Proposed IFC Investment in Mira Power Limited for the Gulpur Hydropower Project

Pakistan

January 21, 2015

The United States opposes IFC’s proposed investment in Mira Power Limited for the Gulpur 

Hydro Project, and wishes to be recorded as voting “no.” It is the United States’ view that the 

environmental risks associated with this project outweigh its potential benefits. The project sets 

an unacceptable precedent for IFC engagement in areas of critical habitat. The United States

remains supportive of helping Pakistan to address its ongoing and severe energy crisis through 

increased electricity generation and sectoral reforms, which includes well-designed hydropower 

projects. The United States is committed to continuing to partner with Pakistan in this 

effort. However, in this particular case, the United States does not believe that IFC has 

accurately judged the risks of this investment.

When IFC proposes to finance a project in sensitive critical habitat such as the Poonch River –

home to two endangered fish species, one of which is critically endangered – the Performance 

Standards require that the project will cause no harm to the endangered species, and will result in 

a net gain. The United States believes that the methodology used to assess the environmental 

impacts of this project, as well as to assess the potential benefits of the proposed mitigation 

measures, was fundamentally flawed. 

First, the methodology sets an unjustifiably low “no project” environmental baseline: inevitable 

and complete degradation of the critical habitat due to unchecked illegal mining and fishing. 

Measured against such a baseline, the ESIA showed a “net gain” in biodiversity, even while the 

model predicts a net loss relative to present-day conditions. By this logic, any adverse impacts 

of the project on critical habitat would be acceptable, provided those impacts do not result in 

devastation as severe as a continued trend of unchecked illegal activity (the baseline). In our 

view, using a “dynamic” baseline to assess projects in critical habitat in this context is an 

unacceptable approach to implementation of the IFC Performance Standard (PS) on biodiversity 

(PS 6). This PS requires a two-step analysis that it be “demonstrated” that the relevant 

biodiversity will not be harmed and will likely be left better off. Replacing a “current” baseline 

with a “dynamic” baseline that is based on various hypotheses about future actions and inactions 

invites “loading the dice,” and erodes the fundamental requirement that it be demonstrated that 

the project will not result in harm. Moreover, even if a “dynamic” baseline were consistent with 

PS 6, in this case, the dice are loaded with a baseline that sets the lowest-possible “no project” 

bar.

Second, the ESIA makes unrealistic assumptions regarding factors beyond the project sponsor’s 

control, further loading the dice with the best-possible “with project” alternative. For example, it 

assumes: 

• no further watershed development by Pakistan or India (a questionable, yet critical, 

assumption, given that the Cumulative Impact Assessment concludes that construction of 

the five planned projects on the Poonch River would change the entire river into a series 

of lakes and low-flow sections); 
• early and major benefits from an untested program to reduce gravel and de-foresting 

activities elsewhere in the watershed – a program to which no project funds are 

dedicated; and

• no livelihood losses that could lead to implementation risks for the program to reduce 

gravel and de-foresting activities.

Third, the proposed mitigation measures are inadequate. IFC policy stipulates that offsets –

measures to replace habitat adversely impacted by the project – are a mitigation of last resort for 

Tier 1 habitats (as the project site is in), and further notes that it would be difficult (if not 

impossible) in practice to demonstrate an offset in a Tier 1 habitat. Located on a river considered 

to be the endangered Mahaseer’s “last resort,” this project would block its migration to important 

breeding habitat, yet proposes a program of artificial hatcheries and off-site habitat stabilization 

which has not yet proven successful. This project also would inundate the breeding habitat of 

the critically endangered Kashmir catfish, yet proposes no offset program for these catfish and 

selects a level of minimum environmental flow that is insufficient to protect them.

Beyond the flaws in the environmental analysis, we are concerned about the apparent lack of 

coordination between the IFC and the World Bank on this project. As the project document 

highlights, addressing Pakistan’s energy needs is a pillar of the World Bank Group Country 

Partnership Strategy for Pakistan. When the IFC engages in a project such as Gulpur, where 

many of the mitigating actions depend on parties beyond the IFC’s and the project sponsor’s 

influence, there is a strong argument for World Bank engagement in order to help support and 

strengthen these actions. In this case, the United States would have strongly preferred to see 

better coordination between the IFC and the World Bank to promote alternative livelihoods for 

miners and fishermen and to support better river basin planning. 

Finally, the United States questions the decision not to highlight these risks more prominently in 

the project document or to bring this project to the Board for discussion. In a case where the 

risks are clearly significant and the potential development benefits are modest, the United States

believes the Board must be actively involved – at a minimum through a comprehensive project 

document, if not a full Board discussion – to weigh potential tradeoffs. 

In sum, the United States believes this project sets an unacceptable precedent for the 

implementation of IFC’s Performance Standards and does not strike the right balance between 

economic development and environmental preservation. For these reasons, the United States

wishes to be recorded as voting “no.”