India - Coal Sector Environmental and Social Mitigation Project

Document of The World Bank Report No. 15405-IN STAFF APPRAISAL REPORT INDIA COAL SECTOR EVIRONMENTAL AND SOCIAL MITIGATION PROJECT APRIL 24, 1996 Energy and Infrastructure Operations Division Country Department II South Asia Region  CURRENCY EQUIVALENTS (As of March 31, 1996) Currency units = Rupees (Rs) One Rupee = US$ 0.03 (approx.) One US Dollar = Rs 34.7 One US Dollar = SDR 0.686 MEASURES AND EQUIVALENTS I metric ton of (Indian) coal = 0.46 metric tons of oil 1.9 metric tons of lignite 570 cubic meters of natural gas 1.0 metric ton of fire wood 2.0 metric tons of animal dung ABBREVIATIONS AND ACRONYMS CBO - Community based organization CCL - Central Coalfields Ltd. CD - Communiity development CMPDI - Central Mine Planning and Design Institute Ltd. CPCB - Central Pollution Control Board DGMS - Directorate General Mines Safety EAC - Environmental Approval Committee EAP - Environmental Action Plan EIA - Enviromnental Impact Assessment EMP - Enviroiinmental Management Plan EPAP - Project-affected person entitled to rehabilitation IPDP - Indigenous Peoples Development Plan MCL - Mahanadi Coalfields Ltd. MoEF - Ministry of Environment and Forests NCL - Northemn Coalfields Ltd. NTPC - National Thennal Power Corporation OB - Overburden PAP - Project-affected person R&R - Resettlement and rehabilitation RAP - Rehabilitation Action Plan SC - Scheduled caste SEB - Statc Electricity Board SECL - South Eastern Coalfields Ltd. SPCB - State Pollution Control Board ST - Scheduled tribe WCL - Western Coalfields Ltd. FISCAL YEAR APRIL I - MARCH 31  - i - INDIA COAL SECTOR ENVIRONMENTAL AND SOCIAL MITIGATION PROJECT Credit and Project Summary Borrower: India, acting by its President Implementing Agency: Coal India Ltd. Beneficiaries: Northem Coalfields Ltd. (NCL), South Eastern Coalfields Ltd. (SECL), Mahanadi Coalfields Ltd. (MCL), Central Coalfields Ltd. (CCL) and West- ern Coalfields Ltd. (WCL). Poverty: Program of Targeted Intervention: One of the projects main objectives is to extend social mitigating actions to communities surrounding the selected 25 coal mines and to improve the access to schools, health care, water supply and other community facilities (in particular to tribal populations and women). Most of the people living in these communities are poor. The project contains specific strategies for ensuring access to these facilities by tribal populations and women. Amount: SDR 43.3 million (US$63.0 million equivalent) Terms: Standard, with 35 years maturity. Commitment Fee: 0.50% on undisbursed credit balances, beginning 60 days after signing, less any waiver. Onlending Terms: From the Government to Coal India Ltd. under standard terms and conditions for loans to commercial enterprises. Normally, these carry an interest rate of 16% per annum with a repayment period of ten years and a grace period of one year. Financing Plan: See para 3.21 Net Present Value: The economic net present value of the associated and proposed Coal Sector Rehabilitation Project is estimated at US$6,110 million and the correspond- ing financial net present value is estimated at US$8 16 million. A discount rate of 16% was used for the calculations of both net present values. Staff Appraisal Report: 1 5405-IN   - 111 - INDIA COAL SECTOR ENVIRONMENTAL AND SOCIAL MITIGATION PROJECT Table of Contents Page No. 1. THE ORIGIN OF THE PROJECT ..............................................I Coal: India's major source of commercial energy ........................................... 1 The need for reform ..........................................2 Coal Sector Rehabilitation Project ...........................................2 Coal Sector Environmental and Social Mitigation Project ............. ..............................2 Link to country assistance strategy .....3.....................................3 II. ENVIRONMENTAL AND SOCIAL ISSUES ...............................................3 Environmental issues ..............................................4 Social issues ..............................................6 Consultations and dissemination .............................................. 10 Environmental and Social Review Panel .......1....................................... 1 Poverty category .............................................. 12 Co al In dia Ltd ............................................... 12 III. THE PROJECT AND ITS IMPLEMENTATION .............................................. 13 Project objectives and design .......................................... 13 Project description .......................................... 13 Lessons learned from previous Bank operations .......................................... 14 Project implementation .......................................... 15 Project cost .......................................... 17 Financing plan .......................................... 18 Status of project preparation. .......................................... 19 Procurement .......................................... 19 Disbursements .......................................... 22 This report was prepared by Messrs. /Mme. Peter Pollak (Task Manager), Sadhan Chattopadhya (Senior Mining Engineer), Trish Hackman (Consultant), Lars Lund (Sociologist) and Yaacov Ziv (Senior Environ- mental Specialist). Messrs./Mmes. Robert Drysdale (Senior Operations Advisor), Charles Husband (Senior Financial Analyst), Maria Kutcher (Operations Analyst), Malaine Manzo (Senior Operations Officer), Maritta Koch-Weser (Chief, Environment and Natural Resources, Asia Technical Department) David Marsden (Chief, Social Unit, NDO), Ellen Schaengold (Senior Sociologist) and Michael Whitbread (Consultant) have made valuable contributions to this report. This report could not have been written without the extensive support and contributions from Coal India's World Bank Project Division. The report has been reviewed by Ms. Maureen Cropper and Mr. Peter Van der Veen. It has been endorsed by Mr. Heinz Vergin (Director, South Asia Country Department II) and Mr. Jean-Francois Bauer (Chief, Energy and Infrastructure Operations Division)  - lv - Page No. IV. FINANCIAL AND ECONOMIC ANALYSIS ........................................................... 23 Project benefits ........................................................... 23 Social and environmental benefits ........................................................... 23 Financial and economic analysis ........................................................... 24 Project risks ........................................................... 24 V. AGREEMENTS AND RECOMMENDATION ..................... ...................................... 25 ANNEXES 2.1 Environmental aspects ........................................................ 27 2.2 Coal India's corporate environmental policy ........................................................ 41 2.3 Resettlement, rehabilitation and community development ....................................................... 49 2.4 Resettlement and rehabilitation policy of Coal India ........................................................ 59 2.5 Coal India's community development plan ................... ..................................... 67 2.6 Consultations and participation of project-affect people ........................................................ 75 2.7 Coal mine safety, health and welfare ........................................................ 83 2.8 Technical assistance: Terms of reference ........................................................ 93 2.9 CoalIndiaLtd ........................................................ 101 3.1 Project description ......................................................... III 3.2 Project implementation ........................................................ 139 4.1 Financial and economic analysis of the Coal Sector Rehabilitation Project ............. .............. 163 5.1 Documents available in project file ........................................................ 173 MIAP  INDIA COAL SECTOR ENVIRONMENTAL AND SOCIAL MITIGATION PROJECT STAFF APPRAISAL REPORT I. THE ORIGIN OF THE PROJECT Coal: India's major source of commercial energy 1.1 INDIAS ENERGY RESOURCES. Considering the size of its economy, India is poorly endowed with energy resources. While the country has relatively large coal resources, it has only modest oil and gas resources: India's coal resources are large enough to meet the projected demand for the next 250 years. Coal currently meets two-thirds of India's energy needs. Considering that most of India's coal resources can be produced relatively inexpensively (taking environmental and social mitigating actions into account) and that India's transport infrastructure (ports, railways and roads) would need to be expanded significantly to permit energy imports on a large scale, indigenous coal is likely to remain the least-cost option for the bulk of India's energy needs for the foreseeable future. The prospects for coal are closely tied to the reforms in the power sector, which consumes almost 70% of India's coal output.