's reactions to all these fundamental issues raised was typical. It denied that anything was wrong and started defending the project. However, while outside it kept up the pretence of 'all is well', inside it was well aware that things were seriously wrong with the project. For example in 1988, Shri Moin Quereshi, then Vice President of the Bank wrote to the three Chief Ministers concerned, pointing out the serious lapses in the project, and threatened not to extend the credit to the project. Such conditions were imposed from time to time. Thus, the Bank clearly knew that things were wrong. Yet, it seems that this had become a "prestige issue" for the Bank. The Bank became the biggest defender of the Project. In 1990, it brought out and widely circulated a note on the SSP, heaping praises on the project. Ironically, this blatant defense of the project by the Bank continued even as it was preparing to commission the Independent Review.

Independent Review

Under great pressure from the affected people, the Indian and International NGOs, and donor governments, the Bank appointed an Independent Review to look into the environmental and R&R aspects of the SSP. The Review, headed by former chief of UNDP Mr. Bradford Morse, and co-headed by Canadian lawyer and jurist Thomas Berger, was simply unprecedented in the history of the Bank. It was for the first time that an ongoing project was being independently re-examined for the Bank, that too by a panel of such eminence. The Independent Review spent over 10 months on the job, a large part of this in the field. They met the Government officials, the affected people, the NGOs attempting to resettle the people, and, of course, the Narmada Bachao Andolan.

Whenever the bank officials visited the field, the affected people would "gherao" them, confronting them with questions. These questions ranged from issues of R&R to project benefits, and to the role of the bank itself in the project.

The report was not only historic but the report vindicated what the people's struggle had been saying for so many years, it also lucidly described how the Bank had violated almost every directive and policy that it had laid down for itself. It said that the project was fundamentally flawed, that R&R and environmental assessments were not even complete. More significantly, it held the World Bank squarely and equally responsible for the present situation and called for the Bank to "step back". It also warned that the project could go on only with the use of : "unacceptable means".

Bank's Response to Review

The Bank's reaction to the report was typical. Instead of gracefully accepting the findings and acknowledging that it had been wrong in defending the project, the Bank stepped up its defense of the project. On the same day as the Morse team's report was released, Lewis Preston, the President of the Bank issued a press statement, saying, "continued support to the project is justified". The entire NGO community, the affected people were aghast. This reaction of the Bank did more to reveal the true nature of the Bank than anything else.

What followed was nothing short of a massive cover up operation launched by the Bank with the collusion of Indian Government.

The Bank clearly knew that things were wrong. Yet, it seems that this had become a "prestige issue" for the Bank. The Bank became the biggest defender of the Project.

The Bank meanwhile was launching its "operation cover-up" and sent a 14 member mission to India to examine the situation in light of the Morse Report. The mission, headed by Ms. Pamela Cox spent exactly 14 days in the country and came out with a report which said essentially that the Morse report had exaggerated the situation, and while there were problems - they could always be solved with a little bit of this or a little bit of that. A typical World Bank approach which itself had been criticized by the Morse team, and which the team had held responsible for the aggravation of an already difficult situation. The Cox mission met only the Government officials and the affected people that the Government took them to. They did not meet those affected by the canal and other parts of the project. Because of its blatant attempts at the cover up, the Cox mission was dubbed by the people as "Whitewash mission". The Cox mission recommended that with certain "conditions" the criticism of the Morse team could be taken care of, and the credit to the project continued.

Meanwhile, as more and more nations studied the Morse report, they started coming out with the clear stand on the issue, many calling for the Bank to withdraw from the project. But even then, the Bank management, whose deep personal involvement had made it a prestige issue was not able to see the situation objectively. The "Operation cover up" continued. On Sept. 11, 1992, the Bank brought out its official response to the Morse Report titled, "Sardar Sarovar Project: Review of Current Status and Next Steps". Popularly referred to as "next steps", it was out and out an attempt to brush away the findings of the Morse team. It was so blatant, that Mr. Morse, whose official role was over with the submission of the report was forced to fire an angry letter to the President of the Bank, on whose name "Next Steps" had been issued. In the letter, he said, "We are concerned that it has become necessary to write this letter... It is clear that the Bank's "next Steps" document has sought to present a version of our report that is at variance with the report itself...

The Bank may reject our findings... The Bank may decide that overriding political and economic considerations are so compelling that its Operational Directives are irrelevant....But it should not seek to reshape our report to support such decisions".

Meanwhile, the Government of India, which always accuses the NBA of going to foreign Govern-ments, sent a series of high powered delegations to the major countries to solicit their support for the conti-nuation of the SSP loan. Delegations of the level of Central Ministers and State Chief Secretaries went to Japan, UK, USA, Canada & Germany. The crucial vote took place on Oct. 30, 1992. Six major shareholder countries Directors voted against the continuation, and called for the Bank to 'step back'. These were—USA, Germany, Japan, Canada, Australia and the Nordic Countries. However, the continuation was approved with 58%:42% vote in its favor. The Government of India was asked to fulfill a set of conditions and benchmarks by March 31, 1993, when a fresh review would take place.

A look at these "benchmarks" shows the state of the project. The very first benchmark says that the government must have ready, by the end of March 31, 1993 the "accurate estimate of the number of people to be affected by the project". If even this was not known 14 years after the Tribunal Award and seven years after the Banks approval of credit, the situation and the basis of the Bank's claim that all is well can well be imagined.

The Government of India, which always accuses the NBA of going to foreign Governments, sent a series of high powered delegations to the major countries to solicit their support for the continuation of SSP loan.

In any case, the Indian Govern-ment, desperate to at least show that it was trying to fulfill the con-ditions, unleashed the full force of the State. The Morse report had warned, that any further progress on the project could take place "only with the use of unacceptable means". The warning proved prophetic. The Government launched a massive bout of repression in the valley, with hundreds of people being arrested, many badly beaten, many tortured, and hundreds charged with false cases.

Yet, it was becoming clear to the Government that the conditions and benchmarks - which represented the minimum essentials were simply not possible to fulfill. More important, the Government was this time clear that it would not be possible to prepare some kind of cover-up for the lack of fulfillment of the conditions, as too many people all over the world were watching it too closely. It seemed clear that when March 31 came, the Government would have to face the ignominy of the Bank withdrawing from the project. This was becoming clear to the Bank also. But withdrawing from the project would mean admitting that things were seriously wrong with the project and would go against everything the Bank had been saying till then. The situation was indeed difficult for both, and away had to be found. It was, on March 30, 1993, just one day before the end of the deadline, the Government of India told the Bank that it did not want the Bank's aid in SSP; the reasons given for this refusal were that the Bank was imposing too many and unnecessary conditions, and this was against the nation's pride and sovereignty. Of course, why the Government realized this only when just a day was left for these conditions, and not when the conditions were actually imposed, does not require any imagination.

Both parties were happy. The Government of India went around claiming that it had rescued the sovereignty of the country from the clutches of the World Bank and its conditionalities (no matter that in the rest of the economy we had capitulated completely). The Bank, meanwhile was happy that it did not have to take any stand on the SSP, and had no further responsibility in the project.

All the world over, of course, it was seen and hailed as the victory of the people's struggle not only in the valley, but also of the social action groups and concerned individuals all over the world.

The world over, it was seen and hailed as the victory of the people's struggle not only in the valley, but also of the social action groups and concerned individuals all over the world. The NBA and its supporters called for the resignation of Preston, and the dismissal of the staff who were responsible for the continuation of the Bank credit after the Morse report. But it was also clear to the NBA and the vast international network supporting it that the story did not end here. The issue of the accountability of the Bank was still not over. The Bank had been a party to the project for seven long years, and was equally responsible for the destruction that had already taken place and that was to follow. It could not walk away. It had to be made to accept its responsibility.

Meanwhile, the Bank's withdrawal from the SSP, and the whole Narmada case had completely shaken the Bank's internal system as well as the donor Government's aid setup. As a direct consequence, the Bank ordered a review of the resettlement in about 147 major past projects all over world, 23 are from India. This review is still ongoing. The other fallout of this victory, and the numerous other pressures on the Bank for accountability, forced the Bank to set up the "Independent Panel" for examining Bank projects.

However, the story of the Narmada has shown that if the people of this country decide to fight, it is possible to throw out of this country the powerful agencies like the World Bank, who along with the other international forces are trying to recolonise and exploit our economy. The Narmada struggle is only a part of this large struggle.


For further details contact:PIRG (Public Interest Research Group) 142, Maitri Apt, Plot No 28, Indraprastha Ext. Delhi 110092. India. Ph: 2432054 Fax: 2224233 email:

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