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DAM-L FWD: WALL STREET JOURNAL: resettlement in India/World Bank
The Wall Street Journal
August 14, 2000
Page A1
India Project Shows Risks of Intervening, Despite Sound Goals
By MICHAEL M. PHILLIPS
Staff Reporter of THE WALL STREET JOURNAL
HANDIDHUA RESETTLEMENT COLONY, India -- World Bank officials took a
Hippocratic oath when they agreed in 1997 to lend India more than a
half-billion dollars to mine coal. Above all, the bank officials swore to
themselves, the project would do no harm.
Since then, Coal India Ltd. has reaped big benefits from the bank's money.
The giant state-owned company says it has grown more efficient, more
productive and more profitable.
But the same can't be said for thousands of villagers, whose farms and
homes in east and central India are being swallowed up by the mines
financed by the World Bank.
Gobinda Dehury and his wife Pankajini watched their entire village of
Balanda demolished last year by bulldozers. Now they live with their
two-year-old son in a spartan house here in the "resettlement colony" of
Handidhua, a ghost town where the water taps have no drinkable water, the
shopping center has no shops and the community center no community.
"I'd have rather stayed in the village," Ms. Dehury says. "Everything was
there: water, electricity, coal."
World Bank officials concede that, once again, one of their massive Third
World investments has exacted a severe toll on citizens whose lives
ultimately were supposed to have been made better by economic development.
"We thought we could make a real difference in this project," says Edwin
Lim, the bank's director for India. "We've been disappointed with the
project on a number of fronts." One of the biggest disappointments, bank
officials admit, is they failed to honor their do-no-harm pledge.
What went wrong? From the start, bank officials acknowledge, they knew
they were rolling the dice by lending India $530 million to start, expand
or modernize two-dozen open-pit coal mines. The project would require
large peasant resettlements of the sort caused by many past bank-financed
infrastructure projects in developing countries. The record of such
traumatic dislocations is riddled with failures.
Bank officials envisioned that many of the displaced subsistence farmers
would be transformed into small-business owners. But the bank made a
skeptical Coal India responsible for this ambitious retraining, despite
the company's lack of experience with such a task. With the company
failing to satisfy bank expectations, both sides agreed last month to
cancel the loan, with only half the money disbursed.
The World Bank's major Third World projects have come under increasing
fire in recent years from activists who charge that building roads, dams
and pipelines often serves corporate and elite interests to the detriment
of the poor. In April, some 10,000 protesters making this allegation
marched on bank headquarters in Washington.
Still, bank officials continue to see the big projects as necessary for
nurturing fragile economies. "These are the bread and butter of the bank
historically," and it doesn't intend to back away from them, says Mr. Lim,
who is 59 years old and has been with the institution for nearly three
decades.
Founded in 1944 to rebuild a shattered Europe, the bank -- owned by 181
member nations but dominated by the U.S. -- now focuses on Asia, Africa,
Eastern Europe and Latin America. It has a world-wide active loan
portfolio of $116.4 billion. Its lending has unquestionably helped hasten
economic growth in such nations as Chile, Mozambique and Uganda. And with
its infrastructure projects under assault, the bank has stepped up efforts
to address basic human needs, from primary education to the fight against
AIDS.
Nonetheless, evidence from the field suggests that despite five years of
reformist talk from bank President James D. Wolfensohn, the institution is
still having trouble figuring out how to finance big development projects
in poor countries while protecting the poor themselves.
In Peru, activists complain, a World Bank-financed gold mine adds little
to the local economy while pushing poor farmers from their land. In
Lesotho, critics allege, the bank hasn't done enough to help those
displaced by a series of dams. "We've never had confidence in the World
Bank's ability to restore these people's lives," says Lori Pottinger of
the International Rivers Network, a Berkeley, Calif., group that has
campaigned against the Lesotho water project.
The bank defends the Peru and Lesotho investments, saying those nations
lack enough domestic capital to spark economic growth.
Still, bank officials say they worried about collateral human damage when
they considered the coal-mining loan to India. "Resettlement in very
large, densely populated absolutely poor countries like India is very
tough," says Mr. Lim. But India, hungry for energy, would have expanded
coal mining with or without a bank loan, officials say. The bank concluded
that its participation could soften the blow to farmers whose land and
traditional livelihoods inevitably would be taken away.
The lengthy loan agreement reached with Coal India in 1997 called on the
company to make whole all of the villagers it would displace, with bank
representatives from New Delhi and Washington making periodic monitoring
visits. The bank employs sociologists, medical doctors, economists and
many other sorts of experts on the needs of the poor in developing
countries. But it doesn't run the projects it finances. That duty is left
to borrower governments and, at times, state-owned companies.
Bank staff members say they expected that problems would arise with the
Indian coal project because of its scale and difficulty. They didn't have
to wait long. In late 1997, a bank inspection team discovered in the state
of Bihar that many peasants were resisting resettlement or floundering
once they lost their farms.
Bihar and its southern neighbor, Orissa, offer a mind-bending
juxtaposition of modern aluminum smelters, power plants and coal mines
alongside medieval agriculture. Barefoot men in loincloths guide water
buffalo and wooden plows through small fields. Women dry rice on village
roads and gather seeds and mushrooms from the forest floor. Leprosy
remains common.
Most of the farmers in the way of the mines were immediately suspicious of
Coal India's attempt to move them. Many have refused to go where they're
told or vow improbably to stay put, despite the coming excavation. Reasons
for resistance range from monetary to mystic.
Sankirtan Korali, who is 56 years old and supports a dozen family members
on 18 acres of rice, lentils, oilseeds and millet in the doomed village of
Darliparli, consulted a fortune teller about whether to head south to a
resettlement colony assigned by Coal India. The seer's advice: "Going
south means death." That was enough for Mr. Korali. He says he will take
whatever compensation the coal company gives him and go elsewhere.
Coal India has offered farm families varying sums, depending on the value
of lost acreage and homes. In Darliparli, residents report being offered
$270 an acre. A few hours away, Jallia Gornaik says he received $570 for
each of his three acres of rice paddy in the village of Anantaberini, plus
$4,550 for his house. Faced with widespread resistance from other
villagers, the company recently began offering $1,140 to those families
who head off on their own.
Residents of the village of Balanda objected that these amounts were puny.
They tried a lawsuit and then civil disobedience. But eventually the
bulldozers arrived under police protection and leveled everything.
Hundreds of Balanda families were told last year to move to the Handidhua
resettlement colony, which boasts 321 tiny homesites. Only 11 families
have arrived at the expanse in impoverished Orissa, where unfiltered bilge
water from the coal pits is pumped in a few hours each day for bathing and
washing. The coal company promised to provide drinking water, but so far
hasn't.
On the front porch of the empty shopping center lives Rudramani Naik, a
60-year-old widow dressed in a bright orange sari. In Balanda, she and her
husband owned a house and a small plot of farmland, she says. A rail line
now runs through the former village, framed on one side by the conveyor
belts of the Ananta mine and on the other by the gaping Jagannath coal
pit.
In 1989, Coal India's Orissa subsidiary, Mahanadi Coalfields Ltd., paid
the Naiks 60,000 rupees (about $1,360) for their property. But Ms. Naik
wasn't forced to move until a year ago, by which time her husband and one
son had died and the money was long gone. Her other son, unemployed,
offers no support. While she owns a homesite in Handidhua, she has no
money for a house and survives on her husband's coal-company pension of
less than $14 a month. "My son has left me, so now I'm alone," she says.
"I can't earn any money."
Meanwhile, Coal lndia has improved its earnings. Fueled by the World
Bank's millions, the company says its new excavators are tearing record
amounts of coal from the ground to feed the Indian economy. Modernized
equipment and other improvements are allowing each miner to produce 21%
more per shift than he did just four years ago, the company says.
Wealth will eventually flow to the poor, says Shashi Kumar, the Coal India
engineer charged with carrying out the bank's social dictates. "If coal
production doesn't increase, the power plants won't come," he says. "If
the power plants don't come, the expansion of industry won't take place.
And if industry doesn't expand, employment along the chain won't be
produced."
Company executives note that they allow some displaced villagers to live
temporarily in staff quarters. The sick are permitted to use Coal India
hospitals. And some villagers have fared far better than Ms. Naik.
One unusually prescient group of 60 Balanda families years ago anticipated
the coming of expanded mining and bought 600 acres of good land 12 miles
from the village. When Coal India's eviction notice finally came in 1999,
they took the company's money and moved to what they call New Balanda,
building sturdy cement-block houses.
But complaints outnumber successes. On several occasions, bank officials
returned from inspections and grumbled to Coal India about poor conditions
in resettlement colonies, including Handidhua.
Their patience wearing thin, company officials put most of the blame on
the villagers. "Nobody wants to be resettled, not even from hell to
heaven," says Mr. Kumar. "We genuinely want to help, but somehow -- due to
lack of will on their part and sometimes due to lack of care on our part
-- things aren't working out the way we want."
Beyond moving villagers to make way for mines, Coal India was supposed to
guide peasants toward new means of making a living. The bank's inspectors
found this effort succeeding only sporadically.
India is so crowded that the company couldn't simply find new farmland for
many of those forced to move. For decades, Coal India helped villagers it
displaced by offering them work with the company. But these days, the
mining giant, which has a payroll of 562,000 employees, is trying to
reduce bloat. In fact, the World Bank demanded the company step up
efficiency as a condition of making the mining loan.
But trimming corporate fat means fewer jobs for each ton of coal produced,
and many of those jobs demand greater skills than peasant farmers possess.
Of the more than 10,000 adults expected to lose land or homes, only about
3,200 have secured jobs with Coal India or its subcontractors.
The World Bank thought it had a solution to the jobs problem: requiring
the company to train villagers to start small businesses. Bank officials
say they had seen this strategy work elsewhere in India, although not in
cases of forced resettlement of so many people. Now, all around the coal
areas, the company has sponsored classes in basic carpet weaving, incense
making and electrical repair.
Yet only 1,400 displaced peasants have finished job training, and of
those, just 550 actually earn anything with their new skills, the company
says. One difficulty is that most of the villagers are illiterate and have
had little contact with the market system. Many say they hope that if they
hold out long enough, Coal India eventually will provide them with
full-time salaried jobs.
Bank officials assert the coal company hasn't tried hard enough to help
victims of economic progress. The loan agreement didn't specify a precise
time frame for accomplishing the entrepreneurial training, but the bank
had assumed that Coal India would fulfill this obligation in something
close to the five-year duration of the payout of the loan, ending in late
2002.
Coal India executives now say that expectation was unrealistic. Many
peasants, particularly the women, have turned out not to want to start
businesses, or are just too lazy, company officials say. "To convert a
person from a villager without any trade in his hand, give him training
... and turn him into an entrepreneur -- there's no place in the world
that has taken place in less than a decade," says Mahanadi Coalfields's
chairman, S.N. Sharma.
Bank officials realized as early as 1998 that thousands of villagers
wouldn't get Coal India's training or go into business. Poverty
specialists at the bank suggested a solution that hadn't been in the
original loan plan: Coal India should provide refilled mine land or unused
company property for peasants to start livestock farms, hatcheries or even
forestry operations. These pursuits would be more familiar to people whose
agricultural roots reached back generations, the specialists said.
Coal India signed on, at least in principle, in 1998. But the company
didn't agree to set up test projects until a year later. And even today,
the land-based projects languish in planning stages.
Bank officials carried out six supervisory visits in 1999 and this year.
Each tour led to a stern letter to Coal India about the slow progress in
dealing with the woes of resettled villagers. By this spring, frustration
had mounted on both sides, as the bank's warnings started to sound more
like ultimatums. In April, protesters descended on the bank's Washington
headquarters, although officials say the noisy demonstrations didn't
affect their thinking about the Coal India situation.
Last month, the Indians took the face-saving step of requesting that the
loan be canceled, with only half of the $530 million doled out. The bank
quickly assented -- the second time in three years one of its loans to
India has been derailed. Such drastic moves are relatively unusual.
A smaller $60 million loan aimed at improving Coal India's environmental
practices and aiding displaced peasants remains in place, although the
bank's leverage in enforcing its social goals obviously has been reduced.
Apart from the resettlement and job-training fiascoes, bank officials say
India has been too slow in allowing private investment in its coal
industry and that some Coal India units have been losing money.
Bank officials defend their gamble on Coal India. "We were confident that
these projects would be better done with our involvement than without it,"
says Mr. Lim.
Company officials are ambivalent. "The World Bank loan was very welcome
when it came -- no doubt," says Mr. Sharma of Mahanadi Coalfields. But "if
some part of it isn't available, we'll manage. India will run, World Bank
loan, or no World Bank loan."
Indeed, bank officials confirm that their experience with Coal India
doesn't affect 79 other loans to the country, which have a total value of
about $11.5 billion.