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~ Maju Varghese
Every year, India pays an enormous amount of money as commitment charges to the multilateral institutions for not utilising the loans sanctioned by them. Investopedia defines commitment charges as the fee charged by the lender to a borrower for an unused or un-disbursed loan since it has set aside the funds for the borrower and cannot yet charge interest.
According to the CAG, between 2009-2015 India paid commitment charges up to 602 crores to the external lenders. In 2014-15 itself, India was holding Rs. 2,10,099 crores of unutilised funds thus inviting a commitment charge of Rs. 110 crores. Finance Ministry had found that between 1991 and 2009, the government had paid approximately Rs 1,400 crores as the commitment charges for loans not utilised.
The commitment charges are coupled with interest while reporting by the ministry of finance which makes it difficult to understand the charges paid to different agencies in a fiscal year. The CAG observed that putting commitment charges under the head “interest obligation” is misleading as it does not reflect the nature of expenses.
Arun Jaitley, the Indian Finance Minister minister of India, has been raising the issue of commitment charges. In the 94th development committee of the World Bank, he raised the issue of commitment charges which is highest among multilateral development Banks and demanded its withdrawal. This was again repeated when the demand when the CEO of World Bank visited the country and met the Finance Minister. India is among the countries which are graduating from a low-income country to lower middle-income country resulting in loss of concessional finance from IDA loans.
World Bank charges a commitment charge of 0.25 per cent per annum on un-disbursed loans even if they are committed to be drawn in subsequent years. This is in addition to a front-end fee, a fee paid by the borrower to the lender before the loan offtakes, of 0.25 per cent on loan agreement amount (applicable on current loans). These commitment charges begin accruing 60 days after the loan agreement is signed. Despite resistance from the countries, the World Bank has stated that it will not be able to remove commitment charges due to its cost recovery guidelines.
According to the CAG, India had a total outstanding debt of 51,04,675 crores as on March 31, 2015. This increased to around 57,021,582 crores on August 15, 2016, which means a per capita debt of Rs 44,032. This comes to around 41 per cent of the GDP. To service this massive debt, India pays about 36,318 crores as interest payment every year. CAG further reports that in 2014-15, 77 per cent of the long-term internal borrowings and 73 per cent of the external borrowings were utilised for debt servicing, implying that a larger percentage of debt was being used for paying the existing debts. This, in turn, meant the lower percentage of debt was available for meeting developmental expenditure to promote growth.
Swatch Bharat and commitment charges
The World Bank had approved a US$1.5 billion loan for Swachh Bharat Mission-Gramin (SBM-G), Modi government’s much-hyped flag-ship campaign on Sanitation to support the government’s efforts to ensure all citizens in rural areas have access to improved sanitation. The loan sanctioned in 2015 is the Bank’s biggest lending in the social sector.
The mission has provision for incentivizing states on their performance in the Swachh Bharat Mission. The performance of the States will be gauged through an independent survey based measurement of certain performance indicators, called the Disbursement-Linked Indicators (DLIs). However, due to lack of independent verification of results, India missed the first disbursement of the loan. According to the media reports, India is likely to miss the second tranche too. Despite not receiving a single paisa, India has paid the commitment charge, interest, and front-end fees of USD 15.40 million so far.
The payment of commitment charges to the multilateral agencies because of governmental inability to plan and implement shows a lack of seriousness in using public money. CAG has mapped and pointed out the inefficiency of governments in utilising funds. The money that we pay as fine and commitment charges are a waste of public resources as pointed out by CAG in the reports from time to time. The proposal to set up a public debt and management agency for proper planning of external debt is still pending in spite of various statements by the finance minister.
Multiple CAG reports on debt need to be taken on a priority basis, and an oversight mechanism should be created within the parliament of India through a standing committee to look into external debt and also its investments abroad and making it transparent and accountable to the citizens of the country.
The Asian Development Bank was conceived in the early 1960s as a financial institution that would foster economic growth and cooperation in Asia. India was a founding member of the Asian Development Bank (ADB) and is now the fourth-largest shareholder. ADB commenced operations in India in 1986 and has approved 240 loans totalling $36.8 billion.
Asian Development Bank (ADB) has grown to be the third largest source of development finance in the Asia-Pacific region, next to the World Bank Group and the Japanese Government. Documents published in 2017 reveals that from a lending portfolio of just over $3 billion during the first decade, ADB has expanded its lending to $123 billion during the last 10 years.
However, the Mid-term Review (MTR) of ADB’s strategy for 2015 and 2020 have acknowledged that the Asia-Pacific region faces widening inequalities in income and access to economic and social opportunities. Increased investment in infrastructure has failed to provide inclusive growth and social protection to the vulnerable sections of the populations including the workers and women.
India had about 84 ongoing sovereign loans from ADB amounting to $11.9 billion at the end of 2015. Currently, we have about 170 active projects in the country of ADB alone. The massive Vizag-Chennai corridor, the numerous urban development projects across the country, the ReNew clean energy projects in Andhra Pradesh, Gujarat, Jharkhand, Madhya Pradesh, Telangana and Karnataka, are only a few of the 50 odd active and approved projects. Further 23 projects have been proposed to the ADB waiting for approval. These are just projects covered by ADB, adding them to the projects funded by all IFIs shows the extent of their influence in almost every sector – energy, infrastructure, health, etc. The scale of land grab, loss of livelihood, environmental destruction has been completely overlooked by both the IFIs and the government. The rampant privatisation of all the sectors, including health care, is going to affect all those who would not be able to afford health care. In such a time, holding the development banks accountable has become imperative for one’s survival with some modicum of dignity.
ADB Investments in India. Source: Answer by the government to the parliament of India
ADB 50 campaign in India
The first week of May 2017 was marked by actions across the country against ADB and other IFIs. It coincided with ADB’s 50 years celebrations in Manila. The massive protest actions were intended to send a strong message to the ADB and other IFIs of the havoc their investments have caused. Thousands of people, in over 140 locations spread in over 21 states in India and over 80 organisations, came together to make this campaign a massive success. These protest actions are both a reminder of the reckless lending of ADB and hope to continue the struggle against the IFIs and their inequitable development model.
The coming together of so many organisations resulted in a wide range of programmes, including the public meeting, lectures, demonstrations, and human chains. Activists also made short video clips highlighting the impacts of the investments by IFIs. The protests actions raised concerns about investments of IFIs like World Bank; International Finance Corporation; Japan Bank of International Corporation (JBIC); Asia Infrastructure Investment Bank; New Development Bank; Exim Banks of Korea, United States, China among others. Many of these agencies are co-financiers, with increasing investments in the infrastructure and cross border projects, thus causing irreversible damage to the people and environment, while their policies to safeguard the harm caused by their investments are made opaque and watered down.
The actions mentioned above on the occasion of 50 years of ADB are a part of the continuous struggle of the people from all the regions that have been affected by the projects.
After a Judge declared World Bank immunity cases “wrongly decided,” the communities affected by the Tata Mundra project approach US court to review “absolute immunity” doctrine
Communities harmed by Tata Mundra coal power plant in India continue to seek justice from World Bank Group’s International Finance Corporation
July 26, 2017, Washington, D.C., and Mundra: After a federal judge in US declared that the cases giving the World Bank Group an “absolute immunity” from lawsuits were “wrongly decided,” the communities affected by private-lending arm of the World Bank Group have filed a petition asking the full D.C. Circuit Court of Appeals to revisit its immunity doctrine.
In June, a three-judge panel of the D.C. Circuit, in the case Budha Ismail Jam v. IFC, had ruled that the International Finance Corporation (IFC), the private-lending arm of the World Bank Group, could not be sued for its role in the controversial Tata Mundra coal-fired power plant, which has devastated fishing and farming communities in Gujarat.
In its June ruling, the panel, citing the legal precedents, concluded that the IFC is immune from suit in this case. Justice Nina Pillard, however, wrote a dissenting opinion criticising those decisions as “wrongly decided” and suggested that the full D.C. Circuit, which has the authority to change the law of the Circuit, should revisit those cases.
“The panel’s ruling gives international organisations like the IFC an unparalleled immunity, insulating them from legal accountability regardless of how much harm they cause,” said Richard Herz, senior litigation attorney at ERI, who argued the case for the plaintiffs. “Such sweeping immunity, which is far greater than the privileges enjoyed by sovereign foreign governments, is inconsistent with multiple Supreme Court precedents, and is contrary to the IFC’s development mission,” added Herz.
“We will not give up our struggle for justice,” said Budha Jam, a plaintiff in the case, after the verdict.
“This decision tells the world that the doors of justice are not open to the poor and marginalised when it comes to powerful institutions like IFC,” added Gajendrasinh Jadeja, the head of Navinal Panchayat, a local village involved in the case. “But no one should be above the law.”
It is noteworthy that the plaintiffs filed suit against the IFC in April 2015 over the destruction of their livelihoods and property and threats to their health caused by the IFC-funded plant. The IFC recognised from the start that the Tata Mundra plant was a high-risk project that could have “significant” and “irreversible” adverse impacts on local communities and their environment. Despite knowing the risks, the IFC provided a critical $450 million (Rs 1800 crore) loan in 2008, enabling the project’s construction and giving the IFC immense influence over project design and operation. It failed to take reasonable steps to prevent harm to the local communities and to ensure that the project abides by the required environmental and social conditions for IFC involvement.
The plant has destroyed the local marine environment and the fish populations that fishermen like Jam rely on to support their families, and vital sources of water used for drinking and irrigation. Coal ash contaminates crops and fish laid out to dry and has led to an increase in respiratory problems.
The IFC’s compliance mechanism, the Compliance Advisor Ombudsman, issued a scathing report in 2013 confirming that the IFC had failed to ensure the Tata Mundra project complied with the conditions of the IFC’s loan. Rather than follow CAO’s recommendation for remedial action, rejected most of its findings, and ignored others. Plaintiffs had no other recourse but to sue IFC. In its ruling last month, the panel recognised the “dismal” situation of the affected communities, noting IFC did not deny that the plant had caused substantial damage and yet found IFC could not be sued.
The harms suffered by the communities are all the more regrettable because the project made no economic sense from the beginning. In fact, in the past month, Tata Power, which owns the plant, has begun trying to unload a majority of its shares in the project for 1 Rupee because of the losses it has suffered and will suffer going forward.
On appeal, the plaintiffs argued that IFC has waived immunity because this suit promoted the IFC’s mission, which includes the goals of reducing poverty without harming its projects’ neighbours. The IFC interestingly argued that it is not bound by its own mission.
“The court’s judgment supports the arrogance of lenders like IFC, who disregard the law, their own safeguard policies, and even the findings of their accountability mechanisms,” said Dr. Bharat Patel of Machimar Adhikar Sangharsh Sangathan (Association for the Struggle for Fisherworkers’ Rights), which is a plaintiff in the case. “This sends the wrong message to institutions like IFC – that you can continue to lend money to bad projects, causing irreversible damage to people and environment and no law will hold you accountable.”
The plaintiffs are optimistic that the full D.C. Circuit will reconsider the case.
~ Joe Athialy
With Subhash Chandra Garg assuming charge as secretary of the Department of Economic Affairs (DEA) in the Finance Ministry, the position of the Indian Executive Director (ED) at the World Bank has fallen vacant. The 1983-batch IAS officer of Rajasthan cadre, Garg was the ED at the World Bank from Nov 2014 until June 2017.
Appointments Committee of Cabinet decides appointment of important posts under the Government of India, including ED at the World Bank. While in the past the Appointments Committee had the Prime Minister as its Chair and the Ministers for Home and in-charge of the concerned ministry, with a notification in mid-2016, the Appointments Committee is reduced to only the Prime Minister and Home Minister.
There are currently 25 EDs on the board, one each for the seven largest shareholders at the Bank – US, Japan, Germany, France, UK, China and Saudi Arabia. Other countries are grouped into constituencies, each represented by an executive director. Indian ED is in charge of Bangladesh, Bhutan and Sri Lanka, apart from India.
The EDs are based at the World Bank Group’s headquarters in Washington DC. It is responsible for policy decisions affecting the World Bank Group’s operation, and approval of the International Bank for Reconstruction and Development (IBRD) loan and guarantee proposals and International Development Association (IDA) credit, grant and guarantee proposals.
There are a few pertinent questions surrounding the appointment and functioning of positions like that of World Bank ED:
Shouldn’t the elected representatives of people have a say in the appointment of an ED at any of the multilateral institutions, who represents the interests and positions of the country?
Shouldn’t s/he be guided by the wise counsel of the Parliament, for the positions s/he takes at the Board, given that the positions could have far reaching impact for the country for a long time to come? (In US, Congress provide “legislated instructions” to the ED representing the US at the Bank).
Shouldn’t s/he be transparent and accountable to the Parliament for the positions s/he takes at the Board?
It is the time that we start asking some hard questions.
Netindia123.com: Medha Patkar demands more transparency in ADB projects
(May 9, 2017)
Webindia123.com: Medha Patkar demands more transparency in ADB projects
(May 9, 2017)
The Statesman: Call for nationwide protests against ADB’s projects in India
(May 8, 2017)
Business Standard: Medha Patkar demands more transparency in ADB projects
(May 8, 2017)
Eenadu: Medha Patkar demands more transparency in ADB projects
(May 8, 2017)
Sify.com: Medha Patkar demands more transparency in ADB projects
(May 8, 2017)
The CEO Magazine: Medha Patkar demands more transparency in ADB projects
(May 8, 2017)
Orrisadiary.com: ADB’s 50 years greeted with mass protest at Bhubaneswar, Odisha
(May 8, 2017)
Sambad: ଏସିଆ ବିକାଶ ବାଙ୍କ ବିରୋଧରେ ଆନ୍ଦୋଳନ (May 7, 2017)
The Shillong Times: ADB’s 50 years greeted with nationwide protests (May 6, 2017)
Navratnanews.com: 50 years of Asian Development Bank Destruction, Displacement and Exploitation of Natural resources (May 6, 2017)
Mumbainewsnetwork: ADB’s 50 years greeted with nationwide protests (May 5, 2017)
Daily O: ADB celebrates 50 years, but there’s a problem with development institutions (May 5, 2017)
The Ecologist: Asian Development Bank must end its 50 year addiction to coal!
(May 4, 2017)
The Telegraph: Protests against ADB projects (May 4, 2017)
Emaatimes.com: पटना: टुकड़ों में बंट कर रह गयी बिजली कंपनियां, गरीबों से दूर हो गयी बिजली
(May 3, 2017)
Janjosh.com: अगेंस्ट ADB की बैठक हुई सम्पन्न (May 3, 2017)
TwoCircles.net: Marking Asian Development Bank’s 50 years, protests to take place in over 100 places in India this week (May 2, 2017)
MattersIndia.com: ADB’s 50 years: Protests to take place in several places (May 2, 2017)
National News Analysis: Marking Adb’s 50 Years, Protest Actions To Take Place In Over 100 Places In India This Week (May 2, 2017)
Governance Now: ADB’s 50th anniversary, civil society’s 100 protests (May 2, 2017)
Counterview.org: Anti-ADB protests begin across India: Planks include loss of livelihood of indigenous people, eco-destruction (May 1, 2017)
Ecologise.in: ADB@50, Resistance@50 (April 28, 2017)
Counterview.org: 50 actions of resistance in India at 50 places against ADB’s 50 year of inequitable policies
(April 28, 2017)
(07 May 2017) Jhabua: Protest in Meghnagar, Jhabua against ADB and other IFIs
(May 6, 2017) Bilaspur: ADB Stop Violating Human Rights and Rights of Indigenous, tribal and forest communities: Stop Supporting Militarisation of our Territories
(May 5, 2017) Nagpur: Workers and Hawkers Stages Protests Against Privatisation of Civic Services
(May 5, 2017) New Delhi: ADB’s 50 years greeted with nationwide protests