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India’s Urban Challenge: Building Better While Fighting Poverty World Bank Board Discusses Inspection Panel Investigation of Mumbai Urban Transport Project

Contacts: In Delhi
Sumir Lal   (91 11) 2461-7241
[email protected]
In Washington
Dale Lautenbach (202) 473-3405
[email protected]

Washington DC, March 29 2006 – The World Bank is committed to assisting India confront “the tremendous challenges of its ambitious urban renewal vision” in ways that strengthen the country’s march against poverty, said the institution’
s President Paul Wolfowitz.

He was speaking yesterday at a meeting of the World Bank’s Board of Executive Directors and the institution’s independent Inspection Panel, gathered to discuss the comprehensive Report of the Inspection Panel and its findings regarding problems that arose in the planning and implementation of the World Bank Mumbai Urban Transport Project (MUTP). The meeting also heard how Bank’s Management plans to address the problems in cooperation with the authorities of the State of Maharashtra of which Mumbai is the capital.

Transport development in a mega-city like Mumbai with its roughly 13 million inhabitants is a complex and long-term process. The US$945 million Project, including a US$542 loan from the Bank, and which began in 2002, was designed as a first and urgent step towards improving physical infrastructure in rail and road transportation. An inevitable part of the Project was the resettlement of more than 100,000 people to make way for the infrastructure improvements. MUTP is among the largest urban resettlement projects supported by the Bank in the world.

“The World Bank is committed to assisting India confront the tremendous challenges of its ambitious urban renewal vision in ways that strengthen the country’s impressive march against poverty,” said Wolfowitz. “The issues discussed today need to be viewed against the background of the progress that India has made in a decentralized system of states that are individually larger than most countries in the world. Hopefully the improvements we are making in this Bank-funded Project in Mumbai can be useful for India in addressing the problems of urban poverty throughout the country.”

Wolfowitz said “the flaws identified by the Inspection Panel need to be addressed with urgency now.  The Report proves the worth of the Inspection Panel.”

The Chairperson of the Panel, Edith Brown Weiss, stated “the Panel hopes that by bringing the problems of several thousand shopkeepers and over a hundred thousand other poor affected people to the attention of the Board, the Bank will be able to support such projects more effectively.  Compliance with safeguards policies protects poor people.” She added that “the Panel appreciates the Bank’s acknowledgment of the Project’s problems, its commitment to address them, and its intent to apply the lessons to future urban resettlement.”

The scope of MUTP was modest by Mumbai’s scale but the impact of the infrastructure improvements on the narrowly constrained north-south geography of the city were expected to be noticeable. North-south rail links would run more efficiently, which they are now beginning to do, and new buses, of which 400 have been delivered so far, would ease access in a city where 88 percent of motorized commuters use bus or train or both. Road refinements on the east-west access across the narrow city would also ease the flow for traffic and pedestrians alike.

Since the Project began, some 70,000 people have been resettled, many of whom were among the city’s poorest residents and lived on railways tracks in dangerous and squalid conditions. This resettlement has, in turn, facilitated improvements to rail traffic reducing commuter times for millions of middle and low-income rail passengers. The planned road construction under the Project will also affect large numbers of poor people and shopkeepers living along those roads, who will need to be resettled.

The Inspection Panel originally received complaints from a number of low and middle income shopkeepers who feared their businesses would be adversely affected by changes to urban roads. The Panel also received complaints from other affected people who were to be displaced by the road Project, highlighting a number of problems and risks of income loss that they faced under the resettlement.

The Panel noted that Bank resettlement policy is designed, among other things, to ensure that displaced people are “assisted in their efforts to improve their former living standards, income earning capacity, and production levels or at least to restore them”. Bank policies also require early consultations, assessment of risks and environmental assessment to support effective project design and implementation in cases of involuntary resettlement.

The Panel’s investigation established that the shopkeepers, a number of whom had specific needs for their timber, metal, textile, blacksmith and automotive enterprises, had valid and significant concerns which required full attention.
The Panel found that the Bank did not comply with a number of requirements under its own policies.  Among other things, the Panel found that the Bank overlooked the needs of low and middle-income shopkeepers, did not consult with them in the selection of resettlement sites, and did not ensure that suitable arrangements were provided for their resettlement.  The originally proposed resettlement sites posed difficulties for many shopkeepers in restoring their businesses and maintaining incomes, as confirmed in a recent Business Needs Study launched under the Project.  The Project also failed to give adequate attention to the employees of the displaced shops, who faced risks of income loss.

In addition, the Panel found that many other affected people, including the most vulnerable, faced adverse impacts as a result of non-compliance with Bank policies.  Serious problems were identified relating to environmental and living conditions at the resettlement sites and income restoration.
Environmental and social support services at the sites were not ready or adequate when people were shifted, and many lacked adequate access to water and sewerage.  The Panel also found flaws in the Project environmental assessment.
The Project did not establish an effective grievance system, as required under Bank policy, to enable Project-affected persons to have recourse in case of problems.

The Panel found certain actions at the root of many of these problems, with lessons for the future.  The first was the decision to disband a free-standing project on resettlement, and make the resettlement action a sub-component of the transport Project.  This led to a lesser focus on resettlement, and diverted attention away from the institutional capacity required to effectively address this issue. The Bank also failed to identify major resettlement risks at the outset of the Project, and overestimated the capacity of the Mumbai Metropolitan Regional Development Authority (MMRDA) and the NGO contracted to support project implementation. The Panel also noted concerns about ensuring effective implementation of the Action Plan.

The Board commended the Panel for its Report and the high quality of its work.
The Board discussed and expressed support for the Action Plan which is already under implementation by the Mumbai authorities and the Bank. Among remedial steps to be taken are:

• Improved databases;
• Substantial progress in negotiations with the affected shopkeepers and a broadening of available options; • Improvements in services to the resettlement sites including adequate water supply, better transport connectivity and establishment of a funded maintenance infrastructure; • Effective functioning of the grievance redressal mechanism; • Strengthening of implementation capacity; and • Strengthened Bank supervision.

The Bank suspended disbursements on the road and resettlement components of the Project on March 1, 2006.

“Many of the issues which require action by the Mumbai authorities are already being addressed and we are encouraged by the initial actions they have taken,”
said Michael Carter, World Bank Country Director for India. “They want to move ahead as much as we do. The growth of the urban economy in India is central to its future. In the next five years urban areas will contribute 65 percent of GDP and improved infrastructure is key to this, not just in Mumbai but in all India’s major metropolitan areas. On the other side of that coin is the poverty
challenge: to make these massive improvements without leaving poor people behind.”

Following the discussion at the Board, the Executive Directors endorsed the Action Plan. It was agreed that Management would submit a progress report to the Board in no later than six months and the Panel would report on progress to the Board.

The Bank team has intensified its efforts to work closely with the Mumbai authorities to implement the action plan in full.