The draft EIA, 2020 has been in the eye of the storm for introducing various policies like exempting some developmental projects from EIA process, decreasing public consultancy period and barring citizens from taking cognisance of discrepancies in EIA. The new developments conflict with environmental and social impact assessment standards of International Finance Institutions (IFI). This article aims to highlight differences between social and ecological impact assessment standards of IFIs and the draft EIA, 2020 and its effect on future developmental projects financed by International Finance Institutions.

The central government has tweaked India’s environment law to relax compliance requirement for businesses, through the Draft Environmental Impact Assessment Rules [1] (“the draft EIA”). The Draft has been widely criticised [2] as a short-sighted approach to increase stimulus into the country’s downward spiralling economy. Apart from the possible ramifications on the environment and rights of stakeholders, the Draft is also likely to lock horns with environmental and social standards of International Finance Institutions.

To put things into perspective India being a developing country finances a lot of its infrastructure development through various International Finance Institutions (IFIs) like World Bank, International Finance Corporation (IFC), Asian Development Bank (ADB), Japan International Corporation Agency (JICA), European Bank of Reconstruction and Development (EBRD), Asian Infrastructure Investment Bank (AIIB) etc. These IFIs help developing countries build their infrastructure by giving out loans with cheap rates of interest and provide necessary technical support. Most IFIs while funding the project follow the Equator Principles [3] , which are a set of guidelines which provide the Environmental and Social Risk Management (ESRM) [4] standards for projects financed by its signatories. Although the details of each IFI’s environment social impact assessment mechanism varies, their core focuses on ensuring that the environmental and social risks of the projects financed by them is mitigated to the maximum extent possible.

This article looks into how the draft EIA [5] finds itself at loggerheads with environmental and social impact assessment Standards of IFIs and how it might affect the financing of developmental projects in India.

Costlier Loans

The very first roadblock that developmental projects are likely to face is to get loan approvals from IFIs. IFIs usually require borrowers to conduct a preliminary inquiry into prospective socio-environmental impacts of the project.  Beyond the inherent hazards of the project, IFIs such as the World Bank evaluate [6] the borrower’s capacity to manage the risk associated with the project and its commitment to comply with its Environment and Social Standards policy (ESS). For instance, a project can be categorised as high risk in a country which lacks a robust legal framework and strong technical capacity and of lower risk in a country where the laws are strong and better enforced. The draft EIA is likely to land projects in higher risk categories which will result into costlier loans.

Double Compliance Cost

The Draft EIA [7] divides projects into three categories- A, B1 and B2. Of these, the projects which fall under the B2 category and those that do not fall under any of the categories mentioned above are exempted from undertaking environment and social impact assessment. The exempted projects include many key developmental projects like inland waterways, solar power plants, road expansions, low-income housing etc. Owing to the huge investment involved in these projects government is likely to opt for IFI funding for these projects. However, irrespective of the Draft EIA [8], if these projects are to be financed by IFIs, the project proponents will be required to conduct extensive environmental and social impact assessments. This is mostly because projects in the B2 category might be categorised as high risk by different IFIs. For instance, the European Bank for Reconstruction and Development (EBRD) classifies Inland Waterways as category A projects [9] which requires diligent impact assessment and risks mitigation. Similarly, projects like housing and thermal solar power plants, both of which are currently receiving funding from the World Bank, might require extensive Environmental Impact Assessment depending on the scope, effect and the potential environmental and social risks that could result of the project.

It is important to note that, IFIs like the World Bank strongly believe in strengthening the host nation’s framework [10] for better impact assessment. This means that the bank examines the project proponent’s framework and incorporates its ESS with the project proponent’s existing local/national environmental framework. This means that in the presence of a sound national environmental impact assessment framework, the developmental projects would have to comply only with national/local laws and lessen the burden of additionally complying with World Bank’s framework. There are chances that the Draft EIA [11] will result in dual compliance for the project proponents, i.e. a separate compliance procedure will be followed for World Bank’s framework and another for compliance with the national environmental framework. Countries can avoid double compliance costs for projects funded by IFIs by putting strong environment laws in place . Since the Draft EIA [12] provides leeway to many developmental projects, borrowers will likely have increased compliance costs.

Stakeholder Engagement

Stakeholder engagement forms the backbone of any thriving environmental impact assessment. Inclusive and informed stakeholder engagement can improve the sustainability of the projects by enhancing the project’s chances of acceptance. This, in turn, would significantly contribute to transforming project design and execution. Most IFIs including the ADB [13] and the World Bank [14] require stakeholders’ participation to start right from the planning stage and continue till the implementation of the project is completed, i.e., public consultation should be a continuous process.

Most IFIs emphasise that stakeholder participation should be meaningful. A ‘meaningful consultation’ as per the ADB [15] requires that socio-environmental risks associated with the projects are highlighted enough considering the aptness of time and accessibility. To receive holistic inputs and suggestions on the project, the aim should be to eliminate legal and technical linguistic barriers for the understandability of the project in the minds of the affected people and other stakeholders.

Similarly, the World Bank’s ESS 10 [16] mandates stakeholders to actively consult all the affected and interested parties through dialogue, disclosure and risk-assessment before moving ahead with the proposed project. A prerequisite for any meaningful communication is timely disclosure of relevant facts in a way that is culturally appropriate to the relevant community.

Another mainstay of these consultations is that the borrowers should successfully integrate stakeholder’s suggestions and mitigate potential risks identified by them. For instance, the IFC requires [17] high-risk projects to engage in meaning participation which involves a thorough exchange of information, informed and organised consultation and impact-based decision making through the direct involvement of the affected parties. Similarly, the World Bank, under its ESS [18] requires borrowers to document how stakeholder’s concerns were taken into account. These practices are in line with Article 6 of the Aarhus Convention [19] which states that those who are affected, ought to have a say in the decision-making process.

The draft EIA [20] does not require projects like small-medium mining, irrigation and hydropower; road-expansion projects, elevated roadways, inland waterways, ariel ropeways, solar power plants, etc. to engage in public consultancy. Even in the areas where public consultancy is allowed, the time for completion of the entire public consultation process has been reduced to 20 days. As per the Draft EIA [21] the consultancy should take place only once before preparation of draft EIA report. All the concerns raised during public consultancy are to be addressed in the final EIA report. The draft EIA reduces public consultancy to a one-time process as opposed to a continuous process envisioned by most IFIs. This difference in public consultancy mechanism will require borrowers to operate in two different timelines first according to Indian laws, i.e., completing the public consultation process within 20 days (where applicable) and the second timeline will be as deemed accurate by the IFI keeping in mind the scale and estimated effect of the project on various stakeholders.

Grievance Mechanism

Most of the IFIs mandate the borrowers to provide objection raising mechanisms to redress concerns of those affected by project with regards to the borrowers’ social and environmental performance. Grievance mechanisms are supposed to act as standing channels of communication that assist those who are directly impacted by the project [22]. It is an early warning system [23] that can effectively grab the attention of the enterprise before the goodwill, and operational efficiency of the enterprise or the project gets endangered. Under the World Bank’s ESS parties affected by the project may submit complaints [24] regarding a bank-financed project to the grievance redressal mechanism of the enterprise, appropriate local authorities, or the World Bank’s corporate Grievance Redress Service. Similarly, the EBRD requires [25] project proponents to set up grievance redressal mechanism commensurate to the scope of the project.

In contrast to the extensive redressal mechanism which IFIs require borrowers to set up, the draft EIA does not provide any means for citizens or stakeholders to take cognisance [26] of discrepancies in things like project proponent’s EIA, information disclosure, mode/method or extent of public disclosure. Only government authorities or the project proponent itself are allowed to take cognisance. In the absence of strong legal enforcement capabilities, IFIs might need to rely on financial ‘pressure tactics’ [27] which often involves IFIs withholding or withdrawing the loan facility mid-way.


The draft EIA is at odds with internationally accepted practices. The relaxations given to developers and project proponents are likely to culminate into agitations by the stakeholders, long drawn out litigations and irreparable environmental damage at later stages. The absence of a robust national framework is expected to result in costlier loans and increased compliance costs for developers. The decreased role of public participation in planning and implementation of the project can lead to withdrawal of loan at later stages, as happened with the Narmada Dam project [28], where the World Bank allegedly withdrew the loan facility due to the government’s ineffective resettlement plan. Insufficiency of environmental and social safeguards in the Draft can in future result into call back of loans which will not be a suitable position for many critical developmental projects. 

About the Authors

Mitali Kshatriya is a 3rd Year Law student at the Ram Manohar Lohiya National Law University (RMLNLU) and is an Associate Editor at IJPIEL’s Blog team.

Kshitij Pandey is a 2nd Year Law student at the Ram Manohar Lohiya National Law University (RMLNLU) and is a Junior Editor at IJPIEL’s Blog team.

Editorial Team

Managing Editor: Naman Anand

Editors-in-Chief: Akanksha Goel and Samarth Luthra

Senior Editor: Kanak Mishra

Preferred Method of Citation

Mitali Kshatriya and Kshitij Pandey, ‘EIA 2020: A Retrograde Step for Environmental Projects’ (IJPIEL, 15 October 2020)







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