Sri Lanka - Private Sector Infrastructure Development Project : environmental assessment process study

PRIVATE SECTOR INFRASTRUCTURE DEVELOPMENT PROJECT ENVIRONMENTAL ASSESSMENT PROCESS STUDY  Sri Lanka Erivate Sector Tnfrastructure D2evelopment Project Environmental Assessment Process Document .A. Purpoe 1. The proposed project seeks to develop a modem and efEcient system of infrastructure in Sd Laaka by promoting significant participation of the private sector in the ownership, operation, and maintenance of infrastructure facilities. The project will esmablish a facility which will retail long-term subordinated debt, the present lack of which hinders the development of private sector ifrtrcture projects. In thfs respect, the project is intended to act as a catalyst to encourage private sector investment. The project facility will receive funds from official development sources and da-lend fbr selected private sector sub-projects up to 40% of the sub-project cost. Project sponsors, who would prepare individual sub-projects, would provide their own equity and borrow from commercial sources for the remainder of the necessary debt. _ A list of sub-projects, which is comprised of candidates for private sector participation, and potential borrowers from the proposed facility, is being prepared in close consultation with the line agencies. The projects include power stations, port developments, toil roads and waste water treatment plants. As no project is at an advanced enough state to require financing from the proposed facility at present, a full environmental assessment (BA) for sub-projects is not possible at the outset In such circumstances, OD 4.01 (para 9) required that arrangements be made whereby the project implementing institutions undertake the functions of subproject screening, EA review and imnplementation of mitigation and monitorina plans. This document describes the arrangements and procedures proposed for the project. It is being submitted to the Board in lieu of a project EA and will be the basis of the environmental aspects of appraisal It is also being made available for public review in appropriate locations in Sri Lanka and in the IDA s Public Information Center in accordance with BP 17.50 requirements for disclosure. Detailed EAs for individual sub-projects in Category A and other appropriate analysis for those in category B will be carried out by the private sponsors and cleared by IDA prior to any disbursements (on-lending) to the sub-projects. B. GOSL Environmental Regulations & Procedures 3. In 1981 the GOSL passed the National Environrmental Act (NEA) and in 1982, created the Central Environmental Authority (CEA) as a regulatory and enforcement agency. The CEA's statutory and enforcement powers were strengthened significantly in 1988, by an amendment to the NEA. A cabinet level ministry to handle the subject of environment was created in 1990, with the appointment of a Minister of Environment to ensure that environmental issues would be given the required attention. The GOSL also developed the Environmental Protection License (EPL) Scheme, with the CEA as the enforcing agency, as a regulatory instrument to set industrial pollution standards and control their discharges. The GOSL issued its National Environmental Action Plan  (NEAP) in 1991, which was the first of any Asian county. The NEAP identified the main environmental issues that need to be addressed in Sri Lanka. 4. Under provisions of Part IV C of the NEA No 47 of 1980 as stipulated in Gazette (Extra Ordinary) No 772/22 dated June 24, 1993, the GOSL made Environmental Assessment (EA) a legal requirement for a range of development projects. The list of projects requiring an EA are prescribed in the above Gazette notification (Attachment 1). In addition, the Gazette notification includes a list of line ministries and agencies that are designated as Project Approving Agencies (PAA). With the change of government in August 1994 and the resulting reIlocation of Ministries, a new list of PAAs were specified-under subject area rather than with. name of the Miistry as listed originaly-in Gazette (Extra Ordinary) No 859/14 dated February 13, 1995 (Attachment 2). 5. According to GOSL procedure, any activity that falls within the domain of a prescribed project is subject to an environmental impact assessment (EIA). The EIA. approval/disapproval can be garanted by the PAA with jurisdiction over the project activity, only with concurrence of dhe CEA. However, the project proponent is not permitted to perform the functions and duties of a PAA. Therefore, in the event of a PAA becoming a project proponent, the CEA will designate an appropriate PAA. La instances where the project would fall within the purview of more than one PAA, the CEA will determine an appropriate P.AA. Any functions of the PAA related to the approval of the project can be devolved to a Provincial council only with written concurrence of the .Minister in charge of the suabject of Environment. 6. The proponent of a prescribed project is required to submit preliminary information on the project-by filling out a questionnaire-to the PAA, as early as possible in die project cycle. The PAA in consultation with CEA is responsible for subjecting the preliminary information to environmental scoping, in order to set the Terms of Reference (TOR) for the EIA. The TOR is prepared by a Technical Committee CrC) comprising experts in the relevant field, appointed by the PAA. In developing the TOR, the re=ulations provide for the PAA to consider the views of state agencies and the public. 7. Upon submission of the EIA by the proponent, the PAA is required to determine wlheier issues refered to in the TOR have been addressed and notify the proponent of any inadequacies within 14 days. la the event any inadequacies are identified, the proponent is required to make necessary amendments and resubmit the report. Once accepted, in addition to the EIA being forwarded to the CEA by the PAA, notice is also placed in the government Gazette and in a national newspaper published daily in Sinhala, Tamil and English Ianguages inviting the public to make written comments, if any, to the PA; within 30 days. The notification would specify the times and places at which the EIA would be made available to the public. As a minimum, the report would be available at the CEA. PAA and in a GOSL agency in the locality of the proposed project. The environmental regulations have provisions for public hearings on the project, although it is not mandatory. The PAA is required to forward all comments-either written or raised ..  3 during the public hearing-to the project proponent for review and response within 6 days of completion of the public comment period. The proponent is required to respond to all such comments in writing to the PAA. 8. The TC appointed by the PAA would then evaluate the EIA and requi the project proponent to respond to any queries raised by the TC. The TC would also evaluate the adequacy of the proponent's response to any commets raised during the public comment period. Upon completion of the evaluation of the TC, the PAA, with the concurrence of the CEA, would grant approval for implementation of the proposed project subject to specified conditions or refuse approval for implementation of the project, with reasons for doing so. This notification must be made withia 30 days of receipt of responses from the proponent The PAA is required to speciya period within whichi the approved project should be completed. In the event the proponent is unable to complete the project during the specified period, written permission for an extension has to be obtained from the PAA, 3O days prior to the expiration date- 9. The PAA is responsible for forwardina a report which contains a ptan for monitoring the implementation of the approved project. to the CEA, within 30 days from granting of approval. It is also the responsibility of the PAA to publish in the government Gazette and in one national newspaper published daily in Sinhala, Tamil and English lanrguaaes, the granting of approval for the project. 10. It is mandatory that the project proponent inform the PAA of any alterations to the project as approved and/or the abandonment of the project The PAA shall, where necessary, obtain fresh approval in respect of any such alterations that are intended to be made to the approved project The PAA, in consultation with the CEGA would also determine the scope and format of the supplemental report required to be submitted for such alteradons. 11. In addition, the Coast Conservation Act (C CA) of 1981 also specifies an EIA procedure for projects to be located in the coastal zone of the country. This preceded the CEA requirement, and has been previously applied for a limited range of development projects-hotels, land reclamation and power plant. This CCA defned procedure will continue to apply for projects proposed in the coastal zone. 12. Adequacy of GOSL Environmenttal Clearance: The comiposite GOSL environmental clearance process (EIA, EPL, CCA), in principle, is consistent with the Bank's environmental and public disclosure requirements. The exception being the screening criteria adopted in the GOSL process, where project thresholds are used to determine the type of clearance required and the content of public consultation. Given the recent origin of the CEA regulated EA procedure, implementation experience is yet evolvin-. Tlus reliance cannot be placed on it entirely. In the initial years of project implementation, IDA will review the sub-project EA reports for all A rated projects prior  4 to approval. IDA will at least initially also review the environmental analysis for Category B projects as well. C. .Tustification for TDA Review of EA 13. Due to the iistitutional situation in Sr Lanka and certain unique aspects of the project, the IDA will rely oa its full interal review of the sub-project EAs for A rated projects, to ensure that they are consistent with OD 4.01. MDA will at least initially also review the eavironmental analysis for Category B projects as well. GOSL LA reguladons and procedures, as described above, meet generally accepted standards; but their implementation has not evolved to the point where they can be relied upon to provide adequate environmental safeguards for the sub-projects. Ordinarily this would be remedied by including an instimtional strengthenina component in the project to improve implementation of GOSL EA regulations or, if that were not possible, by developing environmental assessment and environmental credit risk managgement capacity within the financial intermediary. Institutional strengthening for environmental management in Sri Lanka is being administered through several IDA supported projects (SMII-IV, PFDP, CEIP and EAIP), in addition to U-SAID's NAREPP (see descrption of these initiatives below.) This instittional strengthenng work has fully engaged the absorptive capacity of Si Lanka's core environment atrencies. Moreover, it is of necessity a medium- to tong-term undertakig. It is therefore unlikely that sufficient progress will be made to meet the EA needs of the earlier sub-projects under PSIDP. However, stengthening PSIDC's environmental assessment caoabilities would not in the long run stengthen the environmental cacabilities of GOSL, nor would it be appropriate, as PSIDC has been, devised as a transitional instrument, with. a finite life. Thus, relying on IDA review of A rated sub-projects will- necessarily provide the best method of ensuring consistency with OD 4.01. IDA wvill at least initially also review the environmental analysis for Category B projects for OD 4.01 consistentcy. 14. The Barnk-supported TA components in SMvI-IV, PFDP and CEIP, USAID's NAREPP (all currently under implementation) and the proposed Bank-supported EAIP (currently under preparation) include the following extensive institutional strengthening measures: In addition to civil works for industrialw astewater treatment and solid waste management and a Pollution Control Abatement Fund, SMI-IV has financed preparation of a comprehensive Industrial Pd1lution Management Strategy, including: i) a 5-year strategic plan; b) a laboratory accreditation scheme; c) laboratory equipment, including provisioning for eventual certification of CEA's lab as a reference lab; and d) a private labs window to promote accreditation of private labs. Implementation of these activities is proceeding under PFDP and CEIP. 15. USAID's NAREPP has supported a range of environmental policy development and institutional strengthening activities, including: a) support for application of environmental economics to policy, planning and program analysis; b) assistance for updating and revision of the National Environmental Action Plan (ONA?); c) analysis  and improvement of management at the Ministry of Transport, Environment and Women's Affairs (MTEWA) and the Central Environment Authority (CEA); d) support for MTEWA's interagency coordination and development of environmental cells in key agencies (Project Approving Agencies), including TA and training to improve conduct and oversight of EA by CEA and the PAAs; and e) development of graduate environmental education programs in four leading universities in Sri Lanka- 16. EAIP proposes complementary support for core environment agencies at the national level. The institutonal component of NEAl will strengthen the nadonal policy formulation role of M1TEWA, the policy implementation role of CEA, the environmental management capacity and the environmental planning and assessment capabilities of selected PAAs. Proposed initiatives to strengthen CEA include building a stable and: competent environmental cadre through improvements in remuneration, recruiment and training; prforitization of CEA's Corporate Plan; strengthening industrial licensing, laboratory, monitoring and enforcement capabilities; and improving EA through coordination with NAREPP's comprehensive EA t-aining program and targeting selected PAAs for focused environmrental planning and EA capacity development D. Procedures for TDA EA and Sub-loan App1roval ID,d ES4 Aggroval 17. EAs of A rated sub-projects and initially B ated projects would be subject to IDA review and anproval, and because these sub-projects are not yet known, the environmental review and approval process 'AU take place durina project implementation. To ensure consistency of sub-project EAs with OD 4.01, an environmental consultant would be retained by PSIDC to assist and provide technical guidance to the Private Project Companies (PPCs) during the loan application and approval process. 18. There are two principal stages of EA preparation and environmental review that are integrated into PSIDC's sub-project review and approval process. They are: i) review and aareement on the TORs of the EA; and ii) review, comment and approval of the EA report. Review of TORs. The PSIDC will make its environmental consultant available to the PAA to advise on the scoping and draftng of TORs. The consultant have access to detailed information about the proposed sub-project activities and sites at this stage. Review and approval of the EA report. The PPC will submit the EA report to the PSIDC and PAA: i)first submission; ii) adequacy verification; iii) resubmission. PSIDC forvards the EA to IDA. IDA's comments are forwarded by PSIDC to PAA and incorporated into EA. requirements of PPC. PAA conveys decision on EA. The package the GM sends to IDA for final approval should include the internal appraisal report, PPC's feasibilitv study, the draft sub-loan agreement and security package and the PAA approved EA.  19. The GOSL requirements for advertsement and public comment on sub-project EAs will meet the requirements of BP 17.50 for local disclosure. The sub-project EAs will also be placed in IDA's Public Information Center when fotmally received for IDA review. Sub-ogan Approval Process and Environmental Clenrannee 2 GOSL EA Process PSTDC Proiect Gvcle T1A Environmentni Review I PPC submits preliminary PPC submits Loan Application PSIDC checks consistency information to FAA to PSIDC with OD 4.01 screening 2 PAA conducts scoping session 3 Dmfting and issuing TOR for PSIDC issues Preliminary PSIDC obmains IDA clearance EIA by PAA Acceptance Letter for EIA TOR for all A rated projecs and, as appropriate, for B rared projects 4 EIA study by PPC Internal appraisal report S PPC submits EIA report to PAA: -First submission -Adequacy verification -Re-submission 6 Public participation and review PSIDC forwards PPC IDA review of documents for of EIA report by PAA feasioility study, draft sub-loan all A rated projects and, as agreement, internal appraisal appropriate, for B rated report and PAA approved EIA IDA places report in PIC to IDA 7 Finalization of environmental Incorporaion of IDA mirigarion plan comments in BA report and other project documents for all A rated projects and, as appropriate, for B rated 8 PAA conveys decision to PPC . Agrneeent on environmental mitigation plan between PAA, PSIDC, PPC and IDA 9 Implementation of mitigation Project implementation Supervision by IDA during plan implementation m:\jolin\psidpit\cnivimn\<nboarl .doc