ENVIRONMENTAL & SOCIAL RISK MANAGEMENT ：环境与社会风险管理

ENVIRONMENTAL & SOCIAL RISK MANAGEMENT ：环境与社会风险管理 Environmental and Social Management Framework Manual E2333 V2 ENVIRONMENTAL & SOCIAL RISK MANAGEMENT FRAMEWORK MANUAL FOR SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA (SIDBI) Prepared for: SIDBI Prepared by: SENES Consultants India Pvt. Ltd., New Delhi, India Environmental and Social Management Framework Manual ABLE OF CONTENTS T 1.0 INTRODUCTION................................................................ 1 ANNEXURE– III: SIDBI’S REQUIREMENT AND 1.1 Guidance to use of The Manual ................................. 2 RELEVANT EXPERIENCES ………………………….. A-xxiv ANNEXURE - IV: SIDBI’S PROJECT CYCLE…… . A-xxviii 2.0 ENVIRONMENT AND SOCIAL POLICY ...................... 4 ANNEXURE - IV: E&S RISK CLASSIFICATION..… A-xxxii 3.0 REGULATORY FRAMEWORK ...................................... 5 3.1 Legal provisions ......................................................... 5 3.2 SIDBI E&S Requirements ......................................... 7 IST OF TABLES L Table 3.1 : SIDBI’S Environment And Social Requirements…….7 4.0 SIDBI’S PROJECT- CYCLE ........................................... 10 Table 4.1 : SIDBI’s Overall Project Life Cycle. …………….......10 4.1 Project Screening ..................................................... 10 Table 5.1: Risk Mitigation Matrix………………………………..25 4.2 Project Appraisal ...................................................... 11 4.3 Loan sanction / disbursement................................... 12 Table 5.2 : Monitoring Frequency ……………………………….25 4.4 Project monitoring, audits and recovery .................. 12 Table 5.3 : Environment and social Risk Management Plan……..27 Table 6.1 : Responsibility Allocation ……………………………31 5.0 E&S RISK MANAGEMENT PLAN ............................... 14 Table 6.2 : Awareness And Competence Training Modules……..36 5.1 Project Screening ..................................................... 16 5.2 Project Appraisal ...................................................... 19 5.3 Loan Sanction/ Disbursement .................................. 22 5.4 Project Monitoring/ Recovery.................................. 24 5.5 Conditions for Indirect finance ................................ 24 6.0 INSTITUTIONAL ARRANGEMENTS .......................... 28 6.1 Organizational Structure – E&S Risk Management Framework. .......................................................................... 28 6.2 Responsibility Allocation......................................... 29 6.3 Training program ..................................................... 31 ANNEXURE – I : FORMS AND FORMATS………………A-i ANNEXURE - II : LEGAL REQUIREMENTS……………A-vii August, 2004 SENES Consultants India Environmental and Social Management Framework Manual IST OF ABBREVIATIONS L WTO World Trade Organisation CEE Centre For Environmental Education CO Credit Officer CFC Chloro – Floro Carbon CPCB Central Pollution Control Board CRZ Coastal Regulatory Zone DFID Department For International Corporation EIA Environmental Impact Assessment E&S Environment and Social EPTRI Environmental Planning and Training Institute EPA Environment Protection Act FI Financial Intermediatories GOI Government of India IDBI Industrial Development Bank of India IDFC Infrastructure Development Finance Corporation IFC International Financial Corporation IIT Indian Institute of Technology LOI Letter of Intent MoEF Ministry of Environment and Forest MNC Multinational National Organisation NEERI National Environmental Engineering And Research Institute NOC No Objection Certificate NPC National Productivity Council ODS Ozone Depleting Substances PSRA Post Sanction Reporting Authority SFC State Financial Corporation SIDBI Small Industries Development Bank of India SIDC State Industrial Development Corporation SME Small And Medium Enterprise SPCB State Pollution Control Board SSI Small Scale Industries August, 2004 SENES Consultants India Environmental and Social Management Framework Manual 1.0 INTRODUCTION The adoption of environmental and social risk management In its capacity as a nodal lending and development agency for the 1techniques and procedures are becoming important for financial SME sector, SIDBI performs the following functions: institutions across the world, driven on one hand by increasing , Promotion awareness of environmental issues among customers and , Financing , Development of industry in the small scale sector shareholders, and on the other hand by strict liability as a result of , Co-ordinating the functions of other institutions engaged in similar pressure from society and governments. Regulations related to activities businesses and environment, are being constantly upgraded in India, which often creates uncertainties for companies investing significant In the past, SIDBI has implemented various initiatives to create financial resources in their ventures. Consumer reactions and other environmental awareness amongst SSI units. These include environmentally motivated actions create serious regulatory and conducting awareness campaigns and cleaner production workshops. non-regulatory risks that may reduce a company’s market or affects Most of these programs having been conducted in association with its financial strength thus reducing their capacity to repay loans to various state and national agencies such as NEERI, NPC, IIT, CEE, financial institutions. EPTRI etc. In India, banks and financial institutions are currently not liable for Through various circulars, SIBDI has tried to incorporate its borrower’s environmental performance (i.e where an industry environmental safeguards in its internal credit processes, during that has borrowed funds and as part of their operations has financing of projects. contaminated the environment or caused pollution). However they are exposed to indirect (credit) risk that may arise from either a Recognising the importance of E&S concerns in the context of the borrower’s inability to repay loans due to environmental issues or SME sector, SIDBI has taken the initiative of integrating E&S risk reduced value of collateral property (e.g. site contamination). management systems into its financing operations. This is in Emerging trends in India, such as tightening environmental laws & enforcement, increased public pressures and litigation indicate that 1 For the purpose of this project, Small and Medium Enterprises (SMEs) are environmental risks have already started assuming significance. defined as the enterprises having investment in plant and machinery upto 10 crores or turnover less than 100 crores. August, 2004 1 SENES Consultants India Environmental and Social Management Framework Manual addition to its various efforts as a development agency to assist the aspects in their lending procedures. The structure of this manual is SME sector in improving its environmental and social performance. as follows Environment and Social Policy, highlights SIDBI’s commitment This Environmental and Social Risk Management Framework for environmental protection and social security related to its sphere document provides details of environment and social procedures to of business. be adopted by SIDBI for its lending operations. The procedures incorporated in this framework aims to assist the credit officers in Regulatory Framework summarises Indian environmental and assessing E&S risks at early stages of project life cycle and outlines social legislations relevant to SMEs, and The World Bank’s E&S the risk management provisions that can be incorporated in order to safeguards. Credit officer evaluating project proposal should be ensure environmentally sound investments by the Bank. aware of legal requirements of the borrower to assess regulatory risk to the project. A summary of these requirements are provided in The Framework (as discussed in this manual) has been developed in Annexure – II of this document. As the environmental and social consultation with SIDBI team and is based on feedback received laws in India are updating, CO is required to aware of recent during workshop organised in Delhi with Credit officers from changes in these legislation and thus liability of the project Northern region and senior officers from Head office (Lucknow). A proponent Due diligence exercise have also been conducted across various regions, for the priority sector industries of SIDBI, to understand SIDBI’s E&S Requirements outlines the guiding principles for this environmental issue in respective sectors, prior to finalisation of this framework based on SIDBI’s policy, Indian regulations and The manual. This framework has been developed such as to enable its World Bank’s safeguards. The credit officer is required to follow smooth integration with the current credit management system and these requirements in all of the projects undertaken by him. During is not as a stand - alone document. This has been done to facilitate project screening stage and initial interaction with client, CO shall adoption / implementation of the framework without altering or check the project against Exclusionary list (provided in section 3.2) impeding the current process flow. and other requirements, to ensure its consistency with SIDBI’s policy. 1.1 GUIDANCE TO USE OF THE MANUAL Environment and Social risk management framework manual is intended to assist SIDBI to incorporate Environment and Social risk August, 2004 2 SENES Consultants India Environmental and Social Management Framework Manual E&S Management Plan, describes the detailed procedures to be followed for respective category of the project. These procedures are divided into four stages and integrated to SIDBI’s project cycle, which are; , Project Screening: at this phase E&S risk categorisation of the project is carried out. CO is required to check the category of project against the list provided in Annexure - V , Project Appraisal: details the process followed during the appraisal stage, CO should integrate the process stipulated in section 5.2 during appraisal of any project and preparation of the Loan appraisal report. CO is also advised to refer sectoral guidebook while appraising the project, to understand environmental issues and legal obligations associated concerned sector of the project. , Loan Sanction and Disbursement: Credit committees to ensure, implementation of pre- disbursement condition prior to finalisation of loan agreement , Project Monitoring: E&S monitoring report is provided in Annexure – III that need to be filled during site visits during monitoring stage. Institutional Arrangement, provide the organisational structure, roles and responsibilities required to implement this framework and outlines the training modules, for the capacity building of SIDBI’s staff and participating banks. August, 2004 3 SENES Consultants India Environmental and Social Management Framework Manual 2.0 ENVIRONMENT AND SOCIAL POLICY , updating Environment and Social Management Framework at Small Industries Development Bank of India (SIDBI), the apex regular intervals. institute with the responsibility of promotion, finance and development of Small Scale Industries (SSI) in India, strives to promote sustainable development for all small and medium enterprises. SIDBI’s initiatives in the past and future are aimed to reduce environmental and social risks by promoting: compliance to applicable Indian environmental and labour legislations cleaner production methods energy and water saving methods utilization of appropriate technologies no use of child labour and forced labour As the projects financed by SIDBI are small and medium, it will ensure the above by: , capacity building of their staff on environmental and social risk management procedures and , regular training and awareness of their staff , creating awareness for industry borrowers , strengthening Environment and Social procedures by integrating E&S consideration in all Phases of life cycle. , August, 2004 4 SENES Consultants India Environmental and Social Management Framework Manual 3.0 REGULATORY FRAMEWORK Small and medium-sized enterprises (SMEs) are amongst the most Therefore, it is imperative for the financiers to assess E&S risks important sectors of India’s economy. Owing to their labour more effectively, to safeguard themselves from the associated credit intensive operations, they provide employment opportunity for risks. millions of individuals and have contributed largely towards economic development of the nation. High shop floor pollution, occupational health hazards, hazardous waste generation, toxic emission and discharge, low energy The SME sector is typically associated with high adverse efficiency, polluting processes, etc are some key environmental environmental and social impact due to the sheer number of units, issues of SME sector. Social issues in Indian SME sector pertaining and dominance in resource and emission intensive trades such as to use of child/forced labour also exists. Exploitation of workforce metal finishing, leather tanning, dry cleaning, printing and dyeing, vis-à-vis payments and work hour structure is also a common brewing, food processing, fish farming, textile manufacturing, phenomenon in SME sector. chemical production. Moreover, their compliance status is less than desirable resulting in adverse impacts on public health and 3.1 LEGAL PROVISIONS environment. Financial Institutions do not have direct obligation under Indian Some of the defining characteristics of the SME sector which environmental legislations. However, the E&S risk management contribute to poor levels of environmental control in operations are, framework for SIDBI has been developed considering legal obligations of SIDBI’s SME portfolio under Indian environmental & , lack of understanding of environment, public health & safety social laws. In addition, elements of World Bank’s safeguard issues. policies and international standards/ norms have been incorporated , limited awareness on legal obligations in the design of the framework. , non- regularised labour encourages poor environment practices. , due to economies of scale, it is not easy to adopt cleaner Ministry of Environment and Forest (MoEF) of Government of technologies or install expensive pollution control equipment. India, periodically formulates / update environmental acts, which August, 2004 5 SENES Consultants India Environmental and Social Management Framework Manual , Every citizen of India has a duty to protect and improve the further supplemented by rules and regulations. Central Pollution natural environment and to have compassion for living creatures Control Board (CPCB) acts as the central agency for overall (Article 51A (g)). coordination with state agencies, State pollution Control Boards (SPCBs), are mandated to enforce provisions of the rules. SPCB Based on above principles, Government of India, has laid downs however, have been vested with authority to make those rules more various Acts to ensure environmental perseverance and protection. stringent as per the requirement of the state. The relevant Indian Environmental and social laws applicable to SMEs are listed below. These are discussed in detail vide Annexure Regulatory requirements vis-à-vis social issues are governed by –II. various acts of the government, prominent of which is Factories Act, Environment laws 1948 and Factories Act (amended), 1987. These detail various , Water (Prevention and Control of Pollution) Act, 1974 (as measures to be taken by any industry operator for health and safety amended 1988) & Water (Prevention and Control of Pollution) of the workers. Issues of use of child labour, forced labour, Rules, 1983 compensation, working hours, right to form associations, etc. have , Water Cess (Prevention and Control of Pollution) Act, 1977 (as been addressed by the Indian government under corresponding acts amended 1988) & Water Cess (Prevention and Control of and rules listed in the following section. Pollution) Rules, 1978. , Air (Prevention and Control of Pollution) Act, 1981 (as amended NDIAN ENVIRONMENTAL AND SOCIAL LEGISLATIVE 3.1.1 Iin 1987) and Air (Prevention and Control of Pollution) Rules, FRAMEWORK 1983 , Environment (Protection) Act, 1986 and Environment (Protection) (Amendment) Rules, 1996 Indian constitution provides the basic principles of environment , Environmental Impact Assessment Notification, January 1994 (as protection and preservation through Articles 48A and 51A (g), ndamended in May 1994) included during 42 amendment in 1976. These articles provide that: , Hazardous Waste Management Rules, 1989 and the Hazardous Wastes (Management and Handling) Amendment Draft Rules, , The State shall endeavour to protect and improve the environment 2004 and to safeguard the forests and wildlife of the country (Article , Forest Conservation Act, 1927, Forest Conservation Act 1980 (as 48A). amended in 1988) and Forest Conservation Rules 1981 (as amended in 1992 and 2003) August, 2004 6 SENES Consultants India Environmental and Social Management Framework Manual , Coastal Regulation Zone (CRZ) Notification, December 1990 (as amended in June 1997 and 2001). The World Bank group, in its operational directives has stipulated , The Wild Life Protection Act, 1972 (amended in 2002 that all investments made should be environmentally sustainable. Since SIDBI has obtained a line of credit from The Bank, its Health & Safety Regulations operational procedures needs to be consistent with those of The , Manufacture, Storage and Import of Hazardous Chemical (MSIHC) Bank. Rules, 1989 and MSIHC (Amendment) Draft Rules, 1999 , Chemical Accident (Emergency Planning, Preparedness and The environmental safeguards and concerns of The World Bank Response) Rules, 1996 group are endorsed by operational policies of the group. These , Public Liability Insurance Act, 1991 policies form the guiding principles for assessing the environmental , The Insecticides Act, 1968 and the Insecticide Rules, 1971. 2and social acceptability of the project. The World Bank’s safeguard , Factories Act, 1948, Factories Rules, Factories (Amendment) Act, policies are listed below and are discussed in Annexure - II . 1987 and Model Rules , OP 4.01 Environmental Assessment. Social Laws , OP 4.20 Indigenous People , Child Labour (Prohibition and Regulation) Act, 1986 , Bonded Labour System (Abolition) Act, 1976 , OP 4.04 Natural Habitat , Minimum wages act, 1948 , OP 4.12 Involuntary Resettlement , Workmen’s Compensation act 1923 , OP 4.36 Forestry , OP 4.09 Pest Management Apart from these rules and regulations, respective state governments , OP 4.11 Cultural property stipulate specific pollution norms/ guidelines. SIDBI branch offices , Policy on Forced Labour & Child Labour need to be aware of these local requirements, to aid in evaluation of projects in their region. 3.2 SIDBI E&S REQUIREMENTS 23.1.2 THE WORLD BANK GROUP E&S SAFEGUARDS Project here refers to the activity being financed by the World Bank, in this case being the line of credit provided to SIDBI. August, 2004 7 SENES Consultants India Environmental and Social Management Framework Manual , Trade in wildlife or wildlife products regulated under CITES. , Production or trade in radioactive materials. Mandated as “Development Bank” for Small Scale Industries (SSIs) , Production or trade in or use of unbounded asbestos fibers. by Government of India, SIDBI management has adopted various , Commercial logging operations or the purchase of logging environmental safeguards, which are incorporated in its lending equipment for use in primary tropical moist forest (prohibited by procedures through various circulars. In the process of extending its the Forestry policy). sphere of operations to financing of SMEs, SIDBI has developed , Production or trade in products containing PCBs. comprehensive Environment and Social requirements to address , Production or trade in pharmaceuticals subject to international E&S risk that may be arise due to its lending operations in these phase outs or bans. sectors. , Drift net fishing in the marine environment using nets in excess of 2.5 km. in length. These requirements have been constituted on the basis of SIDBI’s 2. SME’s financed by SIDBI, are required to comply with own environmental policies and procedures, Indian regulations and Indian environmental and labour legislations. the World Bank policies (see Annexure – III for relevant references). 3. SIDBI monitors the progress of compliance of These requirements forms the guiding principles based on which environmental and labour legislations after financing during this Environmental and Social Risk Management Framework has project implementation and operational stages. been formulated. SIDBI’s E&S requirements for this framework are 4. SIDBI does not finance production or trade in ozone as follows. depleting substances (ODS) subject to international phase out. 1. SIDBI does not finance the following (Exclusionary List of 5. SIDBI does not finance production or activities involving projects); harmful or exploitative form of child labor or forced labor , Production or trade in any product or activity deemed illegal under 6. SIDBI encourages projects based on fly ash products. Indian laws or regulations or international conventions and 7. Loss of Land / source of income/ livelihood, impact on agreements. community and cultural property resources, safeguard of , Production or trade in weapons and munitions. tribal / marginalized and vulnerable groups are not , Production or trade in alcoholic beverages (excluding beer and applicable for direct financing SMEs. However during wine). consortium funding of infrastructure projects, the , Production or trade in tobacco. requirements of lead member institution cover this issue. , Gambling, casinos and equivalent enterprises. August, 2004 8 SENES Consultants India Environmental and Social Management Framework Manual 8. SIDBI requires that the promoter has carried out environmental assessment, if the project falls under the list of specified industries covered under Environment Impact Assessment notification, 1994 of MOEF. 9. SIDBI will not finance production or trade in pesticides/herbicides subject to international phase outs or bans as agreed by GOI based on Stockholm convention. 10. SIDBI requires that for projects involving pest management, the promoter have capacity to promote and support safe, effective and environmentally sound pest management programs. 11. Participating banks taking refinance from SIDBI under this line of credit, will be required to adhere to the above requirements. Environmental and Social Indicators would be reflected as a part of periodic audit reports, to be carried out at regular intervals. 12. All SIDBI’s Credit scoring tools would incorporate environmental & social parameters. August, 2004 9 SENES Consultants India Environmental and Social Management Framework Manual 4.0 SIDBI’S PROJECT- CYCLE EXT BOX 4.1 : DIRECT AND INDIRECT FINANCING T OPERATIONS OF SIDBI This section provides a review of SIDBI's Project cycle. This is The Indirect Finance business of the Bank consists of refinance intended to serve as a baseline for the subsequent stages of the to State Level Institutions (or SLIs, such as SFCs and SIDCs) and project involving the development of appropriate E&S risk commercial banks. The procedures associated with the management systems for the institution. The baseline review will refinancing activities of SIDBI are relatively straightforward. An enable the development of an E&S risk management system that is institutional limit is assigned by SIDBI, under which refinance is compatible and therefore most conducive to being integrated with obtained by the concerned institution. Generally, refinance is the existing systems and procedures. sought for a cluster of loan accounts, with no set periodicity. The information furnished to SIDBI is limited to basic details such as SIDBI’s business activities are divided into two streams viz. Direct loan size, location, promoter’s contribution, portion for which Finance (DF) and Indirect Finance (IF). This E&S risk management refinance is being sought. framework primarily targets to direct finance projects and project SIDBI does not carry any credit risk for the loans accounts it cycle for these projects comprise of following key activities finances through such route, and the financial institution is , Project Screening obliged to honour its dues under the refinance, even in case of , Project Appraisal non-payment by the client. Accordingly, SIDBI’s credit risk , Loan Sanction and Disbursement management process for indirect finance is restricted to assessment of institutional risk and not individual loan risk. , Project Monitoring However SIDBI proposes to implement E&S management procedures for indirect finance in phased manner by adopting 4.1 PROJECT SCREENING E&S Indicators during audits undertaken periodically At this stage credit officer conduct preliminary project discussion with the client. The prospective client is apprised for SIDBI’s The Direct Finance side of the business consists of core project lending, marketing finance, export finance, direct discounting of lending policy and various schemes under which the project could bills and resource support for Small and Medium sector be financed. enterprise. Once credit officer is assured that the proposed project is in line with SIDBI’s mandate and policy, loan application form is handed August, 2004 10 SENES Consultants India Environmental and Social Management Framework Manual to the client. Legal documentation requirements corresponding to various phases of project cycle are also communicated to the client. At this stage, credit officer in consultation with the client, lists the modifications, if required to be made in structure of the proposal. Credit officer receives the filled loan application from the client and Once the initial project review is completed, CO prepares detail loan checks for the consistency and completion of documentation appraisal report as per the format. The Loan appraisal report of any requirements. Follow ups are conducted in case of incomplete project covers following aspects information and time line is established for fulfilment of the documentation. i. Introductory, promoters & management ii. Technical aspects (including location, technology, utilities, effluent disposal, 4.2 PROJECT APPRAISAL manpower etc.) iii. Project cost and means of finance iv. Financial/ other parameters Credit officer initiate the loan appraisal process through desk review v. Schedule of drawal and repayment of the and assessment of loan , Creditworthiness of borrower vi. Arrangements made/ proposed to be made , Financial rate of return for working capital vii. Market and selling arrangements , Financial structure viii. Financial and economic viability , Project/ borrower / other risk ix. Status of government approvals x. Favourable and risk factors of the project Site investigations are also carried out, if necessary, in order to xi. Eligibility under other lines of credit assess the following xii. Terms of sanction , Suitability of site The appraisal report is tabled to the credit evaluation committees for , Availability of inputs review. , Access to the market , Technical and engineering design , Implementation as per stated design , Construction, operation and maintenance arrangements. August, 2004 11 SENES Consultants India Environmental and Social Management Framework Manual Credit officer then completes the pre- disbursement formalities, 4.3 LOAN SANCTION / DISBURSEMENT which include; , Issue letter of Intent (LOI) to borrower SIDBI has a Committee system for sanction of assistance under its , Discuss terms of loan agreement for the proposal direct finance schemes. The loan appraisal report is presented to the , Interest rate Credit Committee, which in turn appraises and then sanctions or , Repayment Schedule rejects the project proposal. Power and composition of the credit , Security / guarantees committee constituted at the branch level is based on the volume of , other loan conditions business and seniority of the officer heading the branch. Disbursement sanction power of credit committee is capped and , Ensure compliance with pre disbursement conditions deviations, if any, are referred for approval to appropriate levels of including legalities relating to creation of security. decision-making, as per pre-defined delegated authorities. , Finalise and sign loan agreement The appraisal report is further processed using an internal rating 4.4 PROJECT MONITORING, AUDITS AND RECOVERY model (applicable to limited verity of projects). This rating model evaluates the proposal on four broad risk aspects, namely- The monitoring function covers (i) end use of funds (ii) operations a) Financial risk of the assisted units vis-à-vis projections (iii) compliance with terms b) Management risk of sanction (iv) securities offered/ charged and related c) Operational & Business risk documentation (v) detection of warning signals, deterioration in d) Industry risk credit quality & changes in management structure etc. Occasionally, external credit rating agencies are also consulted in This involves periodic visits to assisted units, to enable the credit special cases (mainly restricted to large borrowers). officer to assess the status of operations and identify any warning signals. In addition, borrowers are required to submit periodic Credit committee discusses and subsequently approves pre- letter of returns, which detail their performance. CO prepares site visit intent terms (if any) and approval is granted for the project subject reports as per standard format. to fulfilment of stipulated conditions. August, 2004 12 SENES Consultants India Environmental and Social Management Framework Manual Project completion report is sought from the borrower after project implementation is completed. If required, external agencies are also retained for independent review of the project SIDBI’s monitoring process also includes the following , Each of the branch offices with more than 5 direct finance accounts has a Default Review Committee, which reviews all accounts including standard accounts at least once a month. Minutes of these meetings are sent to the concerned Regional Office. , For direct loan accounts with over Rs.50 million in outstanding, a Credit Monitoring Cell is being proposed at the Zonal and Head Offices. In addition to the detailed Annual review for these accounts, a quarterly short review is being introduced. , The Post Sanctioning Reporting Authority (PSRA) examines decisions on broad parameters as a measure to ensure quality of decision-making on an ongoing basis, which acts as an additional check. Observations by the PSRA, if any, serve as a guide to the sanctioning authority. Loan recovery mechanisms are enforced in case of default. August, 2004 13 SENES Consultants India Environmental and Social Management Framework Manual 5.0 E&S RISK MANAGEMENT PLAN This section discusses the E&S risk management plan for the direct finance business of SIDBI. It encompasses only projects associated with small and medium enterprises, and not infrastructure projects. NOTE:- [E&S Risk Management will be addressed for SIDBI’s other lines of business in the following manner:- The overall aim of the E&S risk management plan is to ensure Indirect Finance - SIDBI will introduce E&S requirements in a phased manner, compliance with the SIDBI E&S Requirements laid out in Section through adoption of E&S Indicators in audits that will be conducted for participating banks / FI’s at periodic intervals. 3.2 of this manual. Direct Finance of Infrastructure projects – This is usually in done under consortium finance where the lead financier typically performs the E&S due It has been recognized that the E&S risk management plan needs to diligence exercise on behalf of the consortium. Due care will be taken by SIDBI be kept extremely streamlined, given the nature of SIDBI’s business to confirm that this is being done in case of the infrastructure projects that it is co-and market, namely, financing. ] , small transaction sizes, and , Informal management systems with majority of clients. Accordingly, E&S risk management steps have been integrated into the existing project life cycle without modifying the basic procedural flow. Moreover, incremental E&S risk management steps have been kept to the minimum. E&S Risk Management flowchart is as described in the subsequent figure August, 2004 14 SENES Consultants India PROCEDURE FLOW FOR E&S RISK MANAGEMENT SYSTEM SIDBI’s Existing Project Life Cycle Proposed E&S Risk Management Initiatives Check against Exclusionary list Interactions with Client Receive loan application form Categorise project And Ask For Risk Category Handover, Loan application form + , NOC from Pollution Control Boards E-I & E-II (Green field & non-Borrower’s Environmental guide + E&S , Other relevant documents and legal SCREENING industrial areas Questionnaire permissions. E-II (others) & E-III Checklist for legal requirements Desk review and assessment of, E-I, Ask For , creditworthiness of borrower E-II (Greenfield & Non industrial NOC + E&S Questionnaire + EIA report , financial rate of return area) (if applicable) , financial structure E-II (Others) & E-III No Objection Certificate (NOC) , project/ borrower/ other risks Site Investigation, if Necessary for Complete E&S Appraisal summary report (For E-I & E-II) , Suitability of site , Desk review of E&S documents , Availability of inputs , Site visit(s) to confirm details provided by client, and identify site-specific risk , Access to market issues (if any). , Technical and engineering designs Loan Appraisal report tabled to review to credit committee. Interaction with client on E&S requirements and Pre-commitment conditions (if any) Loan Approval (Y/N) Issue Letter of Intent Finalise Loan agreement & Security formalities , For E-I, E-II: Finalise loan agreement , Pre-disbursement conditions (NOC for E-I, E-II; EA’s for E-I,) , Conditions of sanction (covenants for social issues & pollution control) Loan disbursement APPRAISAL DISBURSEMEN Project Monitoring , Project completion report Project Monitoring (as part of site visit format for E-I, E-II) , Site visits and Quarterly progress reports for , Legal provisions compliance to disbursement condition , Implementation commitments , External Audits , Condition of on-going operations MONITORING , Enforce Loan Recovery Mechanism if required. 15 Draft Environmental and Social Management Framework Manual for SIDBI Identification of the risk classification at an early stage of the project 5.1 PROJECT SCREENING life cycle is desirable since it would reduce the processing time for loan applications from Non- polluting industries. In the course of the preliminary interactions with the client, the CO will ascertain the proposed project’s nature of activity and confirm SIDBI’s environmental and social risk classification corresponds to that the project is eligible for financing, by checking against Indian environmental legislations, World Bank’s Environment and SIDBI’s Exclusionary List (refer section 3.2). On confirming the social safeguard policies and international best practices / guidelines. same, the CO will assign the appropriate E&S Risk Classification based on following section. SIDBI has decided that social issues are priority and need to be 5.1.1 ENVIRONMENTAL AND SOCIAL RISK CLASSIFICATION addressed equally for all sectors. So social issues related to child labour, forced labour, common property resource etc needs to be The target sectors of SMEs financed by SIDBI are diverse in nature considered while appraising all direct financing projects. The credit having correspondingly varied environment and social risks officer (CO) should ensure that the borrower has developed associated with them. The environmental and social risk based programs for safe working practices for the workers. Infrastructure classification is developed to facilitate early categorisation of the projects, which SIDBI undertakes primarily on co-financing basis, projects (at the screening stage), into pre-defined E&S risk bands. with other institutional financers such as IDBI, IDFC etc. have The objective of this classification is to identify those projects, social issues management plan, built into the financing framework which have significant environment, and social issues associated as per guidelines already existing with the institutional lenders. Thus with them and might pose credit risk to SIDBI, if financed without the sectors have not been classified on the basis of social issues, but necessary mitigants / safeguards. only on environmental issues. The proposed risk classification will be carried out at the screening stage by the credit officers, and will form the basis for determining E&S risk management measures required to be followed in subsequent stages of the project life cycle. Also, these classifications will help the decision makers at all levels to identify appropriate loan conditions and monitoring requirements. 16 Draft Environmental and Social Management Framework Manual for SIDBI Three environmental risk categories have been developed for giving full justification for the same. The steps that follow would classification of projects, namely, then correspond to the specific risk category assigned. , E-I Industries with high pollution potential. The environmental legislation of the country is constantly evolving , E-II Industries associated with significant pollution, but to a and MoEF through various notifications in gazetteer updates the lesser extent than E-I industries. Acts and corresponding rules. Accordingly, necessary modifications , E-III Industries that do not contaminate environment or have an and updation procedures to the E&S risk classification system is part acceptable levels of discharge. of this framework. . NOTE:- [The proposed classification is also in concurrence with Red, Orange, The Sectoral Guidebook is developed to aid credit officers in Green categories, specified by Ministry of Environment and Forest under Doon Valley Notification.] assessing the environmental issues associated with the sectors covered under E-I, E-II and E-III categories. The profiles of the This risk classification is based on the E&S risk profiles at the sectors are captured under the following heads sectoral level i.e. the characteristic pattern of emissions/ effluents , Process description , Basic pollution process generated by a typical facility in a particular sector. Accordingly, the , Critical pollutants risk classification may be arrived at, at the project screening stage, , Summary of key environmental issues once it is ascertained which sector the project will fall under. Sectors , Recommended pollution prevention measures V. falling under aforesaid categories are provided in Annexure – , Cleaner production options , Legal obligations It is realised that such a risk classification is based on a generalisation, and some facilities of a sector may deviate from this generalisation. However, this slight dilution in accuracy of assessment is considered to be justified given the benefits of quick decision-making, as also reduced cost of assessment (as against a more detailed facility specific classification). Moreover, in case of a specific project that significantly deviates from the characteristic sector profile, the CO may assign a higher/ lower risk category 17 Draft Environmental and Social Management Framework Manual for SIDBI TEXT BOX 5.1: DOCUMENTATION AND KEY CONSIDERATIONS FOR CREDIT OFFICERS DURING SCREENING STAGE Where the project falls under E-I, Greenfield E-II and E-II in non-, For E&S risk management purposes we are only concerned industrial area, the CO would ask the project proponent to submit the with the facility being financed. In case of multiple E&S Questionnaire (Provided in Annexure - I (A)) along with the activities being undertaken at the same facility, the other loan documentation. classification would be based on the specific activity being financed or else the dominant activity at the facility. The E&S Questionnaire may be sought even in case of other However, caution needs to be exercised here, in case any categories of projects, if the CO perceives potential E&S risks in such high-risk activities are being undertaken at the facility – the projects; for instance, in case of other E-II facilities. CO is advised to adopt caution to ensure effective addressal , using an outdated (and ‘dirty’) technology, or of E&S risks. , releasing effluents into a freshwater body being used for domestic/ agricultural purposes or, , Where any of the legal approvals are not available, the CO should ascertain reasons for the same, and initiate , having a high density of population in the vicinity (even if aggressive follow-ups to obtain copies of them. located in an industrial area). On receipt of loan documentation, the CO would need to confirm the , With respect to EIAs, the CO should keep the concerned completeness of documents including those relating to E&S aspects SPCB’s list of sectors for which EIA’s are mandated, and viz. cross check if the particular project is required to get an , E&S Questionnaire (where applicable) EIA done. , EIA report, including Environment Management Plan (where , In case the EIA requirement is applicable to the project, applicable) obtain a copy of EIA report where needed. If however, it is , NOC/ Consent to Operate not available for some reason, the CO should ascertain if an , Other applicable legal approvals based on nature of EIA has been or is being conducted and the credibility of operations (CO can check against the List of E&S Legal the agency performing the EIA. Requirements provided in this Manual as well as the Sectoral , While the E&S Questionnaire has been worded as if for a Database). new project, in case of a project involving expansion/ , Gaps in documentation if any. modernization at an existing facility, the questions asked in Some of the other aspects that need to be borne in mind during the the questionnaire should be assumed to imply incremental Screening stage are as follows: increase in that risk aspect. For example, for air emissions, , E&S Risk classification needs to be done based on the it may be treated to imply whether or not the proposed facility, and not the commercial entity under which the project will result in additional air emissions, and if so, facility is operating. The latter may have multiple facilities what safeguards are proposed for the same. having diverse nature of activities. 18 Draft Environmental and Social Management Framework Manual for SIDBI , E&S Questionnaire , EIA report (where applicable), and 5.2 PROJECT APPRAISAL , NOC / Consent to Operate/ Hazardous waste After the completion of loan documentation, a desk review is The officer during the site visit can also refer to the Sectoral undertaken of the same. The project details would be reviewed for Database to identify specific risk aspects that need to be checked E&S risk aspects and provision of relevant safeguards. Specifically, during the site visit. the following documents would be reviewed: , E&S Questionnaire (where applicable) Based on the above evaluations and discussions with the borrower, a , EIA report (where applicable), including Environment decision would be taken on whether or not to proceed with the Management Plan proposal. If yes, the CO would proceed with preparation of the E&S , NOC and other legal approvals appraisal summary report as per format provided in Annexure –II. This review should be cross checked against the Sectoral Database A summary of the key E&S risks and safeguards would be presented to note E&S risks characteristic of the project activity and under the section on “Effluent Disposal” in the current appraisal safeguards required to mitigate these risk(s). Importantly, the CO form. In case of E-III projects, the E&S appraisal report would not should review the conditions stipulated in the NOC / Consent to be necessary, but E&S risk aspects (if any) would be described in Operate and check whether these have been addressed in the project the relevant sections (viz. “Effluent Disposal” and “Utilities”) of the design. appraisal form itself. Internal circulars issued by the Credit Management Department SIDBI has developed Credit Rating Model and is applied to certain should be borne in mind while processing the proposal. These category of projects. Wherever this model is used, the E&S risk circulars would address specific regulatory, sectoral, technological aspects can be addressed through the instruction provided in Text developments taking place from time to time. Box – 5.2 The Desk Review would be followed up with a site visit(s) to review addressal of E&S risk aspects and safeguards (at least the significant ones) as stated in the 19 Draft Environmental and Social Management Framework Manual for SIDBI TEXT BOX 5.2: INSTRUCTIONS FOR INTERPRETATION OF CREDIT RATING MODEL FROM E&S RISK PERSPECTIVE SIDBI has developed a Credit Rating Tool and is used for certain Management Risk category of projects. Where this model is being used, E&S aspects Management Initiatives/ Tie-Ups - A useful indicator of are primarily addressed under the parameter “Pollution Control/ management commitment and performance, in the environmental Environmental norms”, for which three levels of performance have context, is the companies ISO 14001 certification. been defined. The credit officer is required to interpretate these Operational & Business Risk levels of performance as discussed below. Location - The CO needs to consider sensitive areas in the vicinity of the site such as high density of surrounding , Non-polluting – This would typically correspond to population, eco-sensitive habitat, and historical monuments. This projects under the E-III category. There may be some would be particularly important in the case of projects involving projects under the E-II category where clean technologies hazardous substances/ wastes. have been adopted. Technology/ Concept of propose project – Use of cleaner , Polluting but provisions of pollution control equipment/ processes/ technologies should be considered in the assessment of effluent disposal made in the project – This would be this parameter. Typically, cleaner production processes are also applicable to a project under E-I or E-II category, having the more technologically up-to-date ones, and therefore represent adequate provision of pollution control equipment/ effluent no contradiction with the conventional basis for assessing this disposal. Where loans are being extended to existing parameter. facilities, the CO should also attempt to ascertain the Quality of Primary and Collateral Security – In projects reliability of operation of the pollution control equipment/ involving the hazardous substances or generation of hazardous treatment systems. In case, the facility has adequate wastes, the CO needs to evaluate the risk of site/ groundwater equipment, but is not operating these properly then a ‘C’ contamination (past, or potential in future) arising from leakages rating should be assigned. etc. This is important since it can significantly reduce the market value of the property. , Polluting industry – This rating would be assigned to projects under E-I or E-II having inadequate facilities for Impact of WTO & Other provisions – In the current context, use pollution control/ treatment. It may also be assigned where or movement of several substances / products is banned or adequate facilities have been provided for, but are not controlled by various international treaties. These include CFC’s, operated regularly or properly, resulting in release of pesticides, azodyes etc.. The list may be expected to increase with emissions/ effluents beyond acceptable levels. globalisation of trade as well as environmental concerns. CO’s would need to be alert to these provisions, especially in the case In addition to the above, E&S aspects need to be borne in mind of facilities having exports or products that are finally directed to while evaluating some other parameters of the Rating Model as an international market, due to their increased vulnerability to well. These are as follows such provisions. 20 Draft Environmental and Social Management Framework Manual for SIDBI , For E_I & E-II, CO should check the applicability of public Some of the key aspects that need to be borne in mind during the liability insurance. In case the same has not been obtained by the Appraisal stage are as follows: client, the CO should advice to strictly adhere to the requirements , While evaluating the project for legal compliance on the E&S aspects, the CO should be aware of requirements not only as per , For expansion/ modernization projects being financed by SIDBI, national legislation but also state level regulations (this is the officer concerned would need to also review the existing especially applicable to pollution norms, impact assessments and operations for E&S risk aspects, since those could result in guidelines for water use). closure/ suspension of operations for the entire facility. Where possible, especially in case of E-I projects an environmental audit should be conducted of the existing facility to identify potential , The CO should confirm that the cost of the proposed risk areas. environmental infrastructure is properly tied up with the financial overlays. Cost details of the environmental infrastructure may be obtained from the Environment Management Plan provided in the , For expansion/ modernization projects of existing facilities EIA, and/ or the E&S Questionnaire. involving the use of hazardous substances, and where there is a new client relationship being established for SIDBI, a due diligence exercise is desirable. , As mentioned earlier, the CO should attempt to evaluate the use of cleaner technology options in the project (under the Section on Technical Aspects). Information on this is provided in the Sectoral , Management commitment to addressal of E&S risks can be Database and would be updated periodically. assessed from the management measures being/ proposed to be instituted at the facility eg. Environmental audits, identification of responsibility for functioning of pollution control equipment, , In the case of the site visit(s) undertaken prior to approval of the monitoring facilities. A useful indicator of the adoption of these loan, special care should be taken to review storage systems for measures is the ISO 14001 certification. hazardous substances, and systems to handle emergency situations such as leakages/ explosions/ fires. Risks of contamination should be carefully assessed where the project site is being taken as , Where the unit is supplying services or product to large MNC’s, security for the loan. the CO should be aware of the facility’s ability to meet the buyer’s E&S requirements. 21 Draft Environmental and Social Management Framework Manual for SIDBI , Control the risk - clauses in credit agreement, indemnities, 5.3 LOAN SANCTION/ DISBURSEMENT warranties, covenants, certificates. These provide contractual control over client activities. The Appraisal report, along with the E&S appraisal summary report , Transfer the risk - guarantee/ indemnifications by a third party eg. would be submitted for approval to the Credit Committee. Apart parent company or govt. agencies, syndication. from other aspects of the credit evaluation, the Committee would , Finance the risk - establishment of an environmental contingency also review the E&S risks / safeguards analysed in the Appraisal fund, reclamation or remediation bond or Letter of Credit. report, including the E&S questionnaire. Clarifications if any should , Insure the risk (or risk transfer for a fee) to cover sudden or be obtained from the client, and where required, modifications gradual events. incorporated in the Appraisal Report. A few pointers in the context of SIDBI’s E&S Risk Management framework are provided below. If the proposal gets approved, the CO would proceed with deciding the terms of sanction. Pre-commitment conditions if any, would be Pre-commitment conditions reassured or required by the Credit Committee, and the same would , In case of greenfield E-I projects where EIA’s are required as per be communicated to the client. Once these have been complied with, legislation, an EIA should be insisted upon prior to issuance of a a Letter of Intent may be issued to the client. Letter of Intent. Even if a report is not provided to SIDBI at this stage, it should be confirmed – possibly in writing from the client - Detailed terms of sanction would be discussed with the client. On that such an exercise has been or is being completed by a finalisation of these, a Loan Agreement would be prepared and knowledgeable environmental consultant. signed. Requisite terms/ conditions to cover E&S risk aspects would need to be incorporated in the Loan Agreement, in consultation with Pre-disbursement conditions – the client. The CO would ensure compliance with the Pre-, In case of all E-I and E-II projects, NOC’s should be available disbursement conditions, and then release the first instalment of the prior to disbursement. Loan. , For greenfield E-I and E-II projects, an EIA (where applicable), should have been completed and a copy of the EMP made While conditions of sanction to cover E&S risks would need to be available to SIDBI. decided on a case-to-case basis depending on the specific project details, in general the following options exist to cover risks: 22 Draft Environmental and Social Management Framework Manual for SIDBI , In case of projects involving the generation of hazardous wastes , In projects involving operations that may be associated with and being disposed of through external agencies, a copy of the potential emergency/ disaster situations such as explosions, gas contractual arrangements and name of agency should be made leaks, fires etc., a management confirmation may be obtained that available to SIDBI. necessary emergency response systems have been provided for at the project facility. 5.3.1 OTHER CONDITIONS OF SANCTION The following table broadly summarises the risk mitigants that can , For expansion/ modernization projects in the categories given be used for different categories of projects. below, the client should have an environmental auditing system in place, or else SIDBI should undertake a due diligence exercise TABLE 5.1: RISK MITIGATION MATRIX prior to disbursal. Category Risk Mitigants o E-I category (new clients, or projects using/ generating All NOC (Pre-Disb) E-I hazardous substances) Greenfield EIA being done / completed (Pre-Comm) o E-II category (involving use/ generation of hazardous substances). Expansion/ Environmental audit/ Due diligence, Modernisation especially in case of new client relationships, , Where there have been instances of past problems in adherence to or facilities involving use/ generation of pollution norms as indicated by notices/ letters from the SPCB, a Hazardous Substances. letter would be obtained from the management confirming that All NOC (Pre-Disb) E-pollution control equipment would be operated to ensure II Greenfield EIA being done/ completed (Pre-Disb) adherence to legal norms. Expansion/ Environmental audit/ Due diligence, Modernisation especially in facilities involving use/ , In sectors/ regions typically associated with use of child labour or forced labour, a management confirmation would be obtained that generation of Hazardous Substances. such categories of labour would not be used in the facility’s operations. In the above listing, no specific suggestions have been made to finance or insure E&S risks given the current absence of legislation transferring liability for environmental damages to financiers. 23 Draft Environmental and Social Management Framework Manual for SIDBI However, liabilities have been assigned to offending companies, and condition of pollution control facilities, signs of site contamination where sizeable, these have an impact on the financier’s credit and so on. exposure to the client. Therefore, the option of financing/ insuring In addition, for Greenfield E-I and E-II projects, as also E-I and E-II E&S risks needs to be considered in cases where the Bank is projects involving the use or generation of hazardous substances, it exposed to potentially high levels of E&S risk. would be desirable, if the following checks were performed: 5.4 PROJECT MONITORING/ RECOVERY On completion of the implementation phase, a due diligence exercise to confirm installation of requisite pollution control/ treatment facilities as Subsequent to disbursement of the loan, the CO will undertake on-stated in the project design documents. going monitoring of the project to confirm the installation of In the Operational phase, a periodic (e.g. annual) audit to identify any environment control facility, through site visits and progress reports potential E&S risks that may be emerging, thereby enabling the CO to submitted by the client. The following periodicity has been initiate necessary follow up action to address the same. stipulated for this purpose The Environment and Social risk management Plan is summarised TABLE 5.2: MONITORING FREQUENCY in the Table 5.3 MONITORING REPORT FREQUENCY 5.5 CONDITIONS FOR INDIRECT FINANCE Progress reports from customers During implementation Quarterly On commencement of operations Half-yearly Commercial Banks seeking refinance from SIDBI will adhere to Progress reports by CO Quarterly SIDBI’s E&S risk management framework for all project financing done by them under the refinance line. At regular intervals, SIDBI’s In case of all E-I and E-II projects, the site visit reports and quarterly Central Credit department will do a sample review of the refinanced progress reports by the CO would incorporate E&S risk aspects as portfolio of the participating bank to confirm adherence to well as per the formats provided (refer Annexure-I). These would requirements under this framework. include, status of legal approvals, worker health & safety measures, 24 Draft Environmental and Social Management Framework Manual for SIDBI TABLE 5.3: ENVIRONMENT AND SOCIAL RISK MANAGEMENT PLAN E&S Manual STEP PROCESS OUTPUT Reference 1. PROJECT SCREENING Initial customer Discussions with borrower to assess the eligibility of project based on SIDBI Decision on request lending policies. Check against exclusionary list. whether or not to proceed further with Classify project into E&S risk classification – E-I, E-II or E-III. Annexure - IV loan processing Issue Loan Application form Issue Borrowers Guide Issue E&S Questionnaire and Borrower’s E&S Guide in case project falls in Annexure –I & one of the following categories: BEG , E-I , E-II Greenfield , E-II located in non-industrial area Receive project Receive Loan Application form, E&S Questionnaire, EIA (if applicable), Sectoral Guidebook Collation of information NOC and other applicable approvals (check against list of E&S legal necessary details/ requirements). documents on loan proposal Check for complete information & documentation Follow up for gaps (if any) 2.PROJECT APPRAISAL Appraise loan Review and assessment of loan proposal. Section 5.2 Loan Appraisal proposal Report with Identify key E&S risks and note safeguards required to mitigate the risk, from Sectoral Database decision to the Sectoral Database for relevant sector of industry. accept proposal as Site investigation, if necessary. Review for addressal of E&S risk aspects as 25 Draft Environmental and Social Management Framework Manual for SIDBI E&S Manual STEP PROCESS OUTPUT Reference stated in E&S Questionnaire, EIA report and NOC conditions. Also check for submitted any signs of site contamination (past or potential in future), especially if land accept with is being provided as collateral for the loan. modifications reject Modifications (if any) made to structure of proposal, in consultation with borrower Complete Loan Appraisal report, including E&S Appraisal summary report as Annexure -II per format provided in Annexure- II 3. LOAN SANCTION/ DISBURSEMENT Approvals from Appraisal report tabled for review to Credit Committee Section 5.3 Approval obtained appropriate for the project. Modifications made/ Clarifications sought based on observations of Credit authority Committee Discuss pre-Letter of Intent terms (if any) with borrower and ensure compliance with the same. Complete pre-Issue Letter of Intent to borrower. Letter of Intent disbursement issued Discuss terms of Loan Agreement for the proposal formalities for , interest rate loan Loan Agreement , repayment schedule signed , security/ guarantees , other loan conditions Section 5.4 Incorporate E&S terms/ conditions to cover E&S risk aspects identified as part of appraisal. Finalise & sign loan agreement 26 Draft Environmental and Social Management Framework Manual for SIDBI E&S Manual STEP PROCESS OUTPUT Reference Ensure compliance with pre-disbursement conditions including legalities relating to creation of security. Disbursement of Disburse first instalment of loan First instalment loan disbursed 4. PROJECT MONITORING, AUDIT & RECOVERY Ensure Obtain progress reports from customers (quarterly during project Annexure -III Quarterly progress conformity to implementation and half-yearly on commencement of operations). reports standards during Field visits by credit officer. construction, operation and Prepare quarterly progress reports as per formats, including section on E&S maintenance risk aspects. Also review for any change in industry/ market/ regulatory environment. Ensure Disburse subsequent instalments Project Completion compliance to Report Obtain Project completion report from borrower loan disbursement conditions Audit project Audit project with the help of external/ corporate consultants. Audit report Ensure no Enforce loan recovery mechanism (if required) in case of default. Recovery of defaults occur in payments repayment 27 Draft Environmental and Social Management Framework Manual for SIDBI been designed to be compatible with the existing organisational 6.0 INSTITUTIONAL ARRANGEMENTS structure to facilitate integration with the same. Head office, which is located in lucknow is the key decision making SIDBI would identify five nodal officers from its pool of credit body of SIDBI and is responsible for policy level decisions an officers, to form a core group on E&S issues. This core group of implementation of various systems and procedure. Zonal offices E&S Specialists will receive appropriate training from a group of namely Mumbai (West zone), Delhi (North Zone), Chennai (South technical experts as well as external institutions on identifying, Zone) and Kolkata (East zone) are In-charge of SIDBI’s direct screening, mitigating and managing E&S issues in industries. Four lending operations in respective zones. SIDBI has 40 Branch of these officers will be located at the Zonal level (one in each Zone) offices located in all major cities of the countries. and the fifth officer will be located at the Head Office (Credit Department), in Lucknow. Branch offices undertake direct finance operations of SIDBI and the Credit officers deputed in these offices are responsible for accepting The reporting structure of these officers is shown as below; loan application forms, screening, communication wit client and monitoring. However SIBDI has committee based loan appraisal Executive Committee and approval procedures. For all project proposals under direct Credit Department, HO finance, Credit Committees are been constituted at different levels viz. branch office, zone office and head office. The composition of Central Credit Committee Central E&S Specialist (1 no) these committees is dependent primarily on size of loan and includes specialists in their respective fields. Zonal Office(s) 6.1 ORGANIZATIONAL STRUCTURE – E&S RISK MANAGEMENT FRAMEWORK. Zonal Credit Committee Zonal E&S Specialist (4 no) In order to ensure that the Environmental and Social policy and framework are operationalised, SIDBI has developed an Branch Office organizational support structure to complement the existing structure. Environmental and social risk management framework has 28 Draft Environmental and Social Management Framework Manual for SIDBI 6.2 RESPONSIBILITY ALLOCATION Based on the E&S framework a responsibility allocation matrix has been developed as below. TABLE 6.1 : RESPONSIBILITY ALLOCATION S.NO. ROLE PROCESS RESPONSIBILITIES , Check Eligibility of borrower as per SIDBI’s E&S Requirements. 1 Credit Officer Screening , Categorize Project in E-I, E-II and E-III categories , Issue E&S Questionnaire and Borrower’s E&S Guide in case project falls in one of the high risk categories , Receive Loan application form and filled E&S Questionnaire, EIA and NOC as applicable (refer E&S legal requirements and sectoral guidebook). , Desk review and assessment of loan proposal. Appraisal , Identify key E&S risks and note safeguards required to mitigate the risk, from the Sectoral Database. Check whether these are provided for under the project. , Review for addressal of E&S risk aspects as stated in E&S Questionnaire, EIA report and NOC conditions. , Complete Loan Appraisal report, including E&S Appraisal report as per format provided in Annexure –II , Appraisal report tabled for review to Credit Committee Sanction / Disbursement , Modifications made/ Clarifications sought based on observations of Credit Committee , Discuss pre-Letter of Intent terms (if any) with borrower and ensure compliance with the same. , Issue “Letter of Intent” to borrower. , Incorporate E&S terms/ conditions to cover E&S risk aspects identified as part of appraisal. , Obtain progress reports from customers (quarterly during project implementation and half-Monitoring / Recovery yearly on commencement of operations). , Field visits , Prepare quarterly progress reports as per formats, including section on E&S risk aspects. , Review for any change in industry/ market/ regulatory environment. , Obtain Project completion report from borrower 29 Draft Environmental and Social Management Framework Manual for SIDBI S.NO. ROLE PROCESS RESPONSIBILITIES , Review E&S annexure to the appraisal report 2 Zonal Credit Appraisal Committee , Decides E&S terms / condition to cover E&S risk , Decision on Investment with / without modification to the project. , Check E&S pre- disbursement conditions are met before loan disbursement. Sanction / Disbursement , Ensure SIDBI’s E&S requirements are fulfilled prior to disbursement. , Periodical review of Policy and E&S Requirements. 3 Central Credit Policy Department , Coordination of capacity building exercise and training of staff , Review of participating banks portfolios. , E&S Risk Monitoring 4 Risk Monitoring / Management Recovery , Identifying E&S issues related to NPA Department , Update E&S risk management framework in light of change in E&S Legal provisions and 5 Central E&S Monitoring and Specialist Updation communicate to respective SIDBI branches. , Review on sample basis E&S annexure to LA document and site visits reports. , Coordinate Training program for Credit officers and E&S specialists , Coordinate Training programs for Credit Officers from the Participating banks. , Review and assessment of loan proposal for E1 categories, where required. 6 Zonal E&S Appraisal and Specialist Site monitoring , Identify key E&S risks and note safeguards required to mitigate the risk, from the Sectoral Database. Check whether these are provided for under the project. , Site investigation if necessary. Check for any signs of site contamination (past or potential in future), especially if land is serving as collateral for the loan. , Review for addressal of E&S risk aspects as stated in E&S Questionnaire , Review EIA report and NOC conditions if submitted by the project proponent. , Assist Credit Officers to complete E&S Appraisal report as per format provided in Annexure – II. , Coordinate training programs and capacity building exercise at zonal level. , Coordinate with Central E&S Specialist for updation of E&S Management system and procedures 30 Draft Environmental and Social Management Framework Manual for SIDBI 6.3 TRAINING PROGRAM Awareness training will be imparted to all senior staff of SIDBI As a part of its capacity building initiatives, SIDBI would provide (officer grade and above) on a rotational basis. This training formal training to its personnel to develop comprehensive program will mainly cover an appreciation of E&S issues, SIDBI’s understanding of environmental and social issues and the associated environmental policy and vision, E&S initiatives and E&S risks with financing of SME’s. Thus a training program has been requirements to be implemented. To provide competence training, devised for employees at different levels. This training program needs identification will be done by the branch offices, based upon aims to provide SIDBI’s employees with the necessary expertise to the type of industries in their lending portfolios. At least one credit recognize E&S issues at factory sites, and develop suitable officer from each branch and zonal office having the following basic safeguards to protect SIDBI from associated E&S risks. These skills would be selected to receive the competence training: training programs would to be conducted with the help of local and national training institutions and individual technical experts. The , Engineering degree in civil/ chemical / environment/ mechanical. SIDBI E&S team will identify select courses offered by the premier , Science graduate with masters in geology/ biology/ mathematics institutions in India and develop an E&S training plan. etc. , At least 5 years of experience in handling direct finance portfolios. The Central E&S specialist, with the assistance of the Zonal E&S , Good communication skills in English. specialist(s) will coordinate these training programs. In the first phase, these training programs will be conducted at SIDBI’s Head Competence training programs will have a primary focus on office and the Zonal offices. All SIDBI branch offices will designate effective implementation of the E&S framework document and legal employees to be trained, based on their sphere of business and target requirements. These will also cover tools and techniques used for portfolios. Based on this input the Central E&S specialist will effective implementation like due diligence audits, environmental customise the course contents to suit the needs of the concerned management systems, pollution prevention, and cleaner production. zonal/ branch office, as also its specific regulatory context. Two The following table provides an outline of the awareness and types of training will be conducted, namely- competence training modules to be prepared. , Awareness training , Competence training 31 Draft Environmental and Social Management Framework Manual for SIDBI TABLE 6.2 : AWARENESS AND COMPETENCE TRAINING MODULES SL. MODULE COURSE OUTLINE DURATION FREQUENCY TARGET NO AUDIENCE A. Awareness Training , SIDBI’s E&S policy, requirements and initiatives 1 SIDBI’s E&S 30 min. Once Every year All Staff & for all staff Participating banks policies , Introduction to Indian regulatory framework and 2 E&S Regulations 30 min Once Every year All staff for all staff environmental & social legal requirements for SMEs and implementation bottlenecks , E&S requirements of major funding institutions like World Bank, IFC, DFID. , Introduction to air, water and land pollution. 3 Introduction to 60 min Once Every year All staff for all staff , Global environmental issues causes of pollution , Case studies of Industrial processes and associates and its consequences environmental impacts. on environment B. Competence Training , E&S Framework principles 1 Introduction to 4 Hrs Once Every Six Selected Credit (every three months officers , E&S Forms and formats and check sheets SIDBI E&S months on , Environmental & social regulation in India (Acts framework and rotational and rules) procedures basis) , E&S Risk Classification of SME Once Every Year Senior management , Project appraisal methodology , Risk management and mitigation techniques , Monitoring requirements , Cleaner production practices 2. Pollution prevention 4 Hrs Once Every Six Selected Credit (every three months officers , Cleaner production initiatives for E-1 categories techniques months on 32 Draft Environmental and Social Management Framework Manual for SIDBI SL. MODULE COURSE OUTLINE DURATION FREQUENCY TARGET NO AUDIENCE , Air pollution control techniques rotational Once Every Year Senior management basis) , Waste waster treatment techniques , Hazardous substances management , Occupational health and safety Management , Corporate social responsibility 3. Social Audits and 1 day Once Every Six Selected Credit months officers , Social audit principles assessment , Project effected persons identification and management , Social issues and their management measures , Due diligence principles 4. Environment due 1 day Once Every Six Selected Credit months officers , Contamination identification and assessment of diligence and pollution levels assessments , Techniques to perform environment audits , Environment impact assessment (EIA) and reporting , Site visits and exercises , Introduction to environment management systems 5. Environmental 1 day Once Every Six Selected Credit months officers (EMS) and benefits management , EMS implementation techniques systems , Monitoring and measurement of environmental performance 33 ANNEXURE –I: FORMS & FORMATS Annexure –I(A) Environment & Social Questionnaire NNEXURE I(A): ENVIRONMENT AND SOCIAL QUESTIONNAIRE AE&S CATEGORY (ANNEXURE TO LOAN APPLICATION FORM) ------------------------ I. ENVIRONMENTAL ASSESSMENT Environmental Assessment Y/N If Yes, please specify details Environmental Management Measures 1. Is the project site in an area not designated for industrial/ commercial use? 2. Will the project generate any air emissions? 3. Will the project generate any of the following? i. Industrial Waste Water ii. Leakages iii. Any other (please specify) If Yes, provide details of mode of disposal (e.g. river, lake, drain, open land, horticulture use in factory). 4. Will the project generate hazardous solid waste? (for e.g sludge’s, oils, waste chemicals etc.) If yes, please provide details of mode of disposal. 5. Will the project involve handling of hazardous/ dangerous chemicals in its operations? If yes, please provide list of chemicals handled. 6. Will the project cause noise pollution? August, 2004 A-i SENES Consultants India Annexure –I(A) Environment & Social Questionnaire Environmental Assessment Y/N If Yes, please specify details Environmental Management Measures 7. Will the project cause any health hazard to employees? 8. Will the project create smell and/ or smoke? 9. Will the project cause any fire hazards (e.g. fuel storage)? If Yes, please provide details of emergency management systems. 10. Will project involve use of water in its operations? If Yes, please provide source of water supply and water efficiency measures adopted (e.g. reuse/ recycling). 11. Will the project result in cutting of trees? 12. Will the project result in damage of the habitat of any species listed in the schedules of the Wildlife Protection Act? 13. Has an EIA been done for the project? If Yes, please provide name of consultants & when the study was conducted 14. Does the management propose to; (a) Conduct environmental audits (b) Install environment management systems? II. POLLUTION CONTROL EQUIPMENT / TECHNIQUES AND ASSOCIATED COSTS (Please provide details of pollution control equipment, treatment and disposal facilities provided for under the project, and their associated costs.) August, 2004 A-ii SENES Consultants India Annexure –I(A) Environment & Social Questionnaire III. SOCIAL ASPECTS (Please provide details of initiatives adopted to avoid use of child labour or forced labour either directly or through contractors, as part of the project.) IV. LEGAL REQUIREMENTS Sl. Requirements under Indian Environmental Legislations Applicable (Yes/ No) If Yes, status of No requirement Clearance from MoEF (EIA Notification 1994) 1. Valid Air Consent (Air Act, 1981) 2. Valid Water Consent (Water Act, 1974) 3. Hazardous waste authorization (EPA, 1986) 4. Payment of Water Cess (The Water Cess Act, 1977) 5. Provide Safety reports to concerned authorities (Manufacture, storage and import 6. of hazardous chemical rules, 1989) Prepared On-site emergency plan (Manufacture, storage and import of hazardous 7. chemical rules, 1989) Public liability Insurance (Public Liability Insurance Act) 8. Submission of environmental statement (EPA,1986) 9 Registration of dangerous machines (The Dangerous Machine Act, 1983) 10 V. PAST TRACK RECORD (Has this facility or any other facility under the same management been associated with environment related legal violations (viz. notices been issued by concerned authorities) or public protests/ legal action in the past 3 years? If yes, please provide details.) August, 2004 A-iii SENES Consultants India Annexure –I(B) Environment and Social Annexure to Appraisal Format NNEXURE I(B): ENVIRONMENTAL AND SOCIAL APPRAISAL SUMMARY REPORT FORMAT A (APPLICABLE FOR E-I AND E-II CATEGORIES) Project Background 1. Site location and environmental setting (briefly summarise site location with reference to surrounding landuse) 2. Exclusion from Negative List (briefly indicate the project description and its exclusion from the negative list of projects) 3. Environmental Issues ( Provide assessment of expected pollution levels and adequacy of proposed pollution control measures ) i) Air pollution (include emissions from in process and utilities) ii) Water pollution. (include emissions from in process and utilities) iii) Solid and hazardous waste. (Include types of wastes and handling / disposal measures) iii) Hazardous / Dangerous chemicals / fuels. (include types of chemicals, fuels and August, 2004 A-iv SENES Consultants India Annexure –I(B) Environment and Social Annexure to Appraisal Format handling and storage measures) iv) Noise v) Produce or use of banned Pesticides / herbicides (For e.g DDT, Aldrin, Dialdrin, Benzene Hexa chloride etc.) vi) Use of Ozone Depleting Substances (for e.g. chloro fluro carbons in refrigeration, aerosols, solvents, air- conditioning etc.) vii) Environment Management Systems / Audits 4. Resource Utilisation i) Water Consumption ii) Fuel 5. Social Issues (provide note if project involves use of child labour / forced labour) i) Involvement of Child labour / Forced labour in operations / hazardous processes August, 2004 A-v SENES Consultants India Annexure –I(B) Environment and Social Annexure to Appraisal Format 6. Health and Safety i) Proposed health and safety measures. ii) Emergency planning iii) Status of Public Liability Insurance (If applicable) 7. Legal requirements Status of Legal requirements / Obligations (briefly mention which NOC ‘s / consents have been obtained ) 8. Proposed Conditions for Sanction Pre- disbursement Post disbursement August, 2004 A-vi SENES Consultants India Annexure –I(B) Environment and Social Annexure to Appraisal Format NNEXURE I(C ) : E&S SITE VISIT REPORT FORMAT A (ANNEXURE TO EXISTING SITE VISIT REPORT) 1. Name of the Client 2. Location 3. Date of site visit 4. Name of visiting officer 1. Legal Status (Check all the relevant legal documents / permits are updated or not) 2. Pollution Control equipments (Check for all pollution control equipments, as proposed in loan application format, are installed on site. If Yes, are they functioning properly? ) 3. Health & safety measures / procedure adopted by the unit. 4. Social Issues Observed (Use of child labour / forced labour) 5. Recently implemented / planned initiatives for overall environmental improvement within / outside the unit August, 2004 A-vii SENES Consultants India ANNEXURE –II: LEGAL REQUIREMENTS Annexure –II Legal Requirements regulate / stoppage of electricity and water supply in case for non 1.0 INDIAN ENVIRONMENTAL & SOCIAL conformity to these conditions and discharge of effluents beyond the LEGISLATIONS prescribed standards. 1.1 WATER (PREVENTION AND CONTROL OF 1.2 WATER CESS (PREVENTION AND CONTROL OF POLLUTION) ACT, 1974 ( AMENDED 1988) & POLLUTION) ACT, 1977 (AS AMENDED 1988) & WATER (PREVENTION AND CONTROL OF WATER CESS (PREVENTION AND CONTROL OF POLLUTION) RULES, 1983 POLLUTION) RULES, 1978. The Act is first environmental legislations introduced in 1974. The This Act provides for the levy and collection of a Cess on water Water Act, empowers Central and State Pollution Control Board, to consumed by organizations and was specifically developed to lay adequate procedures for prevention and control of water augment the resources of the State Pollution Control Board. General pollution. Under this act SPCBs are authorized to prohibit discharge obligation of the industry, under this act includes timely payment of of wastewater into stream or sewer or land disposal of polluting water cess to SPCB, if the industry falls under 16 classified manner, not in accordance with the standards laid down by SPCB. industries, mentioned in this act. To facilitate the same, project The Act specifies certain obligations, responsibilities and rights that proponent is required to affix water consumption meter, at the are to be recognized by the project proponents. Under this act all location specified by SPCB. Pollution control Boards are new facilities requires to obtain “Consent to Establish” prior to empowered to inspect any industry for the provision of taking any steps to establish an industry, operation, or process or implementation of this acts. any treatment and disposal system which is likely to discharge effluents. “Consent to operate” is also required to be obtained by, all such facilities, before starting of commercial operations, and needs to be renewed periodically. The consents are generally issued with certain conditions, in terms of furnishing information periodically and meeting discharge standards all the time. Non compliance to these conditions may lead to revoke of consent by SPCB and closure notice may be served to the industry. SPCBs are also empowered to A-ix Annexure –II Legal Requirements water supply in case for non conformity to these conditions and 1.3 AIR (PREVENTION AND CONTROL OF discharge of effluents beyond the prescribed standards. POLLUTION) ACT, 1981 (AS AMENDED IN 1987) AND AIR (PREVENTION AND CONTROL OF 1.4 ENVIRONMENT (PROTECTION) ACT, 1986 AND POLLUTION) RULES, 1983 ENVIRONMENT (PROTECTION) (AMENDMENT) RULES, 1996 The Air Act, 1981 provides for the prevention, control and The Environment (Protection) Act, 1986 was introduced as an abatement of air pollution. This Act spells the Government’s powers, umbrella legislation that would provide a holistic framework for the and obligations, responsibilities & rights of organizations that are protection and improvement of the environment. In terms of contributing in some way towards air pollution. This Act also responsibilities, the Act and the associated Rules requires for empowers SPCBs to declare any area within the state as air obtaining environmental clearances for specific types of new / pollution control area and restrict establishment and operation of expansion projects (addressed under EIA notification) and also for any industrial plant / process likely to emit air pollutants into the the submission of an environmental statement to the State Pollution atmosphere. Central pollution control board (CPCB) under this act Control Board annually. The Act and the associated Rules also has proposed industry specific air emissions standards, SPCBs can provides environmental standards across a variety of industry decide to ratify these standards or can adopt the stringent. sectors. While it recognizes the legislation introduced prior to 1986, Obligation of project proponent under this acts includes obtaining of many of the subsequent regulations have been introduced as Rules “Consent to Establish” prior to establishment of any industrial plant or notifications within the scope of this Act. / process within located air pollution control area. The industry is also required to obtain “consent to operate” after trial run and before starting of their respective commercial operations. This consent is 1.5 ENVIRONMENTAL IMPACT ASSESSMENT generally issued with certain conditions, in terms of furnishing NOTIFICATION, JANUARY 1994 (AS AMENDED IN information periodically and meeting emissions standards all the MAY 1994) time. Non compliance to these conditions may lead to revoke of consent by SPCB and closure notice may serve to the industry. Under this notification, environmental clearance is required from the SPCBs are also empowered to regulate / stoppage of electricity and MoEF for large scale government and public sector undertaking projects. EIA Notification of 1994, has been made statutory in 30 A-x Annexure –II Legal Requirements identified activities and details of procedures for obtaining the MoEF has also published the Environmental Guidelines for various environmental clearance including time schedules for decision-industrial sectors, covered under this act, as mentioned previously to making. Under this notification, the project proponent is required to help project proponents in incorporating environmental conduct Environmental Impact Assessment (EIA) for the proposed considerations at an early stage in the project planning. These project / modification, as per the specified format. MoEF employs guidelines include (i) its purpose, (ii) general comments on EIA (iii) project evaluation committee, which consist of experts in various the items to be covered in an environmental impact statement / EIA environmental disciplines and representative from local NGO. On report, (iv) the items to be dealt with in an EMP, (v) how impacts the basis of recommendation of this committee, clearance is granted need to be identified across physical resources (hydrology, surface for the project. water quality, air quality impacts, soils, and noise impacts), ecological resources (fisheries, forestry, wildlife and ecosystems), Out of these 30 listed activities, 14 projects such as petroleum human use values (navigation, flood control and land use), quality of refineries, river valley projects etc., are exempted from, provisions life values (socioeconomic, socioeconomic, resettlement, public under this notification, if the investment if less than Rs 50 Crores. health, aesthetics, archaeological / historical values), (vi) measures However rest 16 categories, require clearance, irrespective of the for the mitigation of adverse impacts (air quality, noise, and size and investments. These categories includes, Bulk drug & relocation), (vii) environmental monitoring, and (viii) management pharmaceuticals, dye and dye intermediates, H- acid industry etc. considerations in hilly areas. In the same year, MoEF published a Handbook of Environmental 1.6 HAZARDOUS WASTE MANAGEMENT RULES, 1989 Procedures and Guidelines, 1994, which gives the details of the AND THE HAZARDOUS WASTES (MANAGEMENT project coverage, which require environmental clearance, guidelines AND HANDLING) AMENDMENT DRAFT RULES, for investors, the documentation required, the environmental 1999 appraisal procedure along with flowcharts, post-project monitoring, brief description of the requirements under other environmental Introduced as a set of Rules within the scope of the Environment legislation. This handbook also includes explanatory notes and a Protection Act, 1986, Hazardous Waste Management Rules, 1989 detailed general questionnaire against which information needs to be was introduced to ensure proper handling and disposal of hazardous furnished. In addition, sector-specific questionnaires have also been wastes. These rules were subsequently amended in the year 1999 & introduced. All these questionnaires are in the process of revision. A-xi Annexure –II Legal Requirements 2003. Under these rules, it is required for the generator of FOREST CONSERVATION ACT, 1927, FOREST 1.7 Hazardous waste / transporter / manager of hazardous waste facility CONSERVATION ACT 1980 (AS AMENDED IN 1988) to obtain an authorization from the State Pollution Control Board. AND FOREST CONSERVATION RULES 1981 (AS AMENDED IN 1992 AND 2003) Hazardous Waste (Management and Handling) Amendment Rules, The Forest Conservation Act, 1980 (as amended in 1988) provide 2003 substitute or modify specified in the earlier rules issued in for the conservation of forests and for matters connected with it. 1989. The specific rules that have undergone substantial Under this Act, the Forest Conservation Rules, 1981 was formulated. modifications include the following. These rules include (i) the kind of details that need to be included in , Identification of hazardous waste based on process involved in proposals for dereservation of forests or use of forest land for non-production and concentration of hazardous substances in waste forest purposes, (ii) details on which Government authority should stream. , The occupier and the operator of any waste handling facility have receive the proposals, and (iii) the mechanism for the review of the been given responsibility and not only the occupier, as was the proposals. These rules carry annexes on (i) form for the proposal, (ii) case earlier. legal advice on mining leases, (iii) regularization of encroachments , Authorization and analysis fees have been increased, ninety days on forestland, (iv) guidelines for laying transmission lines through for providing the authorization has been stipulated and the process forest areas, (v) applicability of cost-benefit analysis, and (vi) has been strengthened. parameters for evaluation of loss of forests. , For transporting, the linkages with the Motor Vehicles Act, 1988 and additional requirements have been included. MoEF has published the Consolidated Guidelines for Diversion of Forest Land under the Forest (Conservation) Act, 1980, which The list of processes generating hazardous wastes has been further clearly specifies (i) the type of projects that come under the purview elaborated. These include cleaning of barrels which have held of the Forest Conservation Act, (ii) the procedures & guidelines for chemical substance, purification process for air / water, waste the afforestation treatment processes, performance of vehicle maintenance / repair work and all actions related to lubricating / system oil. A-xii Annexure –II Legal Requirements 1.8 COASTAL REGULATION ZONE (CRZ) MANUFACTURE, STORAGE AND IMPORT OF 1.9 NOTIFICATION, DECEMBER 1990 (AS AMENDED HAZARDOUS CHEMICAL (MSIHC) RULES, 1989 IN JUNE 1997 AND 2001). AND MSIHC (AMENDMENT) DRAFT RULES, 1999 MSIHC Rules were introduced within the framework of the The CRZ notification aims to protect environmental damages along Environment Protection Act, 1986 and aims to address the coastal areas and prohibits a range of activities within the coastal environmental issues related to the hazardous chemicals. These rules regulation zone (CRZ). Under these notifications, CRZ are defined were further amended in the year, 19 Given that these Rules deal as the areas located between Low Tide line and 500 m from High with hazardous chemicals, they also have significance from the Tide line. Rules classifies the coastal zone into four categories – viewpoint of health and safety. These Rules define 684 hazardous CRZ I to CRZ IV – based on the type of the coastal stretch, and chemicals. Through a categorization based on the extent of severity specify the nature of activities allowed within each of these zones. of these hazardous chemicals, there are different requirements As per the CRZ notification, all coastal States and Union Territories placed for the manufacture, storage and import of hazardous chemicals. have prepared their respective Coastal Zone Management Plans (CZMPs) and this has been approved by the Central Government. It Under these rules, “the occupier” is required to provide the is then the States / Union Territories responsibility to regulate the concerned authorities, detailed note on planned facilities as per developmental activities as per the provisions of the approved format specified in Schedule -7 of these rules. In case, the occupier CZMPs and CRZ notifications. Therefore, any proposed project in requires storage of hazardous chemicals more than “threshold the coastal states would have to be cleared by the States or Union quantities” as specified under these rules, is required to provide Territories and it should be seen to be in line with their respective isolated storage to these chemicals. Also he is required to prepare CZMPs. It also includes guidelines for development activities On- Site emergency plan for the facility and submit to concerned whenever it is allowed. authorities. A-xiii Annexure –II Legal Requirements 1.10 CHEMICAL ACCIDENT (EMERGENCY PLANNING, 1.12 THE INSECTICIDES ACT, 1968 AND THE PREPAREDNESS AND RESPONSE) RULES, 1996 INSECTICIDE RULES, 1971 The Insecticides Act, 1968 regulates the import, manufacture, sale, The Rules compliment those on accident prevention in the MSIHC transport, distribution and use of insecticides with a view to prevent Rules. These rules define major accident hazard installations to risk to human beings or animals, and for matters connected there include industrial activity, transport and isolated storage at a site with. This Act empowers the Central Government to constitute a handling hazardous chemicals in quantities specified. To tackle Central Insecticides Board to advise the Central and State emergencies, these rules provide for a four-tier crisis management Governments on technical matters arising out of the administration set-up at the local, district, state and central level. Identified as of this Act. This Act also empowers to constitute a Registration Crisis Groups, the Central Crisis Group shall be the apex body in the Committee to register insecticides, formation Central Insecticides country to deal with and provide expert guidance for planning and Laboratory and appointment of Insecticide Inspectors to check handling of major chemical accidents. The list of hazardous and above said activities of the board. The act empowers central toxic chemicals, their threshold quantities and associated government to regulate the production and use of insecticide in classifications are same as those given in the MSIHC Rules, 1989. country. Recently Central government under this act has banned use of pesticides which are proposed to phase out under POP convention. 1.11 PUBLIC LIABILITY INSURANCE ACT, 1991 The Insecticide Rules, 1971 addresses the functions of the Board, This Act requires for providing immediate relief to non - workmen Registration Committee, Laboratory, and packing and labelling of or damage to property from an accident occurring while handling insecticides, and provisions regarding protective clothing, specified hazardous substances. For this purpose, the Act requires equipment and other facilities for workers during manufacture, that an insurance policy needs to be undertaken for the purposes of formulations, transport, distribution and application. providing relief. The act also, stipulates provision for environmental relief fund, which may be used for providing funds for relief of the affected people / property, in case of an accident. The owner is required to contribute to this fund based on investments in the facility. A-xiv Annexure –II Legal Requirements Of the several rules are listed as legal requirements and some of 1.13 FACTORIES ACT, 1948, FACTORIES RULES, them include health & safety provisions. These are as follows: FACTORIES (AMENDMENT) ACT, 1987 AND issuance of health & safety guidelines by the Chief Inspector, duties MODEL RULES of a certifying surgeon, disposal of trade wastes and effluents, level The Factories Act 1948 is a Central enactment applicable of humidification allowed, illumination requirements, provision of throughout the country and is enforced by the State Governments. civic amenities, safety precautions related to specific type of While this Act was developed with the factory worker as a focus, equipment, protection of eyes, safety committee, duties of the safety there are several health and safety issues addressed in this legislation officer, fire protection equipment required, interlocking as a part of its chapters. Under this act there are three important arrangements, health and safety policy, information dissemination schedules that are frequently referred in the context of health and and disclosure, occupational health centers, decontamination safety requirements. These are as follows: facilities, first aid appliances, ambulance room establishment, special provisions related to dangerous operations that involve high , The First Schedule containing the list of industries involving noise level, notification of accidents dangerous occurrences, and hazardous processes including SMEs like foundries, metallurgical, maintaining a register of the same. tanneries, chemicals, etc. , The Second Schedule enlisting permissible levels of certain Following the Bhopal disaster, extensive amendments were made to chemical substances (117 of them) in the work environment the Factories Act and the Factories (Amendment) Act, 1987 was , The Third Schedule enlists the list of notifiable diseases released. All of these amendments was directed towards ensuring that there was full and informed co-operation between the To assist in the implementation of the requirements of the Factories employers and the workers in ensuring occupational health and Act, 1948, Rules have been developed. The powers of making rules safety. Some of the salient features of the amendments made in 1987 under the Act are vested in the State Governments, as they are the include the following: enforcing authority. While each of the States have developed their own rules, a typical set of rules is described here with the aid of the , Duties of the occupier to ensure health and safety of the workers Delhi Factories Rules, 1950. were defined. , A health and safety policy was mandated. A-xv Annexure –II Legal Requirements , The term ‘hazardous processes’ was included in the Act and , Issue of guidelines and instructions by the Chief Inspector as per stricter requirements were imposed on the commencement of these the need, and the occupier’s responsibility to maintain records processes. evidencing the follow-up to these guidelines. , An emergency and disaster control management plan for a , Establishment of a safety committee and their conduct hazardous installation was made a requirement. , Site Appraisal committee and their functioning. In the prescribed , Promotion of participants of workers and cooperation between site suitability application, the proponent needs to furnish data workers and management in maintaining safety and health in a related to the various processes and the occupational health and work place through the constitution of a safety committee was safety issues associated with the same. required. , Establishment of a health and safety policy , Powers of the Inspectors and the severity of the penalties were , Collection, development and dissemination of information in the both enhanced. form of Material Safety Data Sheets. , Disclosure of information to the workers in factories carrying on a With the amendment of the Act, it was the responsibility of the hazardous process and undertaking a review of the same annually. , Disclosure of information to the general public when hazardous respective State Governments to elaborate its provisions through processes is involved. developing State-specific Rules. However, to ensure consistency , Disclosures of information to the local authority, district and uniformity in the making of Rules by the State Governments, emergency authority and the chief inspector when hazardous the Ministry of Labor prepared “Model Rules”, so that they could be processes is involved. the basis for establishing the State Rules. However, the Delhi , Formulation and submission of an emergency plan and a disaster Factories Rules described as a typical example incorporates these control and management plan when carrying on a hazardous Model Rules. In general, these Model Rules are available to industry process. for them to proactively act in advance of the notifications that are , Maintenance and submission of information on industrial wastes. likely in their states of operation. The main features of the Model , If the disclosure information is found to be confidential by the Rules that have been prescribed for modifications are described here: occupier, then the need to bring it to the notice of the Chief Inspector. , Facets regarding who is a competent person to carry tests, , Medical examination, its scope and periodicity examination and others in connection with safety and health issues. , Establishment of occupational health centers and its facilities. , Ambulance van and the equipment therein. A-xvi Annexure –II Legal Requirements , Decontamination facilities that are required wherever there are , The port authority within the limits of any port. hazardous processes , Work relating to selling of crackers and fireworks in shops with , Ensuring availability of health records to the workers temporary licenses , Qualification requirements of supervisors for hazardous processes. In any workshop wherein any of the following processes is carried on.1.14 CHILD LABOUR (PROHIBITION AND , Beedi making REGULATION) ACT, 1986 , Carpet Weaving , Cement manufacture including bagging of cement. It defines a child as "a person who has not completed their , Cloth printing, dyeing and weaving. fourteenth year of age”. It does not prohibit child labor per se but it , Manufacture of matches, explosive and fire works. prohibits the engagement of children in certain employment’s and to , Mica cutting and splitting. , Shellac manufacture regulate the conditions of work or children in certain other , Soap manufacture employments. It regulates the hours and conditions of work for , Tanning. child labourers, and prohibits the employment of children in twenty- , Wool cleaning five hazardous industries. , Building and construction industry , Manufacture of slate pencils (including packing) , No child shall be employed or permitted to work in any of the , Manufacture of products of agate following occupations: , Manufacturing processes using toxic metals and substances such , Transport of passengers, goods; or mails by railway as lead, mercury, manganese, chromium, cadmium, benzene, , Cinder picking, clearing of an ash pit or building operation in the pesticides and asbestos railway premise. , Work in a catering establishment at a railway station, involving No child shall be required or permitted to work in any establishment the movement of vendor or any other employee of the in excess of number of hours prescribed. A period of work on each establishment from one platform to another or into or out of a day shall not exceed there hours and no child shall work for more moving train. than three hours before he has had an interval for rest for at least one , Work relating to the construction of railway station or with any hour. No child shall be permitted or required to work between 7 P.m. other work where such work is done in close proximity to or and 8 a.m. between the railway lines. A-xvii Annexure –II Legal Requirements MINIMUM WAGES ACT, 1948 1.16 No child shall be required or permitted to work overtime. The appropriate government shall fix the minimum rates pf wages Violations shall be punishable with imprisonment which shall not be payable to employees employed in a scheduled employment. It will less than three months which may extend to one year or with fine review at such intervals not exceeding five years, the minimum rates which shall not be less than ten thousand rupees but which may of wages so fixed and revise the minimum rates if necessary. The extend to twenty thousand rupees or with both. Any other violations minimum rates of wages may be fixed as a minimum time rate or a under the Act shall be punishable with simple imprisonment, which minimum piece rate or as a guaranteed time rate. It will be applied may extend to one month or with fine, which may extend to ten to all scheduled employments in respect of which minimum rates of thousand rupees or with both. wages have been fixed under this act. Any employer who contravenes any of the provisions of this Act or any order made 1.15 BONDED LABOUR SYSTEM (ABOLITION) ACT, there under shall be punishable with fine, which may extend to 1976 Rs.500. The Bonded Labour System (Abolition) Act purports to abolish all 1.17 WORK MEN’S COMPENSATION ACT 1923 debt agreements and obligations arising out of India's longstanding The act specifies the employer's liability for compensation to the bonded labor system. It is the legislative fulfillment of the Indian employee in the following situations. – Constitution's mandate against begar and forced labor. It frees all , a) If personal injury is caused to a workman by accident arising bonded laborers, cancels any outstanding debts against them, out of and in the course of his employment, his employer shall be prohibits the creation of new bondage agreements, and orders the liable to pay compensation in accordance with the provisions economic rehabilitation of freed bonded laborers by the state. It also Provided that the employer shall not be so liable – criminalizes all post-act attempts to compel a person to engage in (a) in respect of any injury which does not result in the total or bonded labor, with maximum penalties of three years in prison and a partial disablement of the workman for a period exceeding three 2,000 rupee fine. days; A-xviii Annexure –II Legal Requirements (b) in respect of any injury, not resulting in death or permanent If a workman employed in any employment specified in Part C of total disablement, caused by an accident which is directly Schedule contracts any occupational disease peculiar to that attributable to – employment, the contracting whereof is deemed to be an injury by (i) the workman having been at the time thereof under the accident within the meaning of this section, and such employment influence of drink or drugs, or was under more than one employer, all such employers shall be (ii) the willful disobedience of the workman to an order liable for the payment of the compensation in such proportion as the expressly given, or to a rule expressly framed, for the purpose of Commissioner may, in the circumstances, deem just. securing the safety of workmen, or (iii) the willful removal or disregard by the workman of any safety guard or other device which he knew to have been provided for the purpose of securing the safety of workmen, If a workman employed in any employment specified in Schedule contracts any disease specified therein as an occupational disease peculiar to that employment, or if a workman, whilst in the service of an employer in whose service he has been employed for a continuous period of not less than six months (which period shall not include a period of service under any other employer in the same kind of employment) in any employment specified in Part B of Schedule , contracts any disease specified therein as an occupational disease peculiar to that employment, the contracting of the disease shall be deemed to be an injury by accident within the meaning of this section and, unless the contrary is proved, the accident shall be deemed to have arisen out of, and in the course of, the employment is liable for compensation by the employer A-xix Annexure –II Legal Requirements 2.2 POLICY ON FORCE LABOUR & CHILD LABOR 2.0 WORLD BANK’S E&S SAFEGUARDS The Bank do not supports any project which involves forced labour 2.1 OP 4.01 ENVIRONMENTAL ASSESSMENT. or harmful child labour. Forced labour and child labour for this purpose are defined as follows. The World Bank requires all projects to undergo an environmental , Forced Laborconsists of all work or service, not voluntarily assessment process, however the depth and type of analysis required performed, that is exacted from an individual under threat of force in based on nature, scale and potential environmental impacts or penalty. associated with the project. The extent of environmental and social , Harmful Child Labor consists of the employment of children that is economically exploitative, or is likely to be hazardous to, or investigation required is determined at the screening stage. For interfere with, the child’s education, or to be harmful to the child’s example Category A projects requires detailed Environmental health, or physical, mental, spiritual, moral, or social development. Impact Assessment as per specified Table of Content for EA report (refer Annex B of OP.4.01), where as, no further EA action is The Bank also requires the project sponsor to comply with the host required beyond screening, for category C projects. Also for country’s core labor standards and related treaties ratified by that category A projects, the sponsor is required to retain an independent country. environmental expert to carry out EA for the proposed facility. 2.2.1 OP 4.20 INDIGENOUS PEOPLE The Bank advices the project sponsor for EA requirements. If EA partly / wholly completed before the Bank’s involvement then, Indigenous people describe the social groups with a social and environmental & social experts of the bank review the report to cultural identity distinct from the dominant society that makes them ensure it’s consistency to the Bank’s environmental and social vulnerable to being disadvantageous in the development process. policies. Sometimes, they require additional EA work including This directive provides the policy guideline to ensure that public consultation and disclosure. indigenous people are benefited from development projects and to avoid potentially adverse effects on indigenous people caused by the project. A-xx Annexure –II Legal Requirements 2.3 OP 4.04 NATURAL HABITAT 2.5 OP 4.09 PEST MANAGEMENT This policy stipulates the conservation of natural habitat in all World Bank supports a strategy to promote the use of biological or projects assisted by the World Bank Group. The bank does not environmental control measures and reduces reliance on synthetic support any project involving the significant conversion of natural chemical pesticides. The Bank requires project sponsor to select habitats unless there is no feasible alternatives for the project and its pesticides based on WHO recommended Classification of pesticides siting. by Hazard and Guidelines to Classification. The selected pesticide should fulfil the following criteria , Should have negligible adverse effect on human health 2.3.1 OD 4.12 INVOLUNTARY RESETTLEMENT , Proved to be effective against the target species. , Must have minimal effect on non-target species and the natural The directive provides the procedures and guidelines that borrower environment. are expected to meet in operations involving involuntary , Their use must take into account the need to prevent the resettlement. development of resistance in pests. 2.4 OP 4.36 FORESTRY 2.6 OP 4.11 CULTURAL PROPERTY World Bank ensures that all supported projects, do not have adverse The World Bank policy regarding cultural properties is to assist in impacts on the forested areas. The bank does not finance any their preservation. The bank normally rejects proposals that will commercial logging operation or purchase of logging equipment for significantly damage non-replicable cultural property, and will assist use in tropical moist forest. The bank involvement in forest sector is only those projects that are sited or designed so as to prevent such conditional on the project sponsor’s commitment to undertake damage. The bank requires detailed investigation scientific study by sustainable management and conservation – oriented forestry. the project sponsor, for any such property encountered in the project. The project proponent is required to internalis all costs, including training and strengthening of institutions involved in perseverance of nation’s cultural property, to the over all project costs. A-xxi Annexure –II Legal Requirements environmental assessment are identified by environment and social 2.7 IFC’S ENVIRONMENT & SOCIAL REVIEW specialists appointed by IFC. Normally IFC requires the project PROCEDURE sponsor to retain an advisory panel of independent, internationally International Finance Corporation, a private sector lending arm of recognized environmental and social specialists to advice on all The World Bank Group conducts detailed environmental and social aspects of the project relevant to the EA, including during project review of the projects as apart of project appraisal process. implementation. During the environmental and social appraisal Environmental and social review outlines the process by which, IFC process, IFC works with the project sponsor to enhance project determines the adequacy of the project sponsor's environmental benefits or correct any deficiencies. assessment for a proposed project and works with the project sponsor to address environmental and social issues and opportunities After completion of appraisal, IFC hold an Investment Review associated with the project. The purpose of the environmental and Meeting (IRM) to review recommendations for environmental and social review is to ensure that the project complies with applicable social initiatives to be under taken by project sponsor during IFC environmental and social polices and meets the host nation’s implementation and operational phase of the project. Investment environmental and social legal requirements. IFC’s environmental department prepares a Summary of Project Information (SPI) and is and social review procedure involves following steps. disclosed to the public through the bank’s info shop. Project Screening Environmental and Social Clearance Memorandum The purpose of project screening is to decide on the extent of Upon the satisfaction, that the project can comply with applicable environmental assessment required for the project. At this stage, IFC policies and meet the guideline, the environmental division based on project data sheets (PDS) provided by proponent, the issues the environmental and social clearance memorandum to the project is categorised in environmental review categories i.e A, B, C investment department. The ESCM clears the project for Boards and FI. consideration. Project Appraisal Project sponsor is required to submit environmental and social information to IFC as required under the specific category. During project appraisal stage, data gaps or other deficiencies in A-xxii Annexure –II Legal Requirements , Commercial logging operations or the purchase of logging Board Approval equipment for use in Primary tropical moist forest On the basis of IRM and ESCB, the board takes the decision for , Production or trade in products containing PCBs investment in the project. , Production or trade in pharmaceuticals subject to international phase outs or bans Investment Agreement , Production or trade in pesticides/herbicides subject to international After project approval, the investment officer, in consultation with phase outs or bans the lawyer and environmental and social development specialists, , Production or trade in ozone depleting substances subject to ensures that environmental and social requirements are reflected in international phase out the IFC legal documentation for the project. The investment , Drift net fishing in the marine environment using nets in excess of agreement contains covenants which require the project company to 2.5 km. in length. comply with IFC and host country requirements. 2.8 IFC’S EXCLUSIONARY LIST IFC does not finance the following projects: , Production or activities involving harmful or exploitative forms of forced labor1/harmful child labor2. , Production or trade in any product or activity deemed illegal under host country laws or regulations or international conventions and agreements. , Production or trade in weapons and munitions. , Production or trade in alcoholic beverages (excluding beer and wine).3 , Production or trade in tobacco , Gambling, casinos and equivalent enterprises , Trade in wildlife or wildlife products regulated under CITES , Production or trade in radioactive materials , Production or trade in or use of unbonded asbestos fibers A-xxiii Annexure –II Legal Requirements ANNEXURE –III: SIDBI’S REQUIREMENT AND RELEVANT REFERENCES A-xxiv Annexure –III SIDBI’s requirements and relevant references SIDBI’S REQUIREMENT AND RELEVANT REFERENCES S.SIDBI Requirement SIDBI Reference World Bank GOI Reference No Reference 1 SME’s financed by SIDBI, are required to comply with Indian PFD Circular No 17 / environmental and labour legislations. 1998 – 1999 , Detailed Appraisal Note 2 SIDBI monitors the progress of compliance of environmental and PFD Circular No 17 / labour legislations after financing during project implementation and 1998 – 1999, Site visit operational stages. report 3 SIDBI does not finance production or trade in ozone depleting PFD Circular No: 36/ The ODS (Regulation substances (ODS) subject to international phase out. 2000 - 2001 & Control) Rules, 2000. 4 SIDBI does not finance production or activities involving harmful or IFC – Annex Child Labour (P&R) exploitative form of child labor or forced labor A, Act 1986. exclusionary Bonded Labor System criteria (abolition) Act, 1976. 5 SIDBI encourages projects based on fly ash products. PFD Circular No. 37 / 2002 - 2003 6 Loss of Land / source of income/ livelihood, impact on community OP 4.10, OP Land Acquisition Act, and cultural property resources, safeguard of tribal / marginalized and 4.11, OP 4.12 1894. vulnerable groups are not applicable for direct financing SMEs. However during consortium funding of infrastructure projects, the requirements of lead member institution cover this issue. 7 SIDBI requires that environmental assessment has been carried out by OP 4.01 EIA Notification, the promoter, if the project falls under the list of specified industries 1994. covered under Environment Impact Assessment notification, 1994 of A-xxv Annexure –III SIDBI’s requirements and relevant references S.SIDBI Requirement SIDBI Reference World Bank GOI Reference No Reference MOEF. 8 SIDBI will not finance production or trade in pesticides/herbicides IFC – Annex The Insecticide Act, subject to international phase outs or bans as agreed by GOI based on A, 1968. Stockholm convention. exclusionary criteria 9 SIDBI in its lending to SME’s will not finance the following; IFC – Annex The Wild life Production or trade in any product or activity deemed illegal under Indian A, protection Act, 1972. laws or regulations or international conventions and agreements. exclusionary The Forest Production or trade in weapons and munitions. criteria (Conservation) Act, Production or trade in alcoholic beverages (excluding beer and wine). 1980 Production or trade in tobacco. Gambling, casinos and equivalent enterprises. Trade in wildlife or wildlife products regulated under CITES. Production or trade in radioactive materials. Production or trade in or use of unbounded asbestos fibers. Commercial logging operations or the purchase of logging equipment for use in primary tropical moist forest (prohibited by the Forestry policy). Production or trade in products containing PCBs. Production or trade in pharmaceuticals subject to international phase outs or bans. Drift net fishing in the marine environment using nets in excess of 2.5 km. in length. 10 SIDBI requires that for projects involving pest management, the OP 4.09 promoter has capacity to promote and support safe, effective and environmentally sound pest management programs. 11 Participating banks taking refinance from SIDBI under this line of A-xxvi Annexure –III SIDBI’s requirements and relevant references S.SIDBI Requirement SIDBI Reference World Bank GOI Reference No Reference credit, will be required to adhere to the above requirements. Environmental and Social Indicators would be reflected as a part of periodic audit reports, to be carried out at regular intervals. 12 All SIDBI’s Credit scoring tools would incorporate environmental & social parameters. A-xxvii Annexure –IV SIDBI’s Project Cycle ANNEXURE –IV : SIDBI’S PROJECT CYCLE A-xxviii Annexure –IV SIDBI’s Project Cycle SIDBI’S PROJECT CYCLE STEP PROCESS OUTPUT 1. PROJECT SCREENING Initial customer Discussions with borrower to assess the eligibility of project based on SIDBI lending Decision on whether or not request policies. Check against exclusionary list. to proceed further with loan processing Issue Loan Application form Receive project Receive Loan Application form Collation of necessary information details/ documents on loan Check for provision of complete information & documentation proposal Follow up for gaps (if any) PROJECT APPRAISAL Appraise loan Desk review and assessment of, Loan Appraisal Report with , creditworthiness of borrower proposal decision to , financial rate of return accept proposal as , financial structure submitted , project/ borrower/ other risks accept with modifications reject Site investigation if necessary, to assess, , suitability of site , availability of inputs , access to market , technical and engineering designs , implementation as per stated designs , construction, operation and maintenance arrangements. A-xxix Annexure –IV SIDBI’s Project Cycle STEP PROCESS OUTPUT Decide whether or not to proceed with preparation of loan appraisal report. Modifications (if any) made to structure of proposal, in consultation with borrower Complete Loan Appraisal report LOAN SANCTION/ DISBURSEMENT Approvals from Appraisal report tabled for review to Credit Committee Approval obtained for the appropriate project. authority Modifications made/ Clarifications sought based on observations of Credit Committee Discuss pre-Letter of Intent terms (if any) with borrower and ensure compliance with the same. Complete pre-Issue Letter of Intent to borrower. Letter of Intent issued disbursement Discuss terms of Loan Agreement for the proposal , interest rate formalities for Loan Agreement signed , repayment schedule loan , security/ guarantees , other loan conditions Finalise & sign loan agreement Ensure compliance with pre-disbursement conditions including legalities relating to creation of security. Disbursement of Disburse first instalment of loan First instalment disbursed A-xxx Annexure –IV SIDBI’s Project Cycle STEP PROCESS OUTPUT loan 4. PROJECT MONITORING, AUDIT & RECOVERY Ensure Obtain progress reports from customers (quarterly during project implementation and half-Quarterly progress reports conformity to yearly on commencement of operations) standards during construction, Field visits by credit officer operation and maintenance Prepare quarterly progress reports as per formats. Review for any change in industry/ market/ regulatory environment. Ensure Disburse subsequent instalments Project Completion Report compliance to loan Obtain Project completion report from borrower disbursement conditions Audit project Audit project with the help of external/ corporate consultants Audit report Audits in Enforce loan recovery mechanism (if required) in case of default. Recovery of payments repayment of loan A-xxxi Annexure –V Risk Classification ANNEXURE –V : E&S RISK CLASSIFICATION A-xxxii Annexure –V Risk Classification , Rolling & pickling units CATEGORY E-I [HIGH POLLUTION POTENTIAL] , Tanneries , Textile (Dying & printing units only) This category corresponds to the ‘Red Category’ industries , Projects involving rehabilitation and relocation of indigenous designated by pollution control boards, because some of the people. processes in these industries are hazardous in nature. Installation of adequate pollution control equipment or access to a common CATEGORY E-II [MEDIUM POLLUTION POTENTIAL] treatment system is a necessity of these industries as their environmental impacts of their processes pose a significant risk to These categories of projects are in concurrence with Orange the local community. The environmental performance requirements category of MoEF as specified in Doon valley notification. These for these industries under Indian legislations are relatively stringent. industries have relatively less environmental impact as compared to Some of these industries such as Pesticides, dye and dye E-I industries, however they may pose significant environmental intermediate, etc. requires clearance from MoEF and thus have to risks, if located in sensitive ecological areas. The following sectors conduct Environmental Impact assessment (EIA). Also owing to are included in this category. high pollution load, cost of pollution control equipment, to meet the regulatory requirements is higher for these industries. This category , Dairy & dairy products includes the following sectors. , Edible oil & Vanaspati , Glass , Auto ancillary units involving metal surface treatment and , Ceramics electroplating of vehicle parts , Meat & fish processing / Slaughter house. , Chemical manufacturing (organic & inorganic) , Rice mil / Dal mill / flour mill , Cosmetic products involving use of aerosols. , Rubber (type manufacturing / re-trading units) , Cement Plant , Stone crushers. , Dye & Dye intermediates. , Health care establishments , Foundry. , Paper & paper board , Paint & varnishes , Plastic moulding , Pesticides / insecticides , Refractory , Pharmaceuticals , Wood & wood products. A-xxxiii Annexure –V Risk Classification , Hotel & resorts , Leather Products (without leather treatment). The Environmental impacts of these sectors are dependent on , Service sector industries location of the industry. The credit officer is required to appraise the , Garments & apparel manufacturing ( not including dying & project proposal in conjunction to the proposed site of unit and printing operations ) decide on appropriate Risk Management measures as described in the Risk Management Plan (refer section 7.0). Some of the Since SIDBI is expanding its sectoral SME portfolio, some of the deviations in the process flow for category E-II sectors are industries financed may not be a part of above sectors. Under these , E-II Greenfield, refers to those projects under category e-II, circumstances the concerned officer is required to assess the which are proposed to be established as “a new facility” pollution potential of the prospective industry in light of relevant (Greenfield) and not an extension / acquisition of any existing unit. applicable environmental legal provisions and Red, Orange and , E-II projects located in non- industrial areas, refer to those units Green category notification by SPCBs and Doon valley notification. which are not located on any notified industrial areas. The officer would also need to communicate this to the central credit department, to facilitate updation of the classification. CATEGORY E-III [LOW POLLUTION POTENTIAL] The environmental legislation of the country is constantly evolving This category includes all those industries, which do not pose and MoEF through various notifications in gazetteer updates the significant environmental risk as they do no contaminate Acts and corresponding rules. Accordingly, necessary modifications environment or have acceptable levels of discharges. This category and updation procedures to the E&S risk classification system is part of industries is in concurrence to green industries as specified by of this framework. . MoEF and pollution control board. The E-III category includes the following sectors: , Agro products , Cement / concrete products , Electronic & electrical industry A-xxxiv