India - NTPC Power Generation Project : Report on Investigation

THEINSPECTION PANEL RequestforInspection India:NTPCPowerGeneration Project(Loan3632-IN) Reporton Investigation December 22,1997  TableofContents ABBREVIATIONS USEDINTHISDOCUMENT iii INTRODUCTION 1 SUMMARY OFFINDINGS 4 REPORT ONINVESTIGATION 7 Overview 7 Scope 8 A. Strengthening theBorrower's Environmental andResettlement andRehabilitation Capacity: ODs4.30and4.01 11 B. Participation ofAffected People:ODs4.01and4.30 15 C. Involuntary Resettlement: OD4.30 20 D. BankSupervision OfInvoluntary Resettlement: ODs4.30and13.05 33 E. Environmental Assessment: OD4.01 37 F. Supervision OfEnvironmental Aspects: ODs4.01and13.05 43 G. Indigenous Peoples: OD4.20 45 APPENDIX 1 47 APPENDIX 2 51 APPENDIX 3 55 ANNEX I Inspection PanelReport andRecommendation totheExecutive Directors, June24,1997 (Without attachments) ANNEX 2 BankManagementUpdatedActionProgram, September 2,1997  ABBREVIATIONS USEDINTHISDOCUMENT EAP Environmental ActionPlan EAS Environmental AssessmentSummary EdF Electricite deFrance EIA Environmental ImpactAssessment GOI Government of India NCL NorthemCoalLtd./CoalIndiaLtd. NDO WorldBankNewDehliOffice NGO Non-Governmental Organization NTPC National ThermalPowerCorporation OD OperationalDirective PAP(s) ProjectAffectedPeople PAF(s) ProjectAffectedFamilies SAR StaffAppraisalReport R&R ResettlementandRehabilitation RAP(s) ResettlementActionPlan ReAP(s) RemedialActionPlan TOR TermsofReference VDAC VillageDevelopment AdvisoryCouncil XIDAS XavierInstitute of Development ActionandStudies iii  Request forInspection India:NTPCPowerGeneration Project(Loan3632-IN) Inspection PanelReport onInvestigation INTRODUCTION 1. ThisReportresponds totheWorldBank('Bank")Executive Directors' ("Board") decisiononSeptember 11,1997toauthorizetheInspectionPanel("Panel") toconducta limitedinvestigation. TheBoarddecidedthat"inlightoftheconclusions andrecommendation bythePanel,bearinginmindthepreliminaryreviewalready undertaken bythePanel,aninvestigationshouldbeconducted attheBank's Headquarters inWashington tofurtherdetermine theextenttowhichtheBank adhered toitsownpoliciesandprocedures undertheproject." TheRequest forInspection 2. OnMay1,1997the PanelreceivedaRequestforInspection ("Request) froma representativeofpeoplelivingintheprojectarea.TheclaimsintheRequest focusonallegationsofharmsufferedasaresultof non-compliance bytheBankwith itspolicyoninvoluntaryresettlement. TheChairman ofthePanelregistered the Request onMay2,1997. Management Response 3. TheManagement Response ("Response") totheRequest wassubmitted to thePanelonJune3,1997.InitsResponse theManagement includedcorrective actionsintheformofbothaspecificandbroaderactionprogram. Supplementary Submissions 4. Supplementary InformationwassubmittedtothePanelbytwoconcemed NGOs:onMay1,1997fromTheBemeDeclaration andlateronJuly18,1997a "StatementinSupport ofthePanelClaimFiledonBehalfof PeopleSingrauli"fromthe DelhiForum,whichreiteratedtheurgencyofthematter. AdditionalRequests 5. Subsequent to receiving theResponse thePanelreceivedseveralspecific claimsinsupportof allegations intheRequest(May27andJune12,1997).Asthese Requestsdidnotraisenewissuesbutprovidedratherspecificexamples oftheclaims madeintheoriginalRequest, thePanel-pursuantto para.14(d)oftheResolution- didnottransmitthemtoManagement foraformalseparateResponse.  FurtherAllegations 6. Therepresentative oftheRequesters duringMay1997claimedthatPAPs wereforciblyremovedfromthevillagesofJudi,Amratali,andChurchuria to allow construction oftheashdykeforVindhyachal. Theseallegations werecounteredby reportsfromNTPCdescribingthepeacefulrelocation ofPAPsinaccordance witha recentCourtorderwhichprovided fortheirevictionwithin15daysofreceivingrelevant compensation andotherallowances.Bankstafflatervisitedtheareaandreportedthe conflicting viewsofthoseinterviewed.InJune1997,therepresentative ofthe Requesters allegedthatfurther,if necessary forcible,evictionsfromthevillageof Mithini--to makewayforconstruction oftheashdykeforRihandIl-werethreatened.' NTPCassuredthatfurtherrelocation fromMithinivillagewouldbepostponed.Onthe otherhand,onJune19,1997NTPCsentManagement affidavitsfrom92PAPs statingtheyhadrelocatedvoluntarily. PanelRecommendation 7. OnJuly24,1997thePanelsubmitted itsreporttotheBoard.ThePanelfound primafacieevidenceof harmandbelieveditwaspossiblethatseriousviolations by theBankof itspoliciesandprocedures mayhaveoccurredtoadegreebeyondthose identified byManagement initsResponse.Therefore, thePanelrecommended that theBoardauthorize-asamatterof urgency--an investigationintotheinvoluntary resettlement andassociated aspectsoftheproject. Updated ActionProgram 8. OnSeptember 2, 1997theManagement, inresponsetothePanelreportand recommendation foraninvestigation, submittedan"UpdateoftheActionProgram", agreedwiththeGovemment ofIndiaandNTPC.ThisUpdatedActionProgramwas submitted directlytotheBoardnotonlyafterthePanel's"Reportand Recommendation" of July24,1997("Panel's JulyReport"), butalsojustfivedaysprior totheBoarddecisiononaninvestigation. ThePaneltherefore didnothavethe opportunitytoreviewthe"ActionProgram" todetermine whetheritsproposals,if implemented, mightcorrectthepolicyviolationsacknowledged byManagement as wellasmeettheRequesters' concerns. BoardDecision 9. TheBoardmeetingtoactonthePanelrecommendation wasinitially scheduled forAugust29,1997butpostponed toSeptember 9, 1997.Atthismeeting theBoarddidnotreachadecision.A compromise solutionwasreachedat itsnext meeting onSeptember11,1997. 1Inaddition,onJune12,thePanelreceivedasubmission insupportoftheRequestfromsomePAPs.The submission complained thatthe'projectauthorities arenowanxioustomoveusoutwithuseofforcewithout anyguarantee ofanaltemativelivelihood.'TheseRequesters "urgeoursituatontobespotcheckedbythe Panel."'SupportiveClaim-RequestRegistrationNo.RQ197/2"June3,1997fromeightPAPsfromthe villagesofAmrataliandJudi. 2  10. Thisdecision--quoted inparagraph 1above-restricts thePanelinvestigation toadeskstudyinWashington, D.C.("DeskStudy").Preventing thePanelfrom undertakingafieldinvestigationreflected theviewsofsomeExecutive Directors who pointedoutthatit wasunavoidable thatthepublicwouldseeit asaninvestigation-- withallthatword'sconnotations ofwrongdoing-of Borroweractions.ThePanel, however,isnotintendedtoinvestigate Borrower actions.Itsroleisto investigate allegations thattheWorldBankitselfhasfailedtoobserveitsownpoliciesand proceduresandwhetherthishasresultedinthedamageclaimedbyRequesters. PanelInvestigation 11. TheChairman ofthePaneldesignated Panelmember Mr.ErnstGunther Br6der("theInspector")-who hadbeeninchargeofthepreliminary review-toleadthe investigation. InthiscasetheManagement hadacknowledged certainpolicy violations initsResponse andthePanel'sJulyReportindicated thatharmappeared to haveoccurred.TheBankundertook a SupervisionMissionfromSeptember 12-28, 1997,immediately aftertheBoardDecision onthePanel'srecommendation foran investigation. Specificplansforimplementation oftheUpdated ActionProgram are contained intheOctober20,1997BacktoOfficeReport("September Bank SupervisionReport").Becausethecorrective actionsintheUpdatedActionProgram andthesubsequent moredetailedproposal foritsimplementation contained inthe Bank'sSeptember Supervision Reportbothrespondto thePanel'sJulyReportandin themselves evidence theextentofpolicyviolations,thesetwodocuments havebeen reviewed bythePanelforthisinvestigation. Fact-FindingAssignment 12. TheSeptember BankSupervision ReportincludestheTermsof Reference for a ResettlementandRehabilitation impactassessment tobeundertaken forNTPCby an"independent" development institution-the XavierInstituteof Development Action andStudies("XIDAS").ThisentityistoexaminetheissuesraisedbythePanel'sJuly ReportandtheRequester andtheTermsOfReference statethatfurtherrevisions wouldbemadeoftheResettlement ActionPlansandRemedial ActionPlansofthe Projectasrequired. Subsequent Developments 13. OnNovember 24,1997twoNGOs-theWashington-based Centerfor EnvironmentalLawandtheSwiss-based BemeDeclaration--reported tothePresident of theBank,withcopytothePanel,thataffectedpeoplewerebeingforciblyinduced to move.Thisoccurred despiteanagreedmoratorium. 14. ThisReportdealswiththeextentofeachofthepolicyviolations intumand withinthatcontext(I)withthePanel'sJulyReport,and(II)theDeskStudy. 2 2Disclosure. TheRequest, ManagementResponse, andPanel's 'ReportandRecommendation' totheBoard canbefoundinaseparate volumewhichhasbeenavailable tothepublicsincetheBoard's decision on September 11,1997.Because thePanel's investgaton basically confirms itsearlier findings, foreaseof reference thePanel's JulyReport&RecommendationtotheBoard(without attachments) isattached tothis 3  SUMMARY OFFINDINGS 15. ThefindingsofthePanel'sdeskinvestigation confirmthepreliminary conclusionsreachedinthePanel'sJuly24,1997"ReportandRecommendation tothe ExecutiveDirectors" (the"Panel'sJulyReport") whichreliedheavilyontheInspector's observationsinthefield. Sinceinformation gatheredinWashington islargelyfrom secondarysourcesandnotfromfieldworkontheground,thePanelhadto compare thisinformationwithitsearlierfindingsonthespotinanattempttoascertainthefacts. * TheTermsofReference forXavierInstitute of DevelopmentActionandStudies respondtothePanel'sinitialfindingthatthecorrectfactsregarding Resettlement andRehabilitation claimsbyProjectAffectedPeoplemustbeestablished before anyactionprogram forthiscomponent couldbeeffective. * SincetheBoarddecision,anallegedattempttoforcePAPsto movecompletely outofonearea,bydestroying theircrops,hasbeenreportedtoManagement. ThePanelwasinformedbyManagement thattheIndependent MonitoringPanel, constitutedrecentlyinconsultation withNGOsandconsisting ofthreeeminent Indiannationals, willinvestigatethisallegationthroughasitevisitfromDecember 23-27,1997. 16. A majornewfindingofthisdeskinvestigation isthattheviolations of policies andprocedures canbeattributedtopressurefromSeniorRegional Management to accelerate theprocessof loanapprovalandtonotgrantingthesamerelevance to ResettlementandRehabilitation andEnvironmental Actionmattersastootherproject components. * TherecordsshowclearlythatSeniorRegionalManagement pressured staffto processtheloanjustbeforetheendofFY93. * TheissueofResettlement andRehabilitationwasnotevenputontheAgendaas anissuefortheRegionalLoanCommittee MeetinginMarch1993,despite specificrequests fromenvironmental/social specialistsandtheLegalDepartment. * TheNTPCwaspressured bytheBanktoadopthastilyacorporateResettlement andRehabilitation policy.TheBankfailedtoassureitselfthattheBorrowerfully understood theimplications ofthenewcommitments itwasundertaking. * SeniorRegional Management's requesttomakepreparation oftheResettlement ActionPlansaconditionofeffectiveness oftheloanagreement, despiteclear ReportasAnnex1. AlsomadepubliclyavailablewastheManagement's September 2, 1997Updated ActionProgram whichis alsoattachedtothisReportasAnnex2. 4  policytothecontrary,wasrejectedbytheLegalDepartment. Thepolicyrequires Resettlement ActionPlansto beprepared asaconditionofappraisal.The Resettlement ActionPlanswerethenpreparedduringatwoweekvisitbyone specialist staffmemberinMay1993,andsignedoffbyManagement justintime fortheprojecttobepresented totheBank'sBoardof Executive Directorsbefore theendofthe1993FiscalYear(June30,1993). TheBorrower didnotsigntheLoanAgreement untilDecember 9, 1993andthe loanwasnotdeclaredeffectiveuntil6 monthslateronJune6, 1994.Another8 monthselapsedbeforethefirstdisbursement wasmadeinMarch1995. 17. Inlinewithitspolicies,theBankintroduced aprojectcomponent dealingwith theimplementation of Resettlement andRehabilitation andEnvironmental Action Plans.ThePanelfindsthattheBankdidnotassureitselfthattheBorrower hadthe necessary initialcapacityto carryoutthesetasks.ThePanelalsofindsthattheBank didnothavethenecessary capacity tosupporttheBorrowerincarryingoutthese tasks.Thisappearstobea seriousviolationofBankpoliciesonEnvironmental Assessment (OperationalDirective4.01)andInvoluntary Resettlement (Operational Directive4.30).Thisisconfirmed bytheTermsofReference fortheXavierInstitute forDevelopment ActionandStudiesandtheIndependent MonitoringPanelwhich wereestablished inresponse totheInspection Panel'searlierReportofJuly1997. 18. Thepreliminary findingsinthePanel'sJulyReportwhichindicated serious violationsbytheBankof policiesandprocedures onparticipation of andconsultation withaffectedpeopleasrequiredbyODs4.01and4.30areconfirmed. TheBank's failuretoobservepoliciesandprocedures inthedesignphase,however,appearmore seriousthanpreviously assumedbecauseoftheBank'sadmittedinexperience in applyingthepolicybackin1993,anditsfailuretofollowrequiredloanprocessing procedures. 19. TheNTPC'sResettlement andRehabilitation policyandtheResettlement ActionPlansappeartohavecomplied, at leastonpaper,withtheBank'sOperational Directive(OD4.30)andwereclearedbytheBank'sLegalDepartment and Environmental Specialists.However, theloanwasprocessed sorapidly-withthe RAPscompleted immediately beforetheprojectwaspresented totheBank'sBoard-- thattherewasnotimetoensurethatessentialmechanisms andpreconditions,such asStateGovemment commitment, capacityof implementing agency,etc.werein placeoradequate.Theresultingimplementation problemscanbeattributed largelyto thefailureoftheBanktofollowtheprocessofR&Rpreparation asrequiredinOD 4.30. Intum,ProjectAffectedPeopleexpectedtoreceivethebenefitsoftheRAPsto beapplied.ThefactthattheseRAPscouldnot,orwerenot,implemented gaveriseto dashedexpectations, which,asthePanelnotedinitsJulyReport,alsoappeartobe therootofcurrentproblems. 5  20. TheBank'sfailuretoobserveitspoliciesandprocedures conceming Environmental Assessment (OD4.01)inthepreparation phaseappeartobeeven moregravethanobservedinthePanel'sJulyReport. * Theinvestigation confirms that,contrarytoBankpolicy,seriousaltematives forfly ashdisposalwerenotconsidered duringinthedesignphase.CoalIndia's rejectionofdisposalbybackfilling orconsideration ofotherashdisposal/utilization wasacceptedapparently withoutfurtherdiscussionofalternative measures. * TheBankfailedto promoteandtogivesupportfor criticallyneededInter-Agency coordination.ThishasnowbeenrequestedbyBankManagement. 21. Supervision of theResettlement andRehabilitation component andofthe measures to strengthenNTPC'scapacityto monitorhaveeffectively failed.Here againthedocuments reviewed indicatethattheBank'sfailuretoobservepoliciesand procedures asrequiredunderOD4.30andOD13.05onBanksupervision ismore seriousthandescribed inthePanel'sJulyReport.Duringthedesignphase,theBank misjudged theBorrower's abilitytoimplementtheR&Rcomponent andtheBank's capacitytosuperviseit. Asaresult,mostlynegativeoutcomes wereinevitable. 22. ThereviewofBankR&Rsupervision (1993- March1997)revealsavicious circleof negativeeventswhichledtoviolationsofpoliciesandprocedures for Resettlement andRehabilitationandEnvironmental Assessment: * Throughout thisperiod,theBankdidnotsucceedinproviding thenecessary supportto strengthentheBorrower'senvironmental andresettlementand rehabilitation capacity(Para6,OD4.30).Reasons werealackofstafftomakea properassessment ofrequirementsandqualificationsofaBorrower whohad confirmed thatithadnoexperience inthatfield. * Throughout thisperiod,therewerefewqualifiedBankstaffavailable, eitherat BankHeadquarters orinDelhiorSingraulitoinitiateandtosupervise implementation ofrequiredmeasures.Monitoring thereforereliedbasically on secondary sourceinformation.Therewaslittlemeaningful directconsultation with PAPs. * UndercurrentSeniorRegionalManagement a newapproach hasdeveloped.The actionswhichtheynowhaveproposed confirmthepreviousshortcomings and mightgiveaffectedpeoplethehopeof abetterfuture,provided theremedial actionsareimplemented andmonitored inanopen-ended waywitheffective participation ofaffectedpeopleassured.Asstatedabove,Inter-Agency coordinationhasbeenabigproblemandappearsto beacrucialprerequisite to implement anyeffectiveSingrauliareasocialandenvironmental development program.Management hasnowindicated thatitwillsupportanysucheffort. 6  REPORT ONINVESTIGATION OVERVIEW 23. TheNTPCThermalPowerGeneration Project-supported bytheBankLoan 3240approved in1993-islocatedintheSingrauliregionof Indiaabout1000Km southeastofDelhi.Singrauli coverssome2,200squarekilometers spreadovertwo states-Madhya PradeshandUttarPradesh.Theareaincludespartofthereservoir createdbytheRihanddamwhichprovides forirrigation andahydroplantgenerating capacityof400MW.Thermalpowerplantsbasedonmajorcoalreserves nearthe reservoirhaveatotaloperating generatingcapacitycurrentlyat6,360MW.Studies suggestthatestimated coalreserveswouldbesufficienttogenerate20,000MW of powerforthenext130years.IntheSingrauli area,NTPCoperatesseveralthermal powerplants--Singrauli(2000MW), Rihand(100OMW), Vindhyachal (1260MW). The 1993Projectwasdesignedtoincreasethecapacityofeachof Vindhyachal and Rihandby1000MW. 24. Theobjectives oftheprojectareto"(i) helpimprovecommercial discipline in thepowersystemthroughtheimplementation ofnewcommercial andinvestment policies;(ii)helpNTPCmeetitstargetsforcapacity additionsthroughincreased mobilization ofresources fromintemalresources, domesticandforeigncapital marketsaswellasfromtheprivatesectorthroughjointventureoperations; (iii) upgradeenvironmental performance ofNTPCpowerstationsandmakeitsnewpower stationsenvironmentally moresustainable; and(iv)strengthen environmental management andresettlement andrehabilitationmanagement capability." 25. Theprojectcomprises: "(i)supportofafiveyeartime-sliceofNTPC'sleast costinvestment programofnewcoalandgasbasedpower;(ii)supportofNTPC's programto undertake jointventureoperations; and(iii)implementation of an environmental actionplan("EAP")whichincludes upgradingofexistingpower stations,trainingandtechnical assistanceforthestrengthening ofNTPC environmental andResettlement& Rehabilitation ("R&R")management." 26. A majorproblemstemsfromthefactthattheflyashfromthecoalusedfor operatingtheplantsisdisposed of inashdykes.Mostofthelandneededforthe ash dykeshadalreadybeenacquired byNTPCpriorto 1993.Anadditional 300hawasto beacquiredfornewashdykes.Thesitesidentified entailedtheinvoluntary resettlement ofabout370families--Project AffectedPeople("PAPs").Forthisreason, 7  andto remedytheenvironmental situationofthosealreadydisplacedbytheearlier acquisitions, theprojectincludedanEnvironmental ActionPlan("EAP"),two ResettlementActionPlans("RAPs") andprovisionforthreeRemedial ActionPlans ("ReAps"). 27. Theobjectives oftheEAPare,inter-alia,to"addressoutstanding R&Rissues (withinthecontextofthenewcorporateR&Rpolicy);andtoupgradeNTPC's capability toprepareandexecuteR&Rprograms." SCOPE 28. Background information ontheprocessing oftheRequestiscontained inthe introduction to thisinvestigation report.ThisreportdealswiththefollowingBank policies: * Strengthening theBorrower's environmental andresettlement andrehabilitation capacity.(ODs4.30&4.01andObjective(d)oftheproject) D Participation ofandconsultation withaffectedpeopleinrelationto Involuntary ResettlementandEnvironmental Assessment. * Involuntary Resettlement (OD4.30)whichManagement claimsto havecomplied with"substantially". * EnvironmentalAssessment (OD4.01)whichManagement claimsto have compliedwith"partially". * BankSupervision (OD13.05)whichManagement claimstohavecomplied with "substantially". * Indigenous Peoples(OD4.20)whichManagement claimstohavecomplied with "fully." 29. Withintherestrictions oftheBoarddecision, thePanelfurtheranalyzed the findingssetoutinitsJuly24,1997"ReportandRecommendation totheExecutive Directors"("Panel's JulyReport").Relevantfilesandsubsequent information providedwerereviewedanddiscussions wereconducted withBankstaffin Washington andwithotherstofurtherdetermine towhatextenttheBankhadfailedto complywithpoliciesandprocedures.ItshouldbenotedherethatthisDeskStudy hadtorelyonthePanel'sJulyReport-andrepeattherefrom-because the investigation asauthorized bytheBoarddemandsscrutinyofthepreliminary findings ofthatReportandanevaluation oftheirvalidity.Thisisof particularimportance because: 8 Tm,. r--  (a) TheBoarddidnothavetheopportunity todiscussthesubstanceofthePanel's findingsduringitsmeetingsonSeptember 9 and11,1997;and (b) Itisnecessary tobasetheDeskStudyontheInspector's observations inthefield sincesomedocumentation inBankfilessupportsthefindingsonthespotwhileother information confirmsthecontradictions. Thisisnotsurprising becausetheBank's knowledge waslargelybasedonsecondary data,i.e. progressreportsandotherdata provided byNTPC. 30. ThePanel'sfindingsinitsJulyReportwerebasedontheinformation obtained duringtheInspector's visitto Delhiandtheprojectareainadditionto information contained intheRequest, theResponse, supplemental information furnishedby NGOs,andadditional information providedbytheRequesters, Management, and NTPC. 31. ThePanel'sJulyReportaddressed theRequest's claimsofharmsuffered- allegedlyasaresultofBankactsoromissions inviolation of itspoliciesand procedures- inrelationtoinvoluntary resettlement andassociated environmental issues.Theextentof authenticlocalresidentparticipation 3 inrelationto Resettlement andRehabilitation ("R&R")wasaddressed first.Banksupervision thenwasreviewed, andlastlytheadequacy oftheremediesproposed byManagement inthe'Action Program" intheManagement Response werediscussed. 4 32. TheRequestraisedthequestionofwhethertheBankhadcompliedwithits policy(OD4.20)onIndigenous Peoples.Management claimedfullcompliance inits Response.SincetheInspector receivednocontradictory information fromlocal sourcesduringhisfieldvisit,thePaneldidnotfurtheraddressthisallegation atthat time. 33. ThePanel'sJulyReportpointedoutthattheenvironmental andresettlement aspectsoftheprojectarecloselytiedtogetherbythetechnicalchoiceforash disposal.Tobuildtheashdykes,landhadtobeacquired andpeopleinvoluntarily resettled.Inaddition,thedykesthemselves constitute aseriouspotential environmental hazardtothepopulation. AsnotedinthePanel's'ReportandRecommendation" ofJuly1997,broadquesbons relatedtoOD10.04on Economic Evaluation ofInvestmentOperations cannotbeaddressed realistically notbediscussed, atthislatedateandwere ofanaltemative exceptastheyrelatedtothechoiceofashdisposaloptions.Theverycomplexquestion energyishardlyrelevantinpracticaltermsconsidering madeandthecurrentinfrastructure thatdecisionshavealreadybeen existswhichcannotbebasically upgraded removedbutmaybeabletobe toexistingenvironmental standards.Anyaltematives forthefutureareandmustbethoroughly exploredandareoutsidethescopeofthisinvestigation. 4Management's remedialactionswerelaidoutintheActionProgram attachedasAnnexAtotheResponse. ThereweretwopartstotheActionProgram.Onewasa"broader ProjectSpecificActionProgram. actionprogram'forthefuture;theothera 9  34. TheBankinitsResponse admitted"shortcomings" inapplication ofthe policiesonInvoluntary Resettlement,Supervision andEnvironmental Assessment. ThePanelfound: (a)preliminaryevidenceofmaterialharm;and (b)primafacieevidencethatsuchharmwasa resultoftheBank'sadmitted shortcomings intheapplication ofBankpolicesandprocedures. 35. ThePanel'sinvestigation takesintoaccount Management's Updated Action Program proposedafterthePanelrecommended aninvestigation,andtheBank Supervision MissionReportforthemissionundertaken fromSeptember 12-28,1997, immediately aftertheBoardDecision onthePanel'srecommendation foran investigation. TheSupervision ReportincludestheTermsofReference ("TOR")for theSocialImpactAssessment assignment beingundertaken byaconsultant,the XavierInstituteof Development ActionandStudies("XIDAS").ThoseTORinclude investigation intotheR&RstatusofindividualProjectAffectedPeople("PAP")and ProjectAffectedFamilies("PAF"), whichthePanelhadalreadyhighlighted asan essential prerequisite forresolving thetensesituationandconflictsonthegroundand totheimplementation ofanyremedialactionplans. 36. Untilthecompletion oftheXIDASassessment therewasanagreement that furtherforcibleevictionswouldbesuspended. SincetheBoarddecision,analleged attempttoforcePAPstomovecompletely outofonearea,bydestroying theircrops, hasbeenreportedto Management. Asstatedabove,thePanelwasinformedby Management thatanIndependent Monitoring Panel,constituted recentlyin consultationwithNGOswillinvestigate thisallegation throughasitevisit. 37. Inthisreport,first,therelevanttextoftheapplicable policyorprocedureis quoted;then(I)thefindingsofthePanel'sJulyReportarenoted;and(II)resultsof theDeskStudy-whichincludesresponsiveness oftheSeptember 2,1997 Management "UpdateoftheActionProgram"('UpdatedActionProgram") tothe Panel'sJulyReport,andanyadditional informationfromthisinvestigation phase--are discussed; andlastly,thePanel'sfindingsarepresented. 5 5 'SeptemberMissionReport"refersto theOctober20,1997Supervision reportfortheBankmissionin September. 10  A. STRENGTHENING THEBORROWER'S ENVIRONMENTAL ANDRESETTLEMENT ANDREHABILITATION CAPACITY: ODs4.30AND 4.01 Policies&Procedures Strengthening ofEnvironmental Capabilities 38. "Theultimate successofEAdependsuponthecapability andunderstanding ofenvironmental mattersofthegovemmental agencies concemed.Therefore, aspart of theEAprocess,it itsnecessary toidentifyrelevantenvironmental agenciesand theircapabilityforcarryingoutrequiredEAactivities..projectswithpotentiallymajor impactnormallyrequirethestrengthening ofseveralenvironmental functions....(OD 4.01,1 12) Involuntary Resettlement inParticular "Theorganizational framework formanaging resettlement mustbedeveloped during preparation...Theorganization responsible forresettlement shouldbestrengthened whenentitiesexecuting infrastructure orothersector-specificprojectslackthe experience andoutlookneededtodesignandimplement resettlement.One altemative istocreateaspecialreseftlement unitwithintheprojectentity... (OD4.30,