By Nita Bhalla

NEW DELHI (Thomson Reuters Foundation) - A World Bank investigation into a tea plantation project in India that it jointly finances with tea giant Tata Global Beverages has found that it has failed to tackle alleged abuses of impoverished workers, the group said on Wednesday.

The International Finance Corporation (IFC) - a member of the World Bank Group - said its accountability office began a probe into the project, run by Amalgamated Plantations Private Limited (APPL), after reports tea pickers were being exploited.

In a statement emailed to the Thomson Reuters Foundation, the IFC said it welcomed the investigation by the Compliance Advisor Ombudsman (CAO) and would work toward improving conditions for workers in plantations in India's Assam state.

"IFC is continually working with APPL in its ongoing program of improving living and working conditions and will continue to collaborate with the CAO on the next steps, post-audit," it said.

APPL said it was currently implementing a project focused on areas such as housing, sanitation, medical facilities, health and safety, and worker engagement following an independent assessment into conditions its tea estates in June 2014.

"The company remains committed to investing funds in the project and maintaining its momentum, to bring about a positive change in living & working conditions of its workers," said a statement from APPL.

APPL said its charitable arm, the APPL Foundation, was monitoring the project and ensuring that workers benefited from it in the best possible way.

APPL was set up in 2009 to acquire and manage tea plantations previously owned by Tata Global Beverages (TGB) - which owns Tetley, the second-largest tea brand in the world.

TGB responded to the findings of the CAO probe, saying it was deeply concerned about allegations of the poor condition of workers, adding that it would work with the IFC to make sure annual independent audits of the project are conducted.

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"Tata Global Beverages is committed to the fair and ethical treatment of people across its supply chain," TGB said in a statement emailed to Thomson Reuters Foundation.

"As a concerned shareholder TGB continues to support the management of APPL towards improving the living and working conditions of workers."

The IFC's $7.8 million involvement in the $87 million "Tata Tea" project was aimed at promoting shareholder workers and helping to create more than 30,000 permanent jobs.

Tata Global Beverages took a 41 percent stake in APPL and the IFC took 20 percent, with the remainder held by workers and smaller firms.

But complaints by charities and trade unions about exploitation and abuse of tea-pickers - including long working hours, low wages, lack of freedom of association, over-exposure to pesticides and poor health and living conditions - prompted the CAO to launch an investigation in February 2014.

The CAO's findings, released on Monday, found the IFC failed to identify and address labor, social and environmental issues, including potential violations of Indian and international law, including those related to housing and wages.

"CAO finds that IFC has not assured itself that the wages paid by the client are consistent with IFC's commitment to support jobs which offer a 'way out of poverty' or 'protect and promote the health' of workers," it said.

The IFC's investment also supported a problematic employee share-purchase program, the CAO found. It said APPL misrepresented the risks associated with buying stock, resulting in debt incurred by workers who came under pressure to buy shares.

The CAO said the IFC supported issuing more shares, reducing the value of workers' shares and diluting their stake in APPL, without consulting worker-shareholders.

Human Rights Watch called on the IFC to conduct a review of the social impact of its investment and work with its clients to improve the plight of impoverished tea pickers in Assam.

"The IFC has been sluggish in responding to its endemic failures and done little to remedy the impact of its past mistakes at the community level," said Jessica Evans, senior international financial institutions researcher at HRW.

"The IFC's board should send the action plan back to the staff and require it to consult with workers and the groups that filed the complaints to make sure that all the violations are addressed and appropriate responses are developed."

(Reporting by Nita Bhalla; Editing by Katie Nguyen and Astrid Zweynert. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, trafficking, corruption and climate change. Visit news.trust.org)