World Bank Group's audit arm has decided to probe whether IFC violated environmental and social impact compliance norms while providing advisory services for the Rs 7,500-crore Vizhinjam deep sea port project.
The Kerala government's ambitious Vizhinjam port project was recently awarded to the diversified Adani Group.
International Finance Corp (IFC) -- an arm of the World Bank Group that lends to private sector -- had taken up the advisory services project for Kerala government.
The mandate was to design and implement a bidding process for the development of the port through Kerala government's wholly-owned arm, Vizhinjam International Seaport Ltd (VISL).
Following complaints that raised concerns about possible adverse impact of the port project on environmental and social aspects, World Bank Group's audit arm -- Compliance Advisor Ombudsman (CAO) -- has now decided to investigate the issue with respect to IFC's role.
"On the balance of considerations, CAO has decided to conduct a compliance investigation of IFC's E&S performance in relation to this AS (Advisory Services) project," CAO, who directly reports to the World Bank Group President, has said.
The "compliance investigation" would be to ascertain whether IFC breached environmental and social (E&S) assessment related norms while giving advisory services for the project.
"On the basis of available information, CAO considers that the complaints raise potentially significant concerns about the E&S impacts of this project. The complaints also raise questions about the application of IFC's E&S requirements to the project," the ombudsman said in a recent statement.
Vizhinjam International Seaport, Special Purpose Vehicle of the Kerala government, was formed to implement the project.
The estimated cost of the project is Rs 7,500 crore which also includes investments to be made by the Kerala government.
Last week, Gautam Adani-led Adani Ports and Special Economic Zone said it has received state government's nod for developing the project.
IFC did not comment on the probe. CAO did not clarify on the status of the investigation, while Adani Ports and Special Economic Zone did not offer any comments.
In 2012 and 2013, CAO said, it received "three complaints regarding the project from potentially affected communities.
Due to the related nature of the issues raised, all three complaints are considered in this compliance appraisal."
Now, CAO would study whether IFC's advice in relation to the E&S issues was consistent with the performance standards, especially in assessing environmental and social impacts of the land-based infrastructure.
Besides, it would assess "...whether IFC's policies, procedures and practices as applied to the selection and structuring of this AS project provided an adequate level of guidance and protection in the context of IFC's broader commitments to sustainable development." .
CAO said that though IFC had no ongoing involvement in the project, any future exposure to the construction of the port, either directly or through a financial intermediary would be of relevance in the context of compliance mandate.
The first complaint, dated August 2012, was filed by a representative of Kerala Hotels and Restaurants Association, a former representative of the State Fisheries Department and a social activist, CAO said.
The second complaint, in September 2012, was filed by a local fishing group -- Kerala Swathantra Malsya Thozhilali Federation (Kerala Independent Fish Workers Federation). And, the third complaint, in April 2013, was filed by 14 residents of Mullor village, located near the project site, it added.
"In March 2013, IFC concluded its role in the AS project.
At this point, the port development had been put to tender but Kerala government had decided not to award the contract.
"Subsequently, however, Kerala government reopened the bidding for the port development and in May 2015 a government committee recommended the award of the port project to the sole bidder, APSEZ," it added.
IFC was hired as the transaction advisor to assist VISL in structuring and implementing the project and seeking private sector partner to implement the plan in collaboration with Kerala government's Ports department.