Nepal Power System Expansion

Complaint

In October 2018, the Free Prior and Informed Consent (FPIC) and Rights Forum from Lamjung district (Nepal) submitted a complaint with a request for mediation regarding the EIB-funded 220 kV Marsyangdi Corridor transmission line and other hydropower sector development in the region. The complaint mainly concerns Component 2 of the Power System Expansion Project (PSEP or the “Project”).

 Work performed

Following the initial assessment phase in July 2019, the EIB Complaints Mechanism (EIB-CM) proposed to facilitate a collaborative resolution process. Given the absence of an agreement with the Promoter on the proposed way forward, the complaint became subject to a compliance review in August 2019, in line with EIB-CM policy.

 Conclusion

The table below presents the different allegations received from the Complainant and EIB-CM’s conclusions following its investigation.

N.	Allegations made in the complaint		EIB-CM’s conclusions (Compliance with the project applicable standards) [1]
1	Significant gaps in environmental and social due diligence for the PSEP, especially the 220 kV Marsyangdi Corridor	1.1 Failure to apply the higher Environmental Impact Assessment (EIA) standard for the environmental and social impacts assessment(s) for the PSEP, or at least for the 220 kV Marsyangdi Corridor and associated hydropower sector development	Partly grounded EIA process and formal document for both of the transmission lines in the Marsyangdi Corridor not fully in line yet with the EIB requirements based on its environmental and social (E&S) standards, the finance contract, and as indicated in the Bank’s appraisal documents.
		1.2 Salami slicing of the PSEP when evaluating environmental and social impacts/Lack of Cumulative Impact Analysis (CIA)	Partly grounded The Initial Environmental Examination (IEE) report for Udipur-Bharatpur contains some information on cumulative impacts of the Project, though is considered not satisfactory. The (draft) EIA report for Manang-Udipur does not contain an assessment of cumulative impacts of the Project yet. Not yet in line with the explicit requirement of an assessment of the potential cumulative impacts (as part of the EIA procedures) as spelled out in the Bank’s appraisal documents, and in the finance contract.
		1.3 Lack of Strategic Environmental Assessment	Not grounded
2	Failure to comply with EIB requirements on consultation and information disclosure and violation of the rights to information, language and dignity	2.1 Lack of adequate and meaningful consultations with project-affected people, especially in Lamjung district and with people affected by the Right of Way (RoW)	Partly grounded A number of shortcomings identified in view of EIB E&S standards. Absence of a Stakeholder Engagement Plan is not compliant. Other issues range from low levels of participation, especially of women, lack of clarity about the extent of consultation with people affected by the RoW, and in general about the representativeness of participants in public consultations, to the level of effectiveness and meaningfulness of the public consultation process.
		2.2 Inadequate participation and agreement seeking from affected communities in decision-making about the Project
		2.3 Lack of adequate disclosure of information about the Project and its impacts in a manner that is accessible to affected local people, including indigenous peoples
3	Lack of FPIC for the Project from affected communities, especially indigenous peoples		Partly grounded Absence of timely and sufficient attention to determine the applicable indigenous peoples-related requirements during Project preparation, and to the process of engaging with indigenous peoples during Project implementation. No satisfactorily documented evidence of the engagement process with indigenous peoples and outcome. Absence of an updated/final Indigenous Peoples Development Plan. Not in line with the EIB E&S standards and other project applicable standards as presented in Section 5.3.
4	Failure of the Project in Lamjung to adhere to special protections for involuntary resettlement and land acquisition (EIB standards and national law and policy)	4.1 Failure to comply with requirements for physical and economic displacement and land acquisition in terms of process and procedures (lack of adequate notice, information and consultation; absence of plans; lack of transparency in calculation of compensation)	Grounded Limitations in consultation process. Resettlement Action Plans (RAPs) not finalised (problematic for the Udipur-Bharatpur transmission line since tower construction has already started, and the land acquisition process and payment of compensation are on-going). Moreover, available draft RAPs do not deal with land use restriction issues. Not in line with the EIB E&S standards, and contractual obligations (for the Udipur-Bharatpur transmission line).
		4.2 Inadequate compensation, especially for landholders under the RoW	Not able to conclude
5	Insufficient consideration for a series of environmental and social impacts and the need for appropriate mitigation measures		Partly grounded Scope for improvement as part of finalisation of EIA procedures.

While the responsibility for compliance with the project applicable standards lies with the Promoter and the local authorities, the EIB is required to appraise and monitor projects to ensure that they meet the project applicable standards. The Conclusions report indicates some strengths and weaknesses in relation to the EIB’s role (Section 5.6.B, and Table 6, link below).

The services developed a corrective Environmental and Social Action Plan following their monitoring mission in June 2019 (see major elements in Annex 2 of the Conclusions report). The EIB-CM considered this as a positive step taken towards starting to address the significant issues identified.

Outcome

In the Conclusions report, the EIB-CM issued the following recommendations to the Bank:
1.    Update the corrective Environmental and Social Action Plan as soon as possible. 
2.    Engage closely with the Promoter the soonest possible with a view to strengthen its capacity. At the minimum, this implies the need for engaging expert(s) in stakeholder engagement, with specific expertise in indigenous peoples, (not later than six months). 
3.    Continue to strengthen EIB monitoring of the Project and follow up closely with the Promoter, provide technical guidance on E&S matters in view of EIB’s requirements, and monitor the updated corrective Environmental and Social Action Plan’s implementation on a bi-monthly basis.
4.     In line with the finance contract, ensure that the status of progress made in the updated corrective Environmental and Social Action Plan’s implementation is a major determinant in EIB proceeding with disbursements for the Marsyangdi Corridor component of the Project.
5.    Organise a workshop to present the Guidance Note on Stakeholder Engagement in the EIB Operations (for promoters) as soon as possible with the Promoter/the ESSD and other key stakeholders. 
6.    Develop an internal procedural checklist to assist EIB staff in the due diligence of the quality of the assessment of potential significant cumulative effects of a concerned project as part of the EIA process and report.

 Monitoring

The EIB-CM started monitoring implementation of the above recommendations after issuance of its Conclusions report.

In this context, the EIB-CM reviewed Project-related information on E&S evaluations and management, consultants’ activities and the Bank’s monitoring. Between April 2021 and October 2024, the EIB-CM organized separate meetings with the operational services of the Bank and with the Complainant, LAHURNIP and/or Accountability Counsel to discuss the progress in the implementation of the EIB-CM’s recommendations, and remaining issues and challenges on the ground. Moreover, the EIB-CM facilitated meetings between the Bank’s operational services and the Complainant, LAHURNIP and Accountability Counsel, during which the parties shared information and their views directly with each other about the progress made in relation to the allegations.

As part of its monitoring of the implementation of the recommendations, the EIB-CM performed a monitoring visit between 21 and 26 October 2024. The team met with the Complainant, local communities, the promoter, and several other key stakeholders. A monitoring report both in English and Nepali is available through a link at the bottom of this page.

As of end December 2024, the EIB-CM considered the implementation of five of the six recommendations (#1 to #5) as completed.

Nevertheless, the Monitoring report shows that despite the Bank’s best efforts and the progress made by the Promoter towards achieving Project compliance with the applicable EIB E&S Standards and the implementation of the Environmental and Social Action Plan (see Tables 1 and 2 in the Monitoring report) since the issuance of the EIB-CM’s Conclusions report, challenges remain on the ground in terms of meaningful stakeholder engagement, including with indigenous peoples in the communities, and regarding compensation, especially for the RoW. Some of these challenges are beyond the scope of this individual Project and actually relate to issues that are subject to national-level policy discussions (e.g. in relation to RoW compensation). As such, the implementation of the EIB-CM’s recommendations and the enhanced monitoring of the Project by the Bank can have a positive contribution, but the satisfactory resolution of these issues significantly depends on how they are addressed at national level. 

The EIB-CM will continue to monitor the implementation of recommendation #6.