India - Private Infrastructure Finance (IL&FS) Project : environmental and social report (Vol. 2 of 6)

* INFRASTRUCTURE LEASING & FINANCIAL SERVICES LIMITED ENVIRONMENTAL AND SOCIAL REPORT VOLUME II: MAIN REPORT November 1995 -_ I:., r  a VOLUME II: ENVIRONMENTAL AND SOCIAL REPORT a I  DVTA, TABL NT DESCRIPTION PAGE NOS Purpose 9-16 Preamble The BOOT/BOT Contractual Framework and the ESR Purpose Strucure of the Report Users of the ESR Prepartion of the ESR Part 1: Environmental And Social Statement of IL&FS 17-19 Enviromental and Social Statement of IL&FS Part l: Operational Procedures 20-23 Chapter I: Iegal and Institutional Setting 24-45 Environental Aspects Consfitutional Provisions - Intemational Treaties, Conventions and Protocols - Stats of National Environmental Legislation and Regulation - Organisaion Structure for Environment Management in India - World Bank Operational Directives Concernmg Environment Social Aspects - Constitutional Provisions - Intrnational Treaties, Conventions and Protocols on Human Rights and Indigenous People - Stams of Social-Related Legislation and Policies - Summary of Key Trends in Indian Law/Policies - Operational Agencies and Key Actors in RAR Plannig and Implementation - World Bank Operfaional Directives regarding Social Aspects - Comparison of Indian Law and World Bank Operational Direcdves 4.30 and 4.20 - Social Impact and Entitlement Framework for World Bank Financed Projects 2  DZSCB=aflI PAGE NOS Chapter nI: Major Issues in Priority Sectors 46-55 Enviromnental Issues - Integrated Area Development - Water Supply and Sanitation Infastructure - Surface Trnsport - Power Social Issues - Involuntaiy Resettlement - Protection of Marginalised and Vulnerable Groups - Public Consultation and Consensus Building Chapter m: Operational Procedures 5S6-90 The IL&FS Project Cycle Environment and Social Assessment Report (EAR/SAR) Environmental and Social Assessment Frmework Environmental Assessment Process (EAP) - Environmental Screning - Enviromental Scoping - finasation of TOR for Environmental Assessment Studies - Appointment of Envinmental Assessment Consultant - Environmental Assessment Studies - Review of EAR - Translation of Agreements into Legal Instruments - Monitoring of Enviromnental Action - Annual Environmental Audit Social Assessment Process - Social Screening - Social Scoping - Finalisation of TOR for Social Assessment Report - Appointment of Social Assessment Consultant - Establishment of Neighbourhood Committee - Social Assesment and Preparation of Mitigation Plan - Review of SAR - Translation of Agreements Wto Legal Instruments - Monitoring of RAP/IPDP - Annual Social Audit 3  PAGE NOS Chapter IV: Environmental And Social Risk Management 91-105 Environmental and Social Risk What is Envirommental and Social Risk IL&FS Project Cycle and the Risk Evaluation Process - Risk Identification - Risk Assessment - Allocation of Risk Pesponsibility - Risk Management Insttional Framework Part In : Organisational Requirements 106-107 Chapter V: Organisational Support 108-117 h itroduction Role of IL&FS IL&FS Organisational Structure and the ESR ilAFS Responsibility'Allocation Framework l&FS Organisational Support for the ESR - Corpomte Leel - Project Level Chapter VI: Staff Development Plan 118-127 Staff Development Needs Staff Development Plan Resources for hnplementation Chapter VII: IL&FS - Mltblateral Agency Interface 128-129 4  LIST OF TABLES Table I - Shareholder - SPV Relationship Table 1.1 - Comparison of Indian Law with World Bank Directives (Environmental) Table 1.2 - Comparison: Indian Law and World Bank Directives (Social) Table 1.3 - Social Impact and Entitlement Framework for World Bank Financed Projects Table 3.1 - IL&FS Project Cycle Table 3.2 - Environmental and Social Assessment Report Table 3.3 - Enviromnental and Social Assessmnent Framework Table 4.1 - Illustrative Environmental and Social Risks Table 4.2 - The EA/SA Process and Risk Evaluation Table 4.3 - Illustrative Risk Responsibility Framework Table 5.1 - IL&FS Departmental Responsibility Allocation Table 5.2 - Deployment of Corporate Consultant Per Project Table 6.1 - IL&FS Expertise Requiremnent Table 6.2 - Staff Development Plan 1996-1998 Table 7.1 - Interface Matrix 5  LIST OF FIGURES Figure I - Thc BOOT/BOT Framework Figure 1.1 - Organisation Structure for Environment Management at the Central Government Level Figure 2.1 - Probable Environmental Impact Matrix Figure 5.1 - IL&FS Organisational Structre and the ESR Figure 5.2 - Schematic Representation of Proposed Organisational Support 6  LIST OF ACRONYMS ADR - Altemative Dispute Resolution BOO - Build Own Operate BOOT - Build Own Operate Transfer BOT - Build Operate Transfer CBO - Community Based Organisation CC - Corporate Consultant CFD - Contractual Framework Documentation COD - Committee of Directors CPCB - Central Pollution Control Board CRZ - Coastal Regulation Zone DFIBR - Detailed Feasibility and Investment Banking Report DPI - Detailed Prcess of Implementation EA - Environmental Assessment EAP - Environmental Assessment Process ESAR - Envirownental and Social Assessment Report ED - Executive Director EIA - Environmental Impact Assessment EMP - Environmental Mitigation Plan ESMG - Environmental and Social Management Group ESR - Environmental and Social Report FRI - Forest Research institute GOI - Govermment of India lL&FS - Infrastucture Leasing and Financial Services Limnited IPDP - Indigenous People Development Plan ISR - Initial Screening Report ITRC - Indian Toxicology Research Centre LA - Local Authority LAA - Land Acquisition Assessment MA - Multilateral Agencies MoEF - Ministry of Environment and Forests MOU - Memorandum of Understanding NDP - Neighbourhood Development Plan NEERI - National Environment Engineering Research institute NGO - Non Governmental Organisation O&M - Operation & Maintenance OD - Operational Directive PAP - Project Affected Person PRA - Participatory Rual Appraisal R&R - Resettlement and Rehabilitation RAP - Rehabilitation Action Plan 7  REP - Risk Evaluation Process RMG - Risk Management Group RMP - Risk Mitigation Plan SA - Social Ass:ssment SAP - Social Assessment Process SAR - Social Assessment Report SDP - Staff Development Plan SIA - Social Impact Assessment SPCB - State Pollution Control Board SPV - Special Purpose Vehicle TOR - Terms of Reference UMTS - Urban Mass Transit System WB - World Bank Wil - Wildlife Institute of India S  P1URPOSE 9  TABLE OF CONTENTS Preamble The BOOT/BOT Contractual Framework and the ESR Purpose Structure of the Report Users of the ESR Preparation of the ESR 10  PUREOSE PREAMBLE (I) Infrastructure Leasing & Financial Services Limited (IL&FS) is pioneering and promoting innovative approaches to infrastructure development in India. It is developing a pipeline of commercially viable projects which includes urban by-passes, mass transit systems, watcr and sanitation infrastructure and integrated area development. The projects are to be developed as Build-Own-Operate-Transfer (BOOT) or Build-Operate- Transfer (BOT) schemes (2) IL&FS recognizes the need to clearly demonstrate its commitment to environmental and social issues in each of its projects. The visibility, variety and complexity of the projects make it imperative that they conform to a transparent environmental and social policy with full public disclosure and with the full cost of environmental and social management factored into projects costs (3) This document, the Environmental and Social Report, presents IL&FS Enviromental and Social Policy and operational procedures. It has been designed to be in confonnity with Government of India environmental and social requirements and with the Operational Directives of the World Bank (4) IL&FS focus in the infatcture sector has been on commercially viable infrastructure projects, where recovery of investments could be effected through the levy of user charges. The BOOT/BOT contractual framework for infastructure projects and its principal shareholders is presented in Eig= I below: 11  Eigure I THEF OOTOT FRAME3WORK I GOVERNAMNt IConcesion |IL&FS/ | ImLcdm | r Shareoldlrs SHAREHOLDERSl W~~~~~~ I |Constucdton Contrac O&m- Contract I CONSTRUCTION CONSORT=IM O&M CONSORTI (5) The critical aspect of the BOOT/BOT framework is the ability to allocate responsibilities and risks through contracts. Each leg of the framework enables allocation on the basis of agreed responsibility and in the process provides a transparent and contractually effective mechanism to undertake project implementation and operation and maintenance within a public-private partnership framework. More specifically, the relationship between each shareholder to the SPV is provided in Table I 12  ICakkl SHAREHOLDER ROLE Govemment 1i- Extend concession to the SPV Provide land and grant clearances/approvals to the SPV Regulate SPV operation . Safeguard Public Interest Project Sponsors Provide equity to the SPV . Develop the project Special Purpose Vehicle - Mobilise project finance - Manage project implementation - Manage project O&M Lenders Extend debt to the SPV JL&FS as financial internnediary -Provide equity to the SPV - Mobilise equity/debt for SPV Act as project advisor/management Construction Consortium Undertake prject constructon Participate in debt/equity of SPV Provide construction finance Operations and Maintenance Consortium Undertake project O&M - Provide commercial management of Project on BOOT/BOT basis . Participate in debt/equity of SPV (6) T.he enviromnental and social frmework for IL&FS has been designed to be consistent, inter alia, with the BOOTIBOT framework. The ESR outlines the various policies, procedures, frameworks and assessments that will enable IL&FS as a financial intermediary to ensure, that a project is developed in consonance with its policies, and is adequately protected from attendant risks. In the process, the enviromnental and social framework assigns responsibilities to each of the prospective players and illustates the instrunents thrugh which such an allocation or assignment will be effei.ted 13  P[URPOSE (7) The Environmental and Social Report (ESR) is a core document of IL&FS for its infrastructure activities. The purpose and aim of the ESR is to provide the Institution an overall framework to guide it in the identification, assessment and management of environmental and social concems at the project and at the organisationa! level (8) As a financial intermediary, IL&FS will ensure that the contractual fiamework for each project complies with the provisions of the ESR prior to obtaining the approval of its competent authority for investment in the project (9) Thus, as a core document of the Institution, the ESR is also meant to provide project shareholders, existing as well as prospective, and IL&FS staff a cornmonality of language and a framework of operation qmi F THLREEQRT (10) The Environmental and Social Report (ESR) comprises of three parts: Part I of the Report states IL&FS commitment to responding to environmental and social issues. Part II (Procedures) provides the process by which IL&FS will ensure that each of its infastructure projects is in compliance with its policy. Part II begins with a discussion of the current situation, by describing the legal-institutional scenario and the environmental/social issues pertaining to the priority sectors that IL&FS is concerned with. This nderstanding is incorporated into the project life cycle wo develop a project schedule that includes both legal/mstitutional requirements and environmental/social concems. Risk evaluation and managment is also addressed herein. Part III (Organisational Requirements) outlines IL&FS organisational stucture to administer the ESR. It outlines the organisational support and staff development plan proposed to be implemented and the interfaces that it will put in place, especially in relation to Multilateral Agencies (MA) s;ch as the World Bank (11) By intent, Part I is brief, and is designed to provide an overview of the overriding concerns, and commitments, and priorities of the Institution in relation to environmental and social issues (12) Part II is a detailed exposition of the process by which IL&FS will, inter alia, operationalise its environmental and social policy, allocate responsibility for the implementation of environmental and social management plans within a public-private partnership framework, monitor environmental and social parameters, implement 14  strategies to mitigate risks attendant to each project from these aspects, and undertake review of project documentation (13) It is also designed to provide users of the ESR a clear framework to identify, assess, plan and implement mechanisms that ensure compliance of an infrstructure project with IL&FS environmental and social policy and procedures (14) Part III is designed to enable IL&FS to deliver on its enviromnental and social objectives. The underlying philosophy herein is that environmental and social concems are to be seen as an intrinsic element of project development and that this is best achieved by inculcating awareness at the operational levels of the Institution. The proposed organisational structure, the staff development plan and the institutional interface matrix reflect this intent (15) The terns, definitions and methodology discussed are generic in nature and are flexible enough to accommodate the nature of risks with respect to environmental and social issues that are likely to be encountered by IL&FS in the course of its iructure project activities USERS OF 33E SR (16) The ESR is designed for the use of the following: IL&FS Staff: As an operating document for ensuring that infrastructure projects are adequately assessed and managed from an envirmonental and social point of view, are reviewed in accordance with the ESR, and for setting environmental and social compliance standards SPEYLftect S=nsor: As a document expressing IL&FS requirements with respect to environmental and social issues, the process and documentation that will need to be followed/submitted for each project, and the framework by which enviromnental and social risks are to be managed Project Associates (Other Shareholders. Consultants. Lenders. .-tc-) : As a document expressing the standards and processes which IL&FS will require each of its projects to comply with, especially with respect to environmental and social assessment, risk allocation and management 15  PEPEARATION F HE1SR (17) The ESR was prepared by IL&FS with the assistance of Consultants - Development Altematives - specialised in the field of environmnental and social issues. The process of preparing this report has included desk research on the legal and institutional firamework, analysis of priority issues in the infrastructure sector, consistency checks with operational directives of the World Bank and other multilateral agencies. There have been a series of discussions within and outside IL&FS for the preparation of the Report (18) These discussions have served to distill the experience of IL&FS staff, specialists in the sector, Government, private sector organisations, and representatives of the World Bank. Principal conclusions reached at these discussions have been incorporated in the ESR (19) The ESR has been formally approved by the Board of Directors of IL&FS (20) By design, this document is a statement of the core principles of environmental and social ma!uagement to be followed by IL&FS. Thus, it aims to transcend the limitations of time and continuously adapt itself to the changing needs of the Institution in a dynamic external enviromnent. This will be made possible by reviewing the Report on an on-going basis. Users are encouraged to identify areas requiring revision, addition or deletion by communicating with-the Executive Director (Infiastructure) of IL&FS 16  PART I: ENVIRONMENTAL & SOCIAL STATEMENT OF IL&FS 17  As a dynamic and innovative institution, IL&FS is committed to provide value added services in its mandated areas of operation. The Institution believes that improved access to efficient public infrastructure necessitates synergy between prudent use of natural resources and meeting people's concerns. Thus, attaining environmental and social viability through a consultative process is an integral part of the business operations of IL&FS. The overall goal is contribution to sustainable development in and around the project locations The Environmental and Social Statement of the Institution commits each project to three cardinal principles: (1) Enhance the quality of life and environment in and around the project location, by (a) Conserving natural resources (b) Addressing the legitimate concems of relevant stakeholders, especially project affected persons (2) Prevent adverse environmental and social situations, by (a) Minimising the release of polluting wastes to amounts that do not hann the environment (b) Preserving bio-diversity and ecological equilibriumn by reducing pressure on natural resources (c) Avoiding or minimnising resettlement due to land acquisition through appropriate technical and management measures (d) Ensuring protection of marginalised and vulnerable Groups, including the economically and socially disadvantaged, the elderly, women, children, physically handicapped and indigenous people (e) Minimising health and safety hazards 18  (3) Mitigate possible adverse environmental and social impacts, by (a) Integrating waste managemnent mechanisms and maintaining the environrnental quality of the project locations (b) Ensuring responsible resettlement and rehabilitation of project affected persons through sustainable livelihood options that at least restore, if not improve, their standard of living While enhancenent is the first priority, incorporation of prevention and mitigation measures will ensure minimal adverse impacts. IL&FS is committed to comply with environmental and social regulations and legal requirements in spirit, not just in letter, with due credence to global. domestic and local concerns. Each project will establish a framework that tansparently assigns responsibility and strives to remedy or compensate for damage caused to eco-systems or people IL&FS is intemalising its Environmental and Social Statement into its business operations through detailed operational procedures including systems for continuous perfonnance evaluation and self regulation. The highlights of an Annual Environmental and Social Audit will be mzde public alongwith the Annual Balance Sheet Appropriate modifications to the Environmental and Social Statement and the operational procedures will be made on the basis of lessons learnt from periodic reviews and project experiences 19  PART H OPERATIONAL PROCEDURES 20  TABLE OF CONTENTS PT= E aL DFSCRIPTII PAGE NOS Chapter I: Legal and Institutional Setting 2645 Environmental Aspects - Constitutional Provisions - International Treaties, Conventions and Protocols - Status of National Enviromment Legislation and Regulation - Organisation Structure for Enviromnent Managanent in India - World Bank Operational Directives on r'nviromnent - Comparison of Indian Law with World Bank's Directive OD 4.01 Social Aspects - Constitutional Provisions - International Treaties, Conventions and Protocols on Human Rights and Indigenous People - Status of Social-Related Legislation and Policies - Sunmnary of Key Trends in Indian Law/Policies Operational Agencies and Key Actors in R&R Planning and Implementation 'World Bank Operational Directives regarding Social Aspects ;Comparison of Indian Law and World Bank Operational Directives 4.30 and 4.20 Social Impact and Entitlement Framework for World Bank financed Projects Chapter II: Major Issues In Priority Sectors 48-54 Environmental Issues - Integrated Area Development - Water Supply and Sanitation Infastructure - Surface Transport - Power 21  DZSVREION PAGE NOS Social Issues 54-55 - Involuntary Resettlernent - Protection of Marginalised and Vulnerable Groups - Public Consultation and Consensus Building Chapter m: Operatiqual Procedures 58-90 The IL&FS Project Cycle Environmental and Social Assessment Framework Environmental Assessment Process - Environmental Screening - Environmental Scoping - Finalisation of TOR for Enviromental Assessment Studies - Appointment of Environmental Assessment Consultant - Environmental Assessment Studies - Appraisal of Enviromnental Assessment Report - Translation of Agreements into Legal Instruments - Monitoring of Environmental Action - Annual Environmental Audit Social Assessment Process - Social Screening - Social Scoping - Finalisation of TOR for Social Assessment and Management Studies - Appointment of Social Assessment Consultant - Social Assessment and Preparation of Managenent Plan - Appraisal of Social Assessment and Management Plan (SAMP) - Translation of Agreements into Legal Instruments - Monitoring of Social Action - Annual Social Audit Cbapter IV: Environmenl and Socisl Risk Mnagement 93-105 Background Environmental and Social Risk What is Environmental and Social Risk IL&FS Project Cycle and Risk Evaluation Process Risk E' aluation Process Risk Identification Risk Assessment 22  Allocation of Risk Responsibility Risk management Institutional Framework 23  CHAPTER I : LEGAL AND INSTITUTIONAL SEITING 24  TABLE OF CONTENTS Chapter I: LEGAL AND INSTITUTIONAL SETTING Environmental Aspects - Constitutional Provisions - Intemational Treaties, Conventions and Protocols - Status of National Environmental Legislation and Regulation - Organisation Structure for Environmental Management in India - World Bank Operational Directives on Environment - Comparison of Indian Law with World Bank's Directive OD 4.01 Social Aspects - Constitutional Provisions - International Treaties, Conventions and Protocols on Human Rights and Indigenous People - Status of Social-Related Legislation and Policies Summary of Key Trends in Indian Law/Policies - Operational Agencies and Key Actors in R&R Planning and Implementation - World Bank Operational Directives regarding Social Aspects - Comparison of Indian Law and World Bank Operational Directives 4.30 and 4.20 - Social Impact and Entitlement Framework for World Bank financed Projects 25  I LErILANQNS ISFlTNM 1.01 The legal and institutional setting provides the context in which the environment and social policy and operational procedures of IL&FS is framed. An understanding of the institutional structures that regulate environmental and social issues in India will also serve to help IL&FS respond to their req- irements during the planning and execution of infrastructure projects 1.02 Fundamental national commitments are enshrined in the Constitution of Indi., while the Acts, Notifications, policies, rules and other documents issued by India's Central and State Govemments provide operational details. India also has obligations on environmental and social issues through its participation in international conventions and treaties 1.03 Since IL&FS is seeking lines of credit from multilateral agencies (MA), such as the World Bank, its operations need to be consistent with their operational directives. Currently, the World Bank directives are tile most detailed and stringent among multilateral agencies, and hence these have been used in conjunction wiMl the regulatory framework in India to develop the IL&FS procedures. IL&FS will modify its Environmental and Social Report periodically based on changes in the Indian regulatory framework and operational directives of multilateral agencies that it is associated with ENVIRMNNTAL ASUE 1.04 A number of specific regu!atory instruments for environnmental protection have been developed by both the Central and State Govermments. Many of these have a bearing on IL&FS infrastructure projects. While the Constitution has p.-ovided the fundamental basis, India's contributions to and learnings from negotiations of international treaties have helped immensely in sharpening the focus of the regulatory instruments currently in place. Most States and Central Govemment have either Ministries or Departments of environment and forests as agencies dealing with environmental issues 1.05 World Bank's Directive 4.01 deals with the environmental assessment of projects financed by the Bank and, accordingly, has a major influence on IL&FS infras projects 1.06 With its basic commitmntn to address environmental concems in infrur projects, IL&FS has attempted to captre the essence of the regulatory framework in India and the 26  experience of the World Bank as embodied in its Operational Directives 27