India - Narmada River Development Gujarat. Sardar Sarovar Dam and Power Project (Vol. 2 of 2) : Annexes to Part 1 & 3

Report. No. 14159 PROJECT COMPLETION REPORT INDIA NARMADA RIVER DEVELOPMENT - GUJARAT SARDAR SAROVAR DAM AND POWER PROJECT (Credit 1552-IN/Loan 2497-IN) Annexes to Part I, and Part III March 29,1995 Agricultural Operations Division Country Department 2 South Asia Regional Office   85 Annex 1 Page 1 of 40 PROJECT COMPLETION REPORT INDIA NARMADA RIVER DEVELOPMENT - GUJARAT SARDAR SAROVAR DAM AND POWER PROJECT (Credit 1552-IN/Loan 2497-IN) ENVIRONMENTAL INPACTS AND MANAGEMENT I. Project Background and Environmental Context 1. At the time the Sardar Sarovar Dam and Power Project was being prepared and appraised, the environmental regulatory regime in India and the Bank's operational guidance mechanisms with respect to environment were still being formulated, or were in the early stages of implementation. For example, the Bank's Operational Manual Statement 2.36 was not promulgated until May 1984. It described environmental concerns as "those pertaining to the natural and social conditions sur- rounding all organisms, particularly mankind and future generations. These concerns encompass human ecology and occupational health and safety." Recognizing that some environmental effects may not become identifiable for a long time, the 1984 manual stated that the environmental aspects of projects should be considered in a longer time-frame than may be appropriate for most other aspects of cost-benefit analysis. In particular, the Operational Manual specified that projects with unavoidable adverse effects on the environment should contain an outline of measures needed to avoid or mitigate these effects as well as a component to implement these measures. This statement was subsequently replaced by an Environmental Operational Directive in 1989, which was in tum strengthened and made more stringent (with respect to operational requirements) in September 1991. 2. In India meanwhile, a similar evolutionary process was underway with respect to environ- mental management. Several national committees had analyzed aspects of India's deteriorating ecology, particularly adverse impacts on forest cover and made recommendations for mitigation measures. These culminated, among other things, in the establishment of a Department of Environ- ment and Forests (MOEF) in the Central Government and the issuing of the Forest Conservation Act in 1980. It was not until 1985, however, that the growing public environmental awareness and concem resulted in forceful action at the center - in January of that year, a new Ministry of Environment and Forests (MOEF) was established and the Prime Minister himself assumed the portfolio. Among other responsibilities, the new ministry was charged with environmental clearance of selected development projects. A year later, in 1986, the Govemment of India passed the Environmental (Protection) Act, 1986, empowering the Central Government to take necessary measures for protecting the quality of the environmenL 3. During the period leading to the project approval by the Bank in 1985, a number of environ- mental studies were prepared by the Borrower to obtain the environmental clearance. These studies were undertaken by the State Governments (Gujarat and Madhya Pradesh particularly) and related primarily to impacts on fisheries, flora and fauna. But the environmental clearance was not provided and more studies were to be prepared. In any event, the projects were approved by the Bank's Board in March 1985 and became effective on January 6, 1986 without a formal forest clearance from the MOEF. Finally, a conditional environmental clearance was given in MOEF's letter of June 24, 1987 subject to the completion of several environmental studies relating to: (i) re- habilitation master plan; (ii) phased area catchment treatment scheme; (iii) compensatory afforesta- tion plan; (iv) command area environmental assessment; (v) survey of flora and fauna; (vi) carrying field capacity of surrounding areas; (vii) seismicity; and (viii) health aspects. The letter noted that existing surveys were incomplete and full details would have to be submitted by 1989 as per an  A.nnex 1 86 Page 2 of 40 agreed schedule. It also indicated that the Narmada Control Authority (NCA) "will ensure that environmental safeguards measures are planned and implemented pari pasu with progress of work on projects". Finally, the letter made it clear that the release of forest lands for the project would be subject to the Forest Conservation Act of 1980 and to prior approval by MOEF. 4. Subsequently, on September 8, 1987 the MOEF gave the requisite clearance for the submer- gence of 13,385 ha of forested areas by the Sardar Sarovar Dam subject to the several conditions relating to: (i) submission of detailed compensatory afforestation plans by September 30, 1987; (ii) compensatory afforestation would be double the area affected; (iii) preparation of a catchment area treatment plan by November 30, 1987; and (iv) no forest lands would be utilized for the resettlement of oustees. This latter condition was in contradiction with the project Legal Agreements as will be seen in the next paragraph. Finally, in October 1988, the Government of India Planning Commission also gave its formal endorsement to the project, again subject to several conditions relating to environment as well as R&R. 5. It should be noted that the Bank's appraisal report and legal documents also dealt with environmental aspects in the following ways: a. the Staff Appraisal Reeport contained a summary discussion of the project's environmental impact focussing particularly on fish and fisheries, the reservoir, forests and wildlife, public health, water distribution and drainage network, training (ref. Annex 1, Supplementary Volume L pages 52 to 55); b. the Staff Appraisal Report also required the preparation of an environnental work plan for environmental effects anticipated including training programs for responsible staff and a watershed management study. (SAR p.29 and Table 22 p.102); c. the Development Credit Agreement (Credit 1552-N. May 10. 1985) called for the Borrower to provide forest land, if necessary, in carrying out the project (Section 3.02); and d. The Gujarat Project Agreement (Credit 1552-IN/Loan 2497-IN both of May 10. 19i8 called for Gujarat in collaboration with Madhya Pradesh and Maharashtra to prepare and funiish the Association for approval: i. by December 31, 1985 an environmental work plan to include suitable training programs for project staff in all the three States (including plans, schedules, costing, etc) [Section 2.11 (a)]; ii. by December 31, 1985, studies and implementation schedules for fish and fisheries, forests and wildlife and public health aspects [Section 2.11 (a)]; and iii. suitable training programs and called for Gujarat to implement such approved programs in collaboration with Madhya Pradesh and Maharashtra [Section 2.1 I (b)]. 6. The deadline for submission of these covenants WaS formnally amended to December 31, 1989.  Annex 1 87 Page 3 of 40 II. Project Implementation 7. The project was regularly supervised at six-monthly intervals by Bank missions from inception to Credit closure. In 1985 to 1987, the Bank put much pressure on GOI for releasing the environmental clearance so that construction works could starL The clearance came on June 24, 1987. The first Bank review of the environment component was made in October 1988 and, as the project was not performing well on several fronts, the Bank and the Borrower signed a Memo- randum of Understanding in December 1988 which stated that (i) a comprehensive environmental framework and its subsequent institutionalization in the concemed states should be prepared; (ii) studies on fisheries, forest, wildlife and health should be initiated or completed; (iii) appoint an Environmental Director at the newly created SSNNL; (iv) an Environment Cell should be created in the MOEF to monitor the activities of SSP; and (v) the recruitment of an expatriate environmental consultant to assist the Environmental Cell in preparing the environmental framework stipulated in the legal documents. However, the meeting also agreed that in view of the creation of the Environ- mental Cell it would not be necessary to engage an environmental specialist in NCA. 8. During that period, the Bank commissioned in 1987 an overview of the environmental aspects of the project to be carried out by an environmental consultant. The publishing of the report was delayed for various reasons to 1989. It made a number of observations and recommendations in particular that the Bank should intensify its supervision and enter into supplemental agreements to strengthen the environmental aspects of the projecL 9. On March 31, 1989 theWater Delivery and Drainage project Credit Closing Date was extended by three months and then by one year to July 1, 1990 subject to certain conditions relating to the release of land for R&R in Maharashtra, R&R policies to be in line with the NWDT award, and other conditions relating to RWS. An Environmental Review carried out in April 1989 indicated that the specified time-based environmental work plan was yet to start and its absence was hampering the monitoring of environmental studies. It insisted in an action letter to DEA and MOWR that a consultant should be recruited as per agreed TOR for preparing the environmental work plan. It also recommended that the plan should be completed before institutionalizing the environmental components within NCA, MOEF and the three states. The mission recognized that some progress had been made on the studies on fisheries, compensatory afforestation, and archeology but none on health. 10. An other environmental review mission took place in December 1989. It observed that the environmental work plan that was originally due in December 1985 was still not started and that the staffing of NCA and SSNNL environmental cells was still inadequate. It recommended the Borro- wer to approach USAID to assist in the preparation of the work plan and made several suggestions on the studies relating to: (i) compensatory afforestation which should include habitat and linkages with natural reserves, (ii) catchment area treatment, (iii) wildlife in the submergence area, (iv) up stream and down stream fisheries, and (v) archeological aspects. The action letter to MOWR of De- cember 13, 1989 which stipulated the conditions for a second one year extension of the Water Delivery and Drainage Project beyond July 1, 1990 emphasized the R&R aspects that should be met such as the release of land in Maharashtra for R&R but made no reference to the pending preparation of the environmental work plan. 11. The May 1990 environmental report indicated that the preparation of the environmental work plan had made no progress. However, the Annex on Status of Compliance with Covenants indicated wrongly that the covenant relating to the work plan was in full compliance. The report also indicated that the position of Member Environment in NCA was still not filled. The supervi- sion mission determined that the conditions relating to R&R had been met and particularly that 2,700 ha of forest at Taloda had been released for the resettlement of oustees in Maharashtra. The Water Delivery and Drainage Project was, therefore, extended for an other year to July 1991.  Annex 1 88 Page 4 of 40 12. The June 1991 the environmental supervision mission paid much attention to the progress made on compensatory afforestation, catchment area treatment, wildlife, fisheries, archeology, health, training and NCA. It indicated that environmental training was yet to start '. It also said that the Environment Member of NCA had been posted recently but that this organization had no clear program and was not effective in coordinating and integrating environmental studies. The June 8, 1991 action letter emphasized the need to prepare and implement an environmental training program. 13. In July 1991, the Water Delivery and Drainage Project was extended for a third and last year on the basis of the progress made in the civil works component and also in the implementation of the R&R component of the Dam and Power Project. The January 1992 supervision mission, which included for the first time a malaria specialist, observed that there was no specific anti- malaria program for the project and that the incidence of malaria had increased in the villages surrounding the damn construction site. He also stressed that the Public Health Service was not geared to meet the special needs of the project and that a Heath Cell should be established in SSNNL. 14. As a result of the commissioning of an Independent Review of the SSP project, the Bank recruited an environmental specialist to assist SSNNL in preparing an EIA for the command area in view of a possible Phase I of the Water Delivery and Drainage Project. The consultant then published an Environmental Information Volume2 which listed and summarized the large number of existing or ongoing studies and proposed a work program for the preparation of the command area EIA. This effort and the presence of the Independent Review Team helped in focussing the Borrower's attention on the environmental aspects of the project 15. The last supervision mission conducted in August 1992, determined that the environmental work plan had still not been formulated as well as the malaria control action plan requested by the previous mission. III. Independent Review Report 16. The Independent Review Team initiated its field work in September 1991 and published and circulated its final report in June 1992. It contains seven chapters dealing with environmenL The report comprises an analysis of the legal background and status of compliance. It observes that by the end of 1988, all required agreements had been reached between the GOI, the States, the implementing agencies of which NCA, and the Bank to ensure that an adequate assessment of the environmental impact of the Sardar Sarovar Projects would be made by 1989. However, it notes that by the time of the review, most of the Bank's 1985 legal requirements and most of the condi- tions attached to the MOEF environmental clearance had not been met and concludes that, by any standards, this ought to be unacceptable. The report also criticizes the "pari pasu" approach which subverts any acceptable notion of ecological plnning and defeats the very purpose of preparing environmental assessments to anticipate and prevent impacts and incorporate remedial measures in the project design. 17. After giving some background information on the project design, the report analyzes in more detail the major environmental aspects of the project including the impacts on the Narmada River upstream and downstream of the dam, the reservoir and the catchment areas. It concludes by I Report on R&R and Environmental Training by World Bank Consultant, May 1991. 2 SSP Environmental Information Volume by World Bank Consultant,1992  8nnex 1 89 Page 5 of 40 saying some good work has been done on specific topics in the first part of the command area, but it does not come together to meet the requirements of a good environmental assessment and in the end, this project is likely to perpetrate the deficiencies noted in past projects. 18. On health aspects, the report states that by the time of the project appraisal the dangers of water-borne diseases in irrigation projects were well known and documented particularly those related to malaria and schistosomiasis. The report quotes a status report on malaria and other health-related aspects prepared by the Bank's consultant in January 1992 which states that the project has been planned, designed and executed without incorporation of health safeguards and that the levels of malaria in villages near the dam site were nearly double that of the other villages served by the health center in that area. The report concludes that the Bank and the state govem- ments had failed to address the issue of public health adequately. IV. Management Response 19. The Bank issued a Managemnt Response on June 23, 1992. This document agreed with the Independent Review report on the description of the delays which occurred in completing the mandated environmental studies, and on the need for a more effective central management or coordination function in the Narmada Basin on environmental impact studies and mitigation programs. The Management also agreed on the need to accelerate work on health matters in Guiarat. In particular, the Management noted that greater urgency was needed on the analysis of impacts on the estuary (particularly fisheries) and on the treatment of health issues. However, the Management did not share the conclusions of the Independent Review about the severe environmental consequences of the study delays. With regard to wildlife management, the Management believed that adequate work had been done or was in hand. On hydrology, and sedimentation the Management disagreed with the analysis and particularly the assumptions behind the upstream Narmada Sagar dam. However, the findings of the PCR and the Bank's consultants indicate that the Independent Review had made a good point with regard to sedimentation. The Management's Response appears to defend the Borrower's pari-pasu approach to environmental management and seems to believe that, with an adequate environmental monitoring system, most impacts would be identified and mitigated long before reaching any damaging dimensions. This PCR has not endorsed this position and believes it is always preferable to carry out preventive measures based on prior assessment than to implement corrective measures based on monitoring and evaluation. 20. In July 1992, the Bank mounted a major mission (14 persons) to review the status of imple- mentation and compliance of the project with the Bank's Legal Agreements in the light of the fin- dings of the Independent Review report. The mission reported that the Borrower had completed 22 studies prior to the MOEF environmental clearance in 1987, that 11 had been completed since then and that 15 were underway or proposed. The mission confirmed that there had been no seve- re environmental consequences to date due to study delays. Nevertheless, the mission recommen- ded that a detailed Environmental Management Plan be produced as soon as possible. This plan would include a synopsis of all the studies completed to date, underway or planned, and details of future work needed in the estuary and on health issues. 21. On health aspects, the mission noted that the Government of Gujarat had accepted the fin- dings of the January 1992 mission conceming the expansion in and around the dam construction site, the risk of cerebral malaria and the inadequacy of the primary health care services. The recom- mendations of the mission included the setting up of a Health Planning and Monitoring Cell in SSNNL, preparing an environmental health management plan, and setting up an anti-malaria Unit at the dam site (Kevadia) to be followed by others in the command area later.  Ainnex 1 90 Pp.ge 6 of 40 22. Folowing the July mission, the Bank sent an action letter dated August 10, 1992 which requested the Borrower to submit a schedule for producing an Environmental Management Plan within the next six months and a plan to address the health issues. The letter contained a detailed draft action program on the R&R aspects of the projecL V. Borrower Response 23. Following the Bank's mission and letter, the Borrower, in their letter of September 1, 1992, assured the Bank that GOI would address with urgency the positive concerns raised by the Independent Review and Bank missions and that management and organizational weaknesses in the R&R program would be removed. The attachment to the letter indicates that a comprehensive environmental action plan comprising such activities as catchment area treatment, compensatory afforestation, command area development, health plan, fisheries, flora and fauna, archaeological studies, etc., on which action has already been initiated, has been prepared and is presently under review by NCA. Also attached to the letter is a bar chart showing a list of environmental studies completed, ongoing and proposed. VI. Board Benchmarks 24. A formal report entitled "Review of Current Status and Next Steps" was then prepared and submitted to the Board on September 11, 1992. The report gives a detailed description of the R&R and environmental issues identified by the Independent Review and Bank missions and indicates the most recent steps taken by the Borrower to remedy the situation. The guiding principle of the Management's response has been to seek with the Borrower constructive solutions to the issues rised in view of its belief that, even after full allowance is made for the costs of the R&R and rele- vant environmental mitigating measures, the SSP projects remain economicaUy sound and develop- mentaUy important. The Management's position also recognizes that the benefits of the SSP pro- jects must not be achieved at the cost of reductions in the standard of living of affected persons. According to the report, environmental costs and risks - particularly those related to health, loss of fisheries and possibility of waterlogging and salinity in the command area - have to be handled through an appropriate combination of ex-ante studies and the creation of capacity within the project to take timely ameliorative action. 25. In the section on Next Steps, the Management proposed to the Board three options: a. a formal or informal suspension of disbursements pending completion (and where necessary enhancement) of steps identified in the Borrower's response; b. reappraisal of the R&R and environmental aspects of the SSP projects as a basis for follow up projects to support: (i) R&R of those displaced by the reservoir; (ii) sustainable command area development; and (iii) implementation of an agreed Basin-wide Environmental Management Plan; and c. continuation of the support for the project on the basis of responses received from the Borrower, and subject to the confirmation of continued improvements over the next six months, to be monitored against actions already agreed and benchmarks for assessing progress in implementation. 26. The Management stated its preference for the third option which builds upon the results achieved and maximizes the prospects for successful implementation of the steps noted in the Bor- rower's response which are scheduled to be completed in the next few months. The Management, nevertheless, recognized the risk of these steps not being taken in a timely or effective manner and proposed that, in that event, remedial action be taken through suspension of disbursements.  Annex 1 91 Page 7 of 40 Should financial or skill gaps emerge which prevent timely action, IDA would be prepared to consider supplementary support. 27. The Board of Executive Directors met on October 23, 1992 to discuss the Review of Current Status and Next Steps prepared by the Bank staff. The Executive Directors agreed with the analysis of the Independent Review which had identified a number of deficiencies in the Bank's appraisal and the Borrower's implementation of the projects. Many Directors had concerns about obstacles which still had to be overcome. They emphasized the need for full consultation with the affected people, the importance of satisfactory R&R programs in all three states involved and the importance of a timely and comprehensive analysis of environmental aspects. The Board agreed to the Management's third option to continue support to the projects because they wished to give the benefit of the doubt to the new Government of India which had recently made considerable efforts to address the projects' problems and because it was the best available option. 28. The Board determined a number of benchmarks that the Borrower would have to meet by March 31, 1993. These included: a. Terms of Reference for the preparation of a Narmada Basin Environmental Management Plan; b. Completion of a prioritized environmental overview report for the Sardar Sarovar Projects, including: (i) a summation and qualitative analysis of the 22 studies already completed, as well as the 11 now underway, and covering upstream and downstream impacts on such areas as wildlife, flora and fauna, archeological and religious sites, catchment area treatment, reforestation; and (ii) an environmental work plan covering works remaining to be done in both the upstream and downstream areas; and c. Adequate implementation of Gujarat's malaria control program at the SSP project site in line with the specific recommendations of the July 1992 Bank mission. 29. The Board requested that a special review mission should visit India during April 1993 to assess progress in the implementation of the agreed action plan. Continuation of the Bank's support after April 1993 depended on meeting the agreed benchmarks for assessing progress. During the Board meeting, the UK Executive Director proposed that the Overseas Development Agency (ODA) could assist the Borrower in meeting the benchmarks. Subsequently, a Trust Fund of