India Renewable Resources Development Project

 Renewable resources development project Report No: ; Type: Report/Evaluation Memorandum ; Country: India; Region: South Asia; Sector: Other Power & Energy Conversion; Major Sector: Electric Power & Other Energy; ProjectID: P010410 India: Renewable Resources Development Project (Loan 3544-IN) Tamil Nadu Newsprint and Papers Ltd. Papermill Expansion Component The Implementation Completion Report (ICR) on the India Renewable Resources Development Project, Tamil Nadu Newsprint and Papers Ltd./Papermill Expansion Component (Loan 3544-IN, approved in FY93) was prepared by the South Asia Regional Office, with Part II prepared by the Borrower, and reviewed by the Operations Evaluation Department (OED). The loan of US$75 million for this component was fully disbursed and closed on December 31, 1995, as scheduled. This was the Bank's second loan to Tamil Nadu Newsprint and Paper Ltd. (TNPL); the first (Loan 2050-IN for US$100 million, approved in FY82) was for the construction of a green field, bagasse-based newsprint mill. The main objective of this project was to expand production, using the technology proven in the first project, and thereby to promote an environmentally sound investment that helps prevent the depletion of India's limited forest resources. Secondary objectives were to improve the quality of the plant's liquid effluent, so as to make it more suitable for use in crop irrigation, to correct certain other environmental and social shortcomings of the first project, and to decrease the Stateowned shareholding of the company from 409 percent to 26 percent through maiden issue of shares in the stock exchange. The project was successfully implemented. Capacity has more than doubled, allowing TNPL to achieve important economies of scale. Institutional achievements include TNPL's privatization and the improvement in bagasse-based technology. Most of the social objectives were also met: the approximately 100 families who had been adversely affected under the first project were satisfactorily resettled, and most of the environmental hazards normally associated with chemical pulping have been properly mitigated. However, some minor environmental issues remain outstanding, relating to better control of odor from organic sulfur, noise abatement, and implementation of some worker safety standards. The revised economic internal rate of return for the project is 28.7 percent compared to 26.6 percent estimated at appraisal. The project also produced an important external benefit for the region, in that the effluence water is being used to irrigate (and fertilize) some 1,400 hectares of previously arid land, allowing local farmers to now harvest two or even three crops per year. The benefits of this water supply were not included in the above EIRR. OED rates the outcome as highly satisfactory, sustainability as likely, the institutional development impact as moderate, and Bank performance as highly satisfactory. These ratings are consistent with those in the ICR. OED has, however, rated Bank Performance higher than the ICR ("Highly Satisfactory" compared with the ICR rating of of "Satisfactory") because: (i)during project identification Bank staff convincedthe borrower (a) to rethink their investment plans shifting from the concept of a new green fields plant to an expansion of the existing plant, (b) to greatly expanding the scope of private sector equity participation through the issue of public shares, and (c) to pay more attention to environmental upgrading issues, all of which greatly improved the project design at entry, and (ii) during implementation Bank staff was able to respond quickly and effectively to procurement issues as the arose, which allowed the project to be implemented in a timely fashion. As a result, effectiveness was less than four months after Board approval, and the project was closed, on schedule, just three years after Board presentation, and finally, (iii) the Bank's strict reporting requirements and supervision of the project's environmental impact, through regular follow-up visits by the Bank's environmental specialists, has helped to heightened the borrower's focus on industrial safety and environmental management, and to ingrain the within the corporate culture the importance of these issues. The ICR covers all important aspects of project implementation; it is rated satisfactory. The major lessons learned are: (i) agro-industry projects can have a substantial positive impact on rural development through their employment generation and provision of access to electricity, water and sanitation facilities, when project design takes into account the needs of the local population; and (ii) the establishment of a comprehensive environmental management program and the frequent reporting by the borrower on its status, supplemented by regular follow-up visits by the Bank's environmental specialist, helped embed an appreciation for the importance of these issues in the company's corporate culture. No audit is planned.