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 corporate loan facility is a category B project according to IFC’s environment and social review procedure. In general, the focus of IFC’s environmental and social due diligence for corporate facilities such as this is to assess the capacity of the corporate sponsor to identify, assess, and manage environmental and social issues in compliance with IFC’s requirements. In that regard, the environmental and social issues associated with this project include the following: ???Corporate environmental, health, and social management system. Does Cairn have in place a corporate environmental, health, and social management system (EMS) which has the full support of management? ??????????????????????????????????????????????Compliance with applicable World Bank Group (WBG) and national standards. Does the EMS ensure compliance, in Cairn’s ongoing operations in South Asia, with applicable World Bank Group and national environmental and social standards, including IFC’s environmental and social safeguard policies? - New activities. Does the EMS have the capacity to identify and manage potential environmental, health and social impacts that may result from new operations and manage such impacts in accordance with applicable WBG and national environmental and social requirements?

IFC’s assessment of these issues entailed a desk review of the Cairn Energy EMS, Cairn’s annual sustainability report, interviews with Cairn staff, and visits to production sites at Ravva in Andhra Pradesh State, India, and Suvali in Gujarat State, India. IFC’s review also tried to identify opportunities for addressing relevant environmental and social issues that may go beyond the applicable WBG and national requirements. The results of IFC’s review are outlined in the paragraphs that follow. - Environmental Management System. Cairn has Group HSE, Security & CSR Policies in place and a Group HSE Management System that provides corporate-wide guidance on health, safety and environment, (HSE) matters, and which provides a template to be adapted to address the specific requirements of each exploration or production facility. Additionally Cairn has in India an Environmental Management System that uses the international standard ISO 14001 as the framework. Cairn is currently in the process of rolling out and raising awareness of the requirements of this Environmental Management System and will then consider whether to acquire ISO 14001 certification for its Indian operations. Cairn has also authorized periodic audits of the application of its’ HSE Management System on the Ravva Field in India according to the ISRS standard, and has showed continuous improvement from level 3 to level 8, out of a possible score of 10. The HSE Management System requirements apply not only to Cairn employees, but to contractors. HSE requirements are included as part of all contractor bid packages, and contractors who do not have the capacity to comply with these requirements are not considered. - Corporate commitment. The Group HSE, Security & CSR Policies and Group HSE Management System have been approved by the Chief Executive, on behalf of the Board and senior management. With regard to implementation, line management is held responsible and accountable for HSE and social performance. Cairn has a hierarchy of committees through which HSE and social policies, practices and performance are regularly reviewed and where necessary, actions are passed on to line management to implement. HSE and social impacts are also considered as part of the business risk management process and regularly reviewed by the Board and its’ Risk Management Sub Committee. In India, the HSE Leadership Committee, which is composed of the senior management team and key managers across the assets, and each Asset HSE Committee meet monthly to review HSE issues. Each manager is required as part of performance goals to participate in 4-5 HSE Managers Inspection Tours each year. Thus, each manager is exposed to the HSE issues and performance at all operating sites on a rotating basis. - Ensuring compliance. With regard to environmental compliance, Cairn’s performance in India is regulated by the central Ministry of Environment and Forests, which must approve permits for exploration and production activities, and the relevant state Pollution Control Board. Both agencies require periodic reporting on air emissions, effluent disposal, and other relevant parameters, as outlined in the attached table. Cairn is currently in compliance at all operations. In addition, in line with the goal of continuous improvement as articulated in its Group HSE Policy, Cairn has included targets for reduction of emissions beyond regulatory requirements. This program led to significant emissions reductions across all sites in India during 2002. Cairn’s environmental performance is well within the emissions limits in WBG guidelines for both onshore and offshore facilities. Cairn’s program of emissions reduction is detailed in the group sustainability report for 2002, which is attached to this ERS. - Risk-based employee health and safety. Cairn’s goal is zero lost time accidents across operations. In India the safety case methodology has been adopted in new developments, which identifies appropriate health and safety measures based on an analysis of health and safety risks involved across operations. - Community development activities at existing operations. Where it is the operator, Cairn has sponsored and funded activities to benefit local communities in the area, as outlined in the attached table. - Addressing environmental and social issues at Cairn’s onshore exploration block in Rajasthan. To date, Cairn’s activities in Rajasthan have been limited to seismic acquisition and the drilling of exploration and appraisal wells. In anticipation of greater activity, the company commissioned a social needs assessment to identify appropriate community interventions to ensure that benefits flow to local groups. At the same time, Cairn has contracted with a local NGO, the Society for Uplift in Rural Economy (SURE) to liaise with local villages and conduct community development activities, such as training local workers and assisting local craftsmen. As activities increase, Cairn plans to increase its sponsorship of community development activities. - Reporting. Cairn issues an annual sustainability report outlining its environmental, health, safety, and social development compliance activities and goals. The report for calendar year 2002 is attached and is also available on Cairn’s website. - Overall review of Cairn commitment and capacity. Cairn has demonstrated commitment to maintaining a high level of environmental and social performance. Cairn’s environmental monitoring program indicates that its operations are currently in compliance with WBG environmental, health and safety requirements. The EMS for its Indian operations and Cairn’s approach to holding line managers responsible for HSE and social issues, ensures accountability for performance on the ground. Cairn’s HSE staff is well qualified to provide expert input into the line management’s decisions regarding HSE performance. This indicates that going forward, Cairn has the capacity to meet WBG environmental, health and safety requirements in its new operations as well.

The following supporting documents provide further details of environmental and/or social issues. Cairn Energy Plc. Corporate environment, safety, and health policy Cairn Energy Plc. Corporate Social Responsibility policy “A Measure of Our Progress” – Cairn report on environment and social sustainability for calendar year 2002

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines.

IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering ongoing performance of project-specific environmental, health and safety and social activities. Periodic site supervision visits may also be conducted.