French banks’ refusal to fund Rampal power plant28 June 2015
THREE French banks have reportedly turned down request to invest in Bangladesh's Rampal power plant. Six months earlier, two Norwegian pension funds pulled out their investments from India's National Thermal Power Corporation, which has signed the joint venture contract with Bangladesh to set up the project, reports The Guardian. It calls for fresh thinking to relocate the power plant from around Sundarbans.
Under the agreement signed in 2012, India's largest coal power company, the state-owned National Thermal Power Corporation (NTPC) would develop the Rampal power plant in Bagerhat with Bangladesh Power Development Board to produce 1320 MW electricity. People are concerned that the plant, less than 10 miles from the protected Sundarbans mangrove forest, would lead to its slow extinction by environmental degradation of air, water and its overall ecological system.
Their fears are not unfounded. Bank Track, a coalition of organizations tracking the financial sector investment bids, released its analysis of the Rampal power plant under the Equator Principles. It deals with environmental and social risk management framework of projects for financial institutions vying for investment. The report said, "The analysis shows that serious deficiencies in project design, planning, and implementation and due diligence obligations render the project non-compliant with the minimum social and environmental standards established by the Equator Principles, as well as the International Finance Corporation's Performance Standards."
This failure to achieve even minimum standards could make any financial institution nervous of funding the project. Even Planning Commission in Dhaka refused approval to the project, stating it is not confirm with the country's existing policy, besides its funding and ownership are not clear. This leaves even the 15 percent Bangladesh stake in the project uncertain. Green activists in their Dhaka Declaration in May this year have also called upon the international funding agencies to stay out of its funding. The World Bank and ADB have refused funding by this time.
The project estimated to cost over US$ 1.68 billion is facing hard time to get credible funding agencies and the government is already planning to hold road shows in Japan and South Korea to find interested financiers of the project. As it appears Bangladesh people believe at first that if 70 percent funding of the project should come from international institutions, Dhaka must withdraw from the joint venture with India and plan to set up it at a different locations where it would not face resistance from environmentalist groups from home and abroad. People here are also not sure why India is adamant to build the project near Sundarbans ignoring local and global concerns.
It is advisable that following the rejection of funding of the project by three French banks Bangladesh must think it again to relocate the plant site to remove reservations of global lending agencies from its funding. You can't make everyone fool.