IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because the specific environmental and social impacts that may result can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical and environmental/social information submitted by the project sponsor, and field visits by IFC staff to representative operations of L&T. Because the new investment will be a corporate loan, key issues reviewed during appraisal involved the following: - effectiveness of the environmental and social management systems established within L&T; and - ability of the L&T organization to ensure compliance with applicable host country regulatory requirements and applicable World Bank environmental and social policies and guidelines. IFC’s appraisal reviewed the company's procedures for evaluating environmental and social aspects of projects in which it invests or performs services. The ongoing environmental and social performance of L&T's existing cement and other assets were also reviewed as part of appraisal. IFC additionally sought to identify opportunities to further the sustainable development aspects of the company’s activities.

The company has presented plans and supporting information which confirms that its operations will, upon implementation of the specific agreed measures, comply with the environmental and social requirements - host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential impacts will be addressed by the sponsor is summarized in the paragraphs that follow. Further information is provided in the attached Corrective Action Plan. - Environmental, Social, Health and Safety Management Systems L&T's Corporate Center plays an activist role in managing the diverse business portfolio. The center focuses on setting the overall company direction, including environmental and social practices, building capabilities, and harnessing synergy across the operating divisions. L&T has demonstrated a strong commitment to high standards of environmental health and safety performance in each of its operating divisions. Five operating divisions examined by IFC (Cement, E&C, ECC, Heavy Engineering, and EBG) have achieved ISO 9001 certification; four have achieved ISO 14001 certification and three have achieved OHSAS 18001 certification. The standard operating procedures that are applied to the business of each operating division have been developed in accordance with these international management systems standards. In addition, all divisions have adopted some form of quality management system such as Total Production Management and Six Sigma to engage its employees in achieving high standards of efficiency in production and operations. This performance commitment extends throughout the company’s operations, e.g., each of the company’s cement plants and many of its major construction projects have achieved ISO 9001 certification. L&T plans to complete the certification of all divisions with all three of these ISO standards by 2005. The company will prepare a master plan and schedule for accomplishing full certification, as described in the attached CAP. - Environmental and Social Performance of Existing Activities IFC staff initially met with operating division-level safety, quality assurance and management systems managers, and followed-up with field visits by IFC staff to representative operations of L&T. Operations visited included the company’s heavy manufacturing plants at Powai and Hazira, several cement plants including a plant operated by an L&T subsidiary, and a large-scale civil construction project. Overall, the appraisal found generally effective implementation of corporate and operation-specific environmental and social programs and substantial compliance with applicable regulations. While L&T’s commitment is commendable, there appears room for improvement at the corporate as well as at the operations level, as some corporate goals could be realized more consistently in practice. At the corporate level, the company would benefit from empowering a senior officer with management responsibility over all divisions to ensure the uniform formulation and implementation of environmental, health and safety policies and procedures within all divisions. For example, the application of the company’s official “Health Safety and Environment Rules for Contractors” should be more uniformly applied to all contractor employees at each of its plants. Similarly, every plant should comply with the guidelines for atmospheric emissions and workplace air quality established by the World Bank Group. To the extent that the company has sought ISO certification and implemented systems of quality production management, it has committed itself to continuous improvement in meeting international standards of performance. A senior manager responsible for ensuring such performance would help the company coordinate the setting of performance benchmarks and formulating detailed strategies of how that performance will be achieved. L&T has agreed, as a condition of disbursement of IFC funds, to designate a member of senior management with this authority and responsibility. - Employee Benefits, Training, and Performance Programs L&T places a high priority on professional development and education. Human resources initiatives include an employee stock ownership program (ESOP), a succession plan for its senior executives, and a comprehensive career development plan for its professional staff. Its management development center at Lonavala has facilities to run multiple training programs simultaneously and is available to all operating divisions. As a means to ensure qualified staff in the future, L&T Institute of Technology at Powai conducts four-year industry-integrated diploma courses exclusively for the children of L&T employees. L&T has full-fledged medical clinics at its major works and factories, which are available to all employees and their families. As noted below, the company also makes these facilities available to the community in the event of emergencies and accidents. - Employee and Community Welfare Promotion of employee and stakeholder welfare is a fundamental operating principle of L&T. Employees enjoy generous health, education, job training and counseling benefits at all levels of the company’s operations. The company has established medical units at each of its factories and major construction sites that provide comprehensive preventative and curative health services to staff as well as contract personnel and their families. In areas where available health services are limited or beyond the means of individuals, the company extends its own health services to surrounding communities as it does through its flagship Community Health Centre at Mumbai. Under the supervision of its Medical and Health Services Department at Powai, L&T sponsors a wide range of public health awareness programs targeting tuberculosis, hepatitis, family planning and HIV/AIDS in and around its factories and construction sites. These efforts are typically coordinated with local health officials to ensure replication to a wider community. L&T also sponsors mobile clinics to provide curative health services to the communities surrounding its factories on a regular and continuous basis. All L&T facilities, factories and construction projects that have resulted in the displacement of communities or the acquisition of private land offer employment to members of each affected household in addition to the established standards of land and lost asset compensation. In so doing, the company extends its employee benefits to a wider community of people who, especially in more remote areas of the country, would have no alternative employment or access to such services. The company also employs local service contractors to the extent possible thereby extending the economic benefits of its operations to a wider local community. L&T supports an innovative development program in the communities that surround its cement plants. The company’s VIKAS – Village Improvement Know-how and Skills – program provides a wide range of assistance in the areas of health, education, infrastructure, and enterprise development. From its own account and by leveraging existing government welfare and development programs, the management of each cement plant sponsors efforts in adult literacy and numeracy, the operation of nursery schools, mobile clinics and vaccination camps, vocational skills training for women, road improvements and the construction of irrigation systems. L&T is one of India’s leading proponents of corporate social responsibility and it has received national and international recognition of its efforts. The Company was among the first in India to realize the potential impact of HIV/AIDS in the country and it has pioneered awareness raising and prevention efforts among its employees. While these efforts have had significant impact, they should be more uniformly applied across all L&T’s operating divisions. The company’s efforts could likely have a more far reaching effect if it targeted the most vulnerable segments of their workforce, including construction laborers and transport workers. - Going Forward L&T engages in a broad range of activities in which its ability to control or influence environmental, social and health and safety outcomes varies widely. The company’s policy is to fully comply with all contractual requirements as well as all applicable statutory and regulatory requirements in the countries in which it operates. As part of an investment by IFC, L&T has agreed to develop and maintain procedures, benchmarked on World Bank Group policies and guidelines, for environmental and social screening of new projects. L&T will also ensure that the legal and other requirements that it applies to its activities are expanded to include World Bank Group policies and guidelines as well other international environmental, social and labor standards. The company will exercise its corporate power to the extent possible to ensure that the environmental, social and health and safety management systems and practices on its projects are consistent with the World Bank Group’s environmental and social policies and guidelines.

The attached Corrective Action Plan (CAP) provides further details of environmental and social mitigation agreed.

Accordingly, IFC concludes that the proposed investments will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures in the attached Corrective Action Plan.

IFC will evaluate the Company's compliance with the applicable environmental and social requirements during the lifetime of the IFC investment by reviewing the annual monitoring reports (AMRs) prepared for this purpose covering the results of new project screening conducted during the reporting period, the status of implementation of measures contained in the Corrective Action Plan, and ongoing performance existing operations. Site supervision visits will also be conducted.