Summary Article

"The World Bank's Juggernaut: The Coal-Fired Industrial Colonization of the Indian State of Orissa"

Destroying Orissa, Fueling Climate Change: 
A Joint Project of the World Bank, 
Transnational Corporations, and G-7 Governments

The World Bank, transnational corporations, and G-7 countries are principal actors in the destruction of the state of Orissa in eastern India. They are also proving to be principle actors in the growing instablity of the Earth's climate.

The story, in brief, goes like this: Climate Convention gets signed in 1992 at the Earth Summit in Rio by most of the world's governments, amid much fanfare by wealthy governments and loud complaints by the fossil fuel industry. Poor countries in the global South are given more lead time to "develop their economies" before they reduce greenhouse gas emissions. Rich countries are given notice that their emissions will soon have to be reduced dramatically. Rich countries respond by funnelling massive quantities of capital, via the World Bank, into fossil fuel-driven power plants in the South, and moving energy-intensive industries to the global South. Poor countries, starved for electrical power, and eager to earn foreign exchange to pay off interest on World Bank loans, accept the new sweetheart deals for Northern TNCs, pushed by the likes of U.S. DOE Secretary Hazel O'Leary and (late) Commerce Secretary Ron Brown. Privatization is pushed through at World Bank behest to ensure foreign ownership of power production and consumption is unhindered by sentiments such as the belief that power for domestic purposes should be available and affordable. Post-privatization, power rates go up by 500 percent for the less than 20 percent of households with power; power rates plummet for industry, many of them foreign-owned TNCs, or industries producing products for export to the North. Poor people, whose only wealth is a small plot of land for crops and a clean environment, are pushed off of their land to make way for mines or industry; their air and water grows steadily more polluted. Middle income people find power unaffordable. Rich TNCs make off like bandits. Northern governments smile all the way to the Bank--the World Bank, that is--where they reinvest their profits. Global greenhouse gas emissions continue their steady climb to dangerous heights--1 percent of manmade annual global greenhouse gas emissions coming from Orissa alone.

This story of Orissa, unfortunately, is being repeated around the globe. Under the banner of "poverty alleviation," free trade, and democracy, the World Bank is playing a central role in making a mockery of the Climate Convention--while destroying sustainable, traditional economies in the global South. By providing private industry with such inducements as loan guarantees, low-interest loans, and guaranteed access to international markets, the World Bank is ensuring that coal mining booms in Orissa. By privatizing and deregulating Orissa's power sector, by looking the other way when labor activists are beaten or tortured, by claiming the environment will "benefit" from expanded coal-fired power, as it is in Orissa, the Bank is creating a powerful magnet for chronically-polluting and energy-intensive industries--many of them multinational corporations based in the G-7.

The World Bank, in Orissa as elsewhere around the globe, is not the majority source of investment capital for energy development. It supplies only 3 percent of the total finance requirements for the energy sector in developing economies; the private sector provides about four times the amount provided by official development finance. However, as the Bank admits, "the Bank plays a key role in setting the standard by which other energy projects are judged, thus exerting an influence disproportionate to the size of its investment portfolio alone." Since 1990, the Bank has approved 154 loans totalling more than $22 billion for a variety of projects in the electric power sector. Most of these loans were to non-Annex 1 countries, which do not face binding restrictions on their greenhouse gas emissions.

As in other regions of the world, the Bank has been joined by G-7 countries in financing coal-fired industrialization of Orissa. Known G-7 financiers of Orissa's industrialization include the U.S. government, who loaned $232 million toward the Ib Valley coal-fired power plant; an additional $75 million is forthcoming for further investment in Ib Valley's coal-fired power plants. France provided $607 million toward the construction of an aluminum smelting complex, Nalco; the Kaniha and Ib Valley coal-fired power plants; and the Ananta coal mine. Japan has invested $125 million in coal mining expansion in Orissa. The U.K. has invested $40 million in the upgrading of the Hirakud dam in Orissa, and an additional $75 million toward the privatization of Orissa's power sector.

This investment is not charity. For every dollar the U.S. government puts in the World Bank's coffers each year it gets $1.3 in procurement contracts for U.S. TNCs(1). It is from this perspective-- of "enlightened self-interest"-- that G-7 countries like France, the U.S.A., the U.K., and Japan, and other non-G-7 countries, like Sweden and Israel, have seen gold in this impoverished east Indian state.

The biggest beneficiaries of G-7 government investments were big U.S. TNCs, such as General Electric (with annual sales larger than the Philippines), Dodge Phelps, Foster Wheeler, AES, North-East Energy Services, Spectrum Technologies, and Raytheon. Stein Industries and Aluminum Pechiney of France also gained a foothold in Orissa's expanding industrial economy, as did Alcan of Canada, and Mitsui and Kakoki and Okura of Japan.

What did Orissa get out of it? In strict dollar terms, Orissa's GDP was $3.6 billion in 1993. The World Bank Group, the Asian Development Bank, and G-7 loans and financial assistance, through 1996, have funneled $2.85 billion into the state, about 80 percent of its GDP in 1993. (In comparison, the combined total annual sales of the TNCs who are most benefiting from procurement contracts in Orissa's power sector is more than 80 times both figures: $290 billion.)

However, when one looks beyond the GDP, and into the lives of the people who live in Orissa, one sees a grim picture. The massive exploitation of coal and other mineral resources has unleashed a chaotic torrent of destruction across the state. Thousands of people, most of them participating in subsistence-based economies, many of them tribal (25 percent of Orissa's population is tribal) and among the poorest in India, have been negatively impacted by this energy-intensive, toxic industrial development.

Pollution rises: Dead rivers carry toxic effluent through villages where people still rely on the blackened rivers for bathing, drinking and washing their clothes. Choking levels of pollution from the coal-fired power plants hang in the air.

Power rates go up: Fewer than 20 percent of people living in rural Orissa (and probably closer to 4 percent) have access to electricity produced by the state's power plants, despite the fact that the state government last year declared Orissa had a power "surplus." The lucky few with electricity saw their rates go up by 500 percent after privatization. The agricultural sector will be particularly impacted by the removal of state-subsidized power. This cost will be reflected in higher farm prices, with further adverse consequences for the poorest, whose purchasing power will be reduced.

Jobs go down: While a few Orissans are employed by the coal, bauxite, chromite and other mines and other industries, many of those employed in the mines come from other regions of India. The increasing reliance on open cast--or "strip"--mining has also brought on a decline in coal mining jobs, even while coal mining rapidly expands. India's coal production rose from 200 million to 250 million between 1988 and 1993; yet, the number of people employed in coal mining actually declined from 674,000 to 655,000.

Displacement: Many people are displaced by active resettlement programs that are clearing out "local populations" to make way for coal power-consuming steel mills, bauxite and chromite mines. Poor people are being ousted from land they have held for generations without being given comparable land or even fair compensation; World Bank internal documents urge clients to move people out before the Bank finances a mining expansion project to avoid "high visibility and [providing] oustees and their representatives with an additional platform for discussing compensation issues."

Harassment and suppression of workers rights has escalated: In Talcher, the industrial heart of Orissa, a labor organizer attempting to raise the minimum wage for poor tribals employed in the mines from 9 rupees a day to 14 rupees (or less than 50 cents) a day was beaten unconscious, and his house set on fire. Other activists working to protect the traditional way of life have been arrested, tortured, and illegally jailed.

Greenhouse gas emissions skyrocket: Orissa's industries and coal-fired power plants will be emitting 164 million tons of carbon dioxide equivalent annually by the year 2005--the same amount as all of India's annual emissions for 1996, and the equivalent of about 1 percent of the projected growth in man-made greenhouse gases anticipated globally over the next decade. In addition, Orissa's industrialization will release toxic and potent global warming agents, tetrafluoromethane and hexafluoroethane (byproducts of aluminum smelting) equivalent to 8 million tons of carbon dioxide emissions, which, because they are long-lasting, will contribute to a "perpetual change" in the earth's atmosphere.

Destruction of subsistence communities: Called "an industrial drain", the Nandira tributary, which feeds into the Brahmani River, once life-sustaining river, is dead. The black water is poisoning and slowly killing people, animals, fish and plants as far away as 50 miles downstream. Agricultural productivity has dropped for farmers dependent on this polluted water; fishing communities have been wiped out.

Water supplies depleted: In addition to the contamination from industrial pollutants, groundwater in the coal mining and coal-fired power production region of Talcher-Angul and Ib Valley has dropped dramatically, forcing people to rely on the blackened river water for cooking, cleaning, drinking and irrigation.

Fluorosis: Fluoride, a byproduct of aluminum smelting, which consumes 30 percent of the power produced in the region, has contaminated the groundwater around aluminum smelters. As a result, there is a crippling outbreak of fluorosis -- a disease which causes skin disease, and bones and teeth to grow brittle-- among people and cattle living near the smelter and captive power plant of NALCO (a French-owned aluminum plant), where the state pollution control board tested water wells and ponds and found fluoride well in excess of the regulatory limit. In 1990, scientists from G.M.College of Sambalpur found an astonishing 67% of men and 64% of women suffered from fluorosis; most severely impacted were young people between the ages of 12 and 19. Cattle populations have dropped precipitously in the area due to the bone-weakening disease.

Chronic diseases soaring: The rates of cancer, bronchitis, and other lung and skin diseases in the region around the World Bank-funded Talcher Thermal Power Plant, where air pollutants are heavy are rising. These diseases are especially high among the tribal population which, because they are traditionally landless, have little choice but to live on the most undesirable land -- the non-productive land closest to the mines; they have no option but to drink the water blackened by coal dust and toxic effluents.

Broken Promises: The World Bank and the G-7

Under the Climate Convention, signed at the U.N. Earth Summit in Rio in 1992, the task of mobilizing the financial resources needed to ensure that poorer, developing countries are given the resources to develop their economies in a sustainable manner was given to the World Bank and the IMF.

The Convention states the

"...Multilateral institutions play a crucial role by providing intellectual leadership and policy advice, and by marshalling resources for countries committed to sustainable development."

However, the standard set by the World Bank in Orissa not only contradicts its mandate under the Climate Convention; it also contradicts the original mandate of the World Bank--to alleviate poverty and promote sustainable development. As documented above, the benefits are accruing to some of the wealthiest corporations in the world.

The Bank is also pushing privatization and deregulation in Orissa. yet, privatization means less accountability and virtually no regulatory oversight of industry by government. As Union Carbide proved in Bhopal, multinationals set lower standards for their activity in developing countries; with lower health, safety and environmental standards, accidents happen. And when they do, the ones to suffer are usually those already suffering the most.

The World Bank is also downgrading its own policies, with significant consequences for its projects overseas. In April of 1996, the World Bank revised its guidelines for power plant emissions. The new guidelines are a huge step backward: They double the limit for SO2 emissions given in the 1994 guidelines, ignoring standards set by the World Health Organization and many industrialized countries regarding ambient sulfur dioxide concentrations; they do not set numeric limits for total sulfur dioxide emissions; and fail to address greenhouse gas issues. In addition to acting as agents of climate change, SO2 and NOx are also one of the main agents of severe forest damage via acid rain and soil acidification, leading to reduced crop yields. In high concentrations, SO2 and NOx also have strong negative impacts on human health.

The Bank has continued in this same deregulatory mode in a separate move to downgrade its binding 1992 Board-approved "Operational Policies"on energy efficiency to non-binding "good practices" documents (GP 4.45 "Electric Power Sector"; GP 4.46 "Energy Efficiency"). These changes clearly reflect a lack of commitment to sustainable energy development-- in stark contrast to the Bank's stated goals.

Saying One Thing, Doing Another: The G-7 and Climate Change

The G-7, who together with the World Bank, make destruction of Orissa possible, are equally culpable when it comes to violating commitments they have made to halt climate change. All G-7 countries are signatories to the Climate Convention, and have committed to making sustainable development a central goal of their policies and programs, and to intensifying and deepening the integration of environmental considerations into all aspects of their programs. At the G-7 Summit in Halifax, Canada, held on June 16, 1995, the G-7 countries, all of whom have signed the Climate Convention, made the following commitments:

"...We place top priority on both domestic and international action to safeguard the environment....We underline the importance of meeting the commitments we made at the 1992 Rio Earth Summit and subsequently, and the need to review and strengthen them, where appropriate. Climate change remains of major global importance."

The action of G-7 countries in Orissa, however, shows that their real priority is not to address climate change, but to circumvent the Climate Convention for their own short-sighted ends, while supporting transnationals from their own countries. Until this gaping loophole, intended for Southern countries to develop their own economies, is closed, the people of Orissa will continue to suffer. Meanwhile, all of us will pay an incalculably high price for what TNCs now view as an "externality" in their profit margin: the growing imbalance in the Earth's climate and the growing inequity between rich and poor.