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FEATURE STORY

Development Policy Loan (DPL) to Promote Inclusive Green Growth and Sustainable Development in Himachal Pradesh

September 7, 2012

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Himachal Pradesh is one of the country’s main sources of clean energy, generating hydropower to help alleviate electricity shortages in much of north India.

Michael Foley/World Bank

STORY HIGHLIGHTS
  • Three major rivers flow through Himachal Pradesh to join the mighty Indus, carrying life-sustaining water for more than 200 million people in the vast northern Indian plains.
  • The government of Himachal Pradesh (GoHP) has decided to focus on an environmentally sustainable model of economic growth that is both inclusive and green.
  • The World Bank has approved a $ 100 million Development Policy Loan (DPL) to Promote Inclusive Green Growth and Sustainable Development in the state.

Straddling the ridges and valleys of the northern Himalayas, India’s mountain state of Himachal Pradesh (HP) provides valuable environmental services for the rest of the country. Three major rivers flow through it to join the mighty Indus, carrying life-sustaining water for more than 200 million people in the vast northern Indian plains, including the states of Haryana, Punjab, Uttar Pradesh and Rajasthan.

The state is also one of the country’s main sources of clean energy, generating hydropower to help alleviate electricity shortages in much of north India.  The region’s forests act as an important carbon sink for greenhouse gases and parts of the state are known to be hotspots of global biodiversity. 

To ensure the sustainable development of the state’s vast natural resources, the government of Himachal Pradesh (GoHP) has decided to introduce a series of reforms that will move away from the past pattern of development and focus on an environmentally sustainable model of economic growth that is both inclusive and green.

To help support this shift, the World Bank has approved a $ 100 million Development Policy Loan (DPL) to Promote Inclusive Green Growth and Sustainable Development in the state.  The DPL will support the government of Himachal Pradesh as it launches transformative actions across its key engines of economic growth -- energy, watershed management, industry and tourism. 

Here are some questions and answers about the program:

Has the state of Himachal Pradesh demonstrated its commitment to green growth?
How does this program support India’s climate change strategy?
What about the environmental impacts of hydropower development in the Himalayas? 
Will local communities also benefit from hydropower projects?
How will the program help ensure that the state’s industrial growth remains environmentally sustainable?
What about the tourism sector?
Will the DPL improve the livelihoods of local mountain communities who may not be dependent on the three core sectors mentioned above?
Has the government of HP conducted any consultations regarding this proposed program of green growth?
What are the expected environmental and social impacts of the DPL?

Has the state of Himachal Pradesh demonstrated its commitment to green growth?

The government of Himachal Pradesh (GoHP) has already initiated a transformational program of policy and institutional reforms to shift towards green growth. Further policy actions are planned over the next two years.  Some of the policy actions already undertaken are:

  • Hydropower has been identified as one of the key drivers of the state’s economic growth.  An additional 10 GW of hydropower is planned to be developed by 2020. To gauge the potential impacts of this large scale development program, cumulative environmental assessments have been mandated in the state’s five key river basins. This includes a review of the existing requirement of environmental flows in the rivers. The assessment for the Sutlej River Basin has already been initiated.
  • To ensure that communities living in the vicinity of hydropower projects also benefit, the government has adopted a long-term benefit-sharing policy that will provide cash annuities to affected households during the project’s lifetime.
  • A community-led program to protect watersheds has been launched across the state. This will help enhance the community ’s water efficiency and availability, and thus improve agricultural productivity .  
  • An organic farming policy has been approved.
  • The state’s industrial policy has been amended to promote cleaner methods of manufacturing and production, while disincentives have been put in place to deter the development of polluting industries.  Public disclosure of pollution levels is being promoted.

How does this program support India’s climate change strategy?

India is now at a critical juncture. It has an opportunity to undertake a paradigm shift towards cleaner energy to meet a part of its growing power needs. With this program, Himachal Pradesh will make a tangible contribution to the government of India’s objective of reducing greenhouse gas emissions without impeding economic growth. For instance, the state’s generation of clean hydropower will offset the use of coal, which will contribute to  lowering the carbon intensity of India’s energy sector.  The Bank-supported DPL will ensure that HP’s planned program of hydropower development proceeds in a socially and environmentally sustainable manner.

What about the environmental impacts of hydropower development in the Himalayas? 

A key objective of the DPL is to help the state adopt policies and processes that will ensure that hydropower development proceeds in an environmentally and socially sustainable manner. 

A river-basin approach in the assessment and management of the environmental impacts of large hydropower projects will enable the development of plans to mitigate and manage these impacts.  To this end, cumulative impact assessments will be conducted for all the major river basins. 

The state also plans to formulate Integrated Basin Wide Catchment Area Treatment (CAT) Plans for all river basins. This will help check soil erosion and land degradation in the catchments of the rivers being developed for hydropower.  People‘s involvement in the management of their catchment areas will also be promoted.

HP is the only state in India to have mandated environmental flows for all hydropower projects.  This ensures that hydropower projects release a specified minimum amount of water in the river at all times, safeguarding the aquatic health of the river’s eco-systems and meeting the needs of downstream communities.  The state government has decided to reexamine the current environmental flows regime in the course of the cumulative impact assessments.  To ensure that hydropower developers comply with these requirements, a network to monitor minimum environmental flows is being developed. This information will be available to third parties and interested stakeholders.

Will local communities also benefit from hydropower projects?

Communities living near hydropower projects often have to bear some of the projects’ negative impacts.  To ensure that villagers also benefit from these projects, the state government has decided that 1% of a project’s power sales will be distributed to households in the project-affected area in the form of an annuity payment for the life of the project. ‘Below Poverty Line’ (BPL) families will receive additional funds. 

This complements an earlier policy under which 1.5 percent of the construction costs of a project were deposited by developers in a Local Area Development Fund that funded community infrastructure works in project-affected areas.    As part of this Program, there will also be greater community participation in the implementation and monitoring of these village development works. 

How will the program help ensure that the state’s industrial growth remains environmentally sustainable?

HP has witnessed exponential growth in industrial development. This has created a number of industrial clusters where air and water quality is rapidly deteriorating. The state government has therefore drawn up a list of pollution-intensive industries that will be disincentivized over time. At the same time, efforts are being made to promote industries that adopt cleaner methods of production.

What about the tourism sector?

HP has considerable unrealized potential for ecotourism. The state government plans to amend its tourism policy to ensure that the tourism sector grows in an environment-friendly manner.   The DPL will help identify policies that promote sustainable tourism practices.  GoHP aims to increase the contribution of tourism to the state’s GDP to 15%.

Will the DPL improve the livelihoods of local mountain communities who may not be dependent on the three core sectors mentioned above?

To benefit local mountain communities, the state government has initiated a program of community-led conservation of local watersheds across the state. This will increase the agricultural and horticultural productivity of this fragile mountain region. Under this Program, villagers will draw up local-level plans and implement them. This is expected to improve the availability of water in the hills, help farmers move to higher-income yielding crops, promote the efficient use of scarce water resources, and help communities set up agri-businesses.

The state government plans to pilot this approach in at least one Gram Panchayat in each of the state’s 77 blocks. Once these pilots are assessed for effectiveness, the guidelines will be reviewed and, if warranted, will be implemented state-wide.

Has the government of HP conducted any consultations regarding this proposed program of green growth?

To ensure broad ownership of the green growth program, the state government has conducted 11 consultations with key stakeholders within the state from July 2011 onward. It has also engaged the World Wildlife Fund to host two such sessions in November 2011 to produce an independent account of stakeholder views. 

Local civil society and stakeholder groups have recommended that consultations should not only be held at the policy formulation stage be also during implementation. 

What are the expected environmental and social impacts of the DPL?

The proposed loan will support the government of Himachal Pradesh's move to more sustainable management of its natural resources.  Specific policies supported by the operation are thus not likely to cause adverse effects on the state’s environment, forests, and other natural resources.  In fact, environmentally beneficial outcomes are expected from this operation.


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