 The World Bank suspended its financial support to the roads and resettlement components of the Mumbai Urban Transport Project (MUTP) on March 2, 2006 because the Government of Maharashtra (GoM) was not meeting its legal obligations under loan agreements signed with the Bank. This followed concerns that the resettlement and rehabilitation of some households and shops affected by the Project had not been carried out in compliance with the Bank’s environmental, social and supervision policies.Â
WHAT IS SUSPENSION?
The suspension of a loan or a component of a loan is a remedial measure available under all World Bank loan agreements, taken when the Bank sees that the objective for which funds were earmarked is not being met or the borrower is not fulfilling its obligations under the loan agreement.
Suspension entails a temporary freeze on the Bank's financing of implementation; it does not mean that the Bank withdraws from the concerned project. On the contrary, the Bank steps up its dialogue, activities and supervision in a bid to help meet the conditions for revoking that suspension.
The MUTP seeks to improve the transport network in the heart of the metropolis of Mumbai. Some 17,000 households and 2,500 commercial units are anticipated to be affected by the Project. They were to be moved to new locations, where new houses and shops with title to the properties would be handed over to them. Some 14,000 families and 350 businesses have already moved to their new accommodations. During its supervision visits and from complaints filed before the independent Inspection Panel by affected citizens, the Bank found that the Project was not meeting some of the basic objectives of its policies, especially the Policy on Involuntary Resettlement, with regard to some shop-keepers along the proposed Santacruz-Chembur Link Road. In the case of the MUTP, the Bank also found some major points of departure from the loan agreements including failure to: - Maintain the Project Management Unit at agreed levels;
- Establish and maintain an Independent Monitoring Panel (IMP);
- Act promptly and diligently in order to take any corrective action deemed necessary to remedy any shortcoming in the implementation of the Project;
- Ensure the implementation of the Resettlement and Rehabilitation Policy including the Resettlement Implementation Plan (RIP);
- Implement the Resettlement Implementation Plan and Community Environment Management Plan.
All these factors prompted the Bank to stop the flow of its funds to the road component (US$ 150 million) and the resettlement component (US$ 79 million) of the US$ 940 million MUTP. The rail component of the Project remains unaffected. The Bank has strengthened its supervision of the project and is working with the GoM and the project implementing agency, the Mumbai Metropolitan Region Development Authority (MMRDA) to correct the situation and thus help lift the suspension. Among the steps that need to be taken by the GoM through MMRDA to lift the suspension 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.
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