IFC, Tata Global face World Bank heat over rule breach

World Bank's investigative arm CAO has found that tea plantation firm APPL, a JV between IFC and Tata Global Beverages (TGB), has failed to comply with norms regarding environment protection and working conditions at estates in Assam and Bengal.
In 2006, World Bank financing arm IFC invested a 20 per cent stake in APPL acknowledging poor working conditions at tea plantations due to low productivity and high fixed costs leading to over 60,000 job losses in early 2000s.
India is the world's second-largest tea producer while APPL is the second-largest producer and supplier of tea in the country.
"CAO's investigation identifies a number of non-compliance related to IFC's assessment and management of environmental and social (E&S) risks associated with the investment," it said in the findings released earlier this week.

According to the investigation, there were specific non-compliance issues regarding IFC's assessment and supervision of living and working conditions on the plantations and reported use of banned pesticides.
Non-compliance over information disclosure, consultation, and response to security incidents was also found.

"IFC's investment in APPL was a challenging one, but one with potential for significant positive development impact... It underestimated the environmental and social (E&S) challenges associated with the project (investment in APPL)," CAO said.
The World Bank's independent investigative arm also said IFC did not address key risk areas at APPL tea plantations.
"IFC's supervision of its investment in APPL did not meet the requirements of the Sustainability Policy or relevant Environmental and Social Review Procedure (ESRP)."

On the CAO report, IFC said it is aware of the long-standing challenges of the tea industry in India and working with APPL to improve living and working conditions.
"Indeed, this is why we chose to invest and support the creation of an employee share plan to sustain employment of 31,000 permanent workers at APPL's tea estates in 2009. We have an important role to play and can make a significant contribution to this initiative. We will continue to collaborate with CAO on the next steps, post-audit," it added.
It also ensured proper oversight and evaluation of work at APPL as well as adherence to environmental and social procedures.

"Tata Global Beverages is committed to the fair and ethical treatment across its supply chain. Based on detailed assessment of action areas... APPL is now pursuing a phased action plan to improve living and working conditions at their plantations," TGB said in a statement.
Amitava Sen, CFO, APPL, said the company is committed to investing funds in the project and maintaining its momentum to bring about a positive change in living and working conditions of its workers.
CAO said that given the vulnerable status of workers and APPL's responsibility to provide a range of basic services to workers, IFC's pre-investment (E&S) review was not commensurate to risk.