By financing environmentally damaging projects, can Indian funders be held liable?

Early in February, hundreds of residents of Himachal’s Kullu district blocked highways to protest against the Luhri Hydro Electric project run by the public sector Satluj Jal Vidyut Nigam Limited. They wanted to draw attention to the unsettling cracks snaking through their homes, the dust pollution that is devastating their crops and inadequate compensation they have been given for their loss of land and crops.

The State Bank of India is the lead financier for stage one of the 210-megawatt project. The fact that the bank has not been visible in the discussions about the effects of the project highlights the unwillingness of Indian financial institutions to take responsibility for the human and ecological consequences of their investments.

The Luhri Hydro Electric plan had met with vociferous opposition in Himachal Pradesh from local communities since 2010 when the project was granted received environmental clearance. Residents were wary of the potential impacts of the project, such as agricultural land being submerged upstream, water sources and springs drying up, the low compensation rates for land being acquired and the flaws in the clearances granted by the government.

One of the main anxieties related to a planned 38-km-long tunnel. Tunnelling in the mountains had previously resulted in soil on the slopes loosening, houses developing...

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