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. The mandated 30 day disclosure period commences from the date the ERS and SPI are made available to the local stakeholders or the date on which an announcement in a local and a national daily is made pertaining to public availability of the ERS and SPI, whichever is later.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result, which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted primarily of discussions with IAL management; an appraisal of technical, environmental, social and occupational safety and health information made available for review by the company; and a site visit to the IAL’s facilities at Jamshedpur in Jharkhand and at Pune in Maharashtra, India. The following potential environment, health and safety and social aspect of the operations were analyzed: - corporate environmental, social, and health and safety management systems; - national and local government permitting requirements; - source of power and energy, including fuel storage if applicable; - air emissions from existing and new sources during construction and operation; - ambient air quality and noise impacts on nearby receptors during construction and operation; - source and volumes of water consumed including efforts to minimize water use; - recycling and treatment of process effluent and domestic waste water; - hazardous materials management; - minimization, recycling and disposal of solid and hazardous wastes; - fire and life safety and emergency response; - occupational health and safety in construction and operation; - corporate social responsibility efforts, including HIV/AIDS awareness; and - timely reporting on environmental and social performance to IFC.

The sponsor has presented plans to address these impacts to ensure that the proposed project, upon implementation of the specific agreed measures, will comply with the environmental and social requirements - the 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 company is summarized in the paragraphs that follow. - Corporate environmental, social, and health and safety management systems: The company’s management team appears committed to embedding corporation-wide systems for management of environmental, social, occupational health and safety (ESHS) aspects associated with IAL’s operations. The company is in the process of implementing a certified ESHS management system based on ISO 14001 and OHSAS 18000 standards. A pre-certification audit has been undertaken by UL India Limited for IAL’s plant in Pune. The company is also in the process of implementing a similar ESHS management system at its RSB transmission plant in Pune and hopes to undergo a pre-certification audit by December 2005. In addition, the company has contracted a consultant to develop and implement an ESHS management system at the two IAL plants and one RSB transmission plant in Jamshedpur. The pre-certification audit of Jamshedpur facilities is expected to be completed by the end of January 2006. Although the company has a certifiable ESHS management system at the IAL plant in Pune, embedding of the system in work practices needs to be improved. Some of the areas for improvement are discussed hereunder. National and local government permitting requirements: IAL’s facilities have obtained relevant consents and authorizations under host country regulations. Since IAL also generates and handles hazardous waste including spent cutting oil, oil soaked rags; oil and paint drums, barrels and car buoys and oil containing burrs and chips, the company will apply for an authorization for handling these and hazardous wastes as well. IAL will make available for IFC’s review, any Environmental and Social Impact Assessment Studies and all environmental regulatory clearance documents for the proposed project at Chennai. - Source of power and energy, including fuel storage if applicable:  The principal source of power at IAL’s Jamshedpur facilities is grid electricity with standby diesel generator (DG) sets (Plant 1 - 2 x 500 KVA and 1 x 200 KVA; Plant 2 – 1 x 320 KVA and RSB – 2 x 500 KVA). At the Pune facilities the principal source of power is also grid electricity with stand-by DG sets (IAL – 1 x 200 KVA; RSB – 1 x 500 KVA and 2 x 380 KVA). At the Jamshedpur facilities, diesel is stored in drums without a secondary containment structure. At IAL’s Pune facilities, diesel is stored only in day tanks and procured from a fuel station across the road on an as-needed basis. The company will provide appropriate secondary containment structures around all fuel storage areas, store diesel at locations with low risk of fire incident and provide safety and fire prevention, detection and control facilities for fuels, including in loading and unloading areas. - Air emissions from existing and new sources: The principal point source of air emissions at IAL’s facilities are the standby DG sets. The company will modify the flue gas stacks to ensure compliance with emissions requirements. Sources of fugitive emissions are the paint booths and welding areas. While there is a general exhaust and ventilation system for plant sheds, IAL will install extraction and venting system for painting booths and welding areas. The company is also exploring alternatives for improving the overall ventilation in its work sheds. The refrigerant used in chillers and the air conditioning system is R22, which is in accordance with Ozone Depleting Substances Rules notified by GOI under Montreal Protocol requirements. The company will conduct benchmark testing of DG set emissions across all its facilities to demonstrate compliance with World Bank Group (WBG) guidelines. Further, in accordance with its consent under the Air Act, the company will monitor stack emissions at least on a monthly basis to demonstrate compliance with host country norms and WBG requirements. - Ambient air quality and noise impacts on nearby receptors: Ambient air quality monitoring by the company for its Jamshedpur and Pune facilities indicates that current levels of suspended particulate matter (SPM) exceed WBG limits. IAL will identify all sources of particulate matter emissions and undertake appropriate programs to meet WBG requirements. The company will undertake benchmark monitoring of noise levels at the plant boundaries to demonstrate compliance with regulatory and WBG norms. Where required, the company will identify sources generating high levels of noise and undertake appropriate measures including provision of acoustic treatment/enclosures to comply with WBG and Government requirements. The company is in the process of installing acoustic enclosures for DG sets and compressor in accordance with regulatory requirements, expected to be installed in the next 3 months. IAL will undertake bi-annual monitoring of ambient air quality and ambient noise levels at the existing facility to demonstrate compliance with host country and WBG norms. - Source and volumes of water consumed including efforts to minimize water use: IAL’s facilities meet their entire water requirement from bore-wells. The company currently does not meter the daily withdrawal of groundwater but will install meters and submit results to the regulatory authorities as per its consent requirements. At IAL’s Jamshedpur facilities, drinking water made available to employees is bore-well water, which is filtered, except in the canteen, where a UV based water purifier is installed. At IAL’s Pune facilities, bore-well water to be used for drinking is treated prior to use to ensure potability. The company will undertake benchmark testing of its drinking water and, if required, install additional treatment systems to ensure compliance with appropriate potability standards. IAL has installed facilities for ground water recharge at its Jamshedpur facilities and proposes to install rainwater harvesting facilities at its Pune facilities. - Recycling and treatment of process effluent and domestic waste water: The principal sources of process effluent at IAL’s facilities are the paint shop, plant washing, degreasing/phosphating/activation line, and spent cutting oil. Process effluent at the Jamshedpur facilities is treated and discharged to the industrial area sewerage system and, at Pune, is used for ground irrigation on IAL’s property. IAL will undertake benchmark testing of treated process effluent to demonstrate compliance with WBG and host country norms. Where required, IAL will install appropriate facilities to ensure compliance. IAL will construct appropriately secured facilities for storage and disposal of paint sludge, ETP sludge, phosphating line sludge and cutting oil. The company will ensure complete segregation of process effluent, domestic effluent and storm water streams and ensure that used oil/lubricant spillage or other spills do not flow into the domestic effluent/storm water/treated effluent streams. In consultation with IFC and within a timeframe to be agreed with IFC, IAL will commission an environment audit and develop an action plan for appropriate treatment of process effluents, recycling/reuse of treated effluent and appropriate storage/disposal of wastes. Domestic waste water is disposed of through a septic tank and soak pit route at all of IAL’s facilities. The company will install appropriate facilities for monitoring quantity of effluent discharged, maintain daily measurement records and submit these to regulators as required. The company will sample test treated effluent at least monthly and maintain records of these test results. - Hazardous materials management: IAL uses several regulated hazardous materials including cutting oils, paints, lubricants, chemicals for degreasing line and hydraulic oils. Storage, handling and overall management of hazardous materials requires significant improvement. IAL will adopt improved material handling practices, make available personal protective equipment (PPE) to all workers handling hazardous materials, enforce the use of PPE provided, increase training of employees and contract labor handling hazardous materials and provide washing stations in material handling areas. In addition, the company will ensure that all necessary antidotes for accidental exposure are available and readily accessible. Moreover, IAL will post information on antidotes, their availability and location in relevant areas. - Minimization, recycling and disposal of solid and hazardous wastes: During the site visit, it was observed that management of hazardous waste and other solid wastes requires improvement. At IAL’s Pune facilities, there is provision for segregation and storage of other wastes but waste segregation is not being currently carried out. At IAL’s Pune facilities, vermi-composting of kitchen waste is undertaken and the compost is used as fertilizer in gardens. IAL will undertake appropriate categorization of solid wastes, segregate various classes of wastes and store them in designated areas. A detailed corrective action plan will be developed by IAL for this activity, and submission of a timetable for implementing the action plan acceptable to IFC will be made a condition of disbursement. IAL will implement measures to improve management of hazardous waste in accordance with national regulatory requirements. Specifically, the company will identify the various categories of hazardous wastes generated on its premises in accordance with the Hazardous Waste Management and Handling Rules; seek authorization from the respective State Pollution Control Boards for generation, handling and storage of such hazardous wastes; and store such hazardous wastes only in designated areas with appropriate containment and dispose them off only through authorized contractors in a manner approved by the regulatory authorities. The company will undertake vermi-composting of kitchen wastes at all facilities and use the compost as fertilizer in green belt development. - Fire and life safety and emergency response: IAL’s facilities are equipped with fire extinguishers, which are checked regularly. Fire drills are conducted every six months and training of employees is undertaken. However, the company’s emergency response plan in the event of fire is not displayed, fire exits are not marked, and assembly points have not been designated. In consultation with IFC and within a timeframe to be agreed with IFC, IAL will commission a Fire and Life Safety Audit and develop an action plan to improve fire and life safety systems based on the outcome of the audit. - Occupational health and safety: During the site visit it appeared that some but not all of the employees and contract labor at IAL’s facilities were using requisite PPE. All of IAL’s facilities have safety committees, which conduct weekly safety audits and meet fortnightly. Safety training of employees is conducted. At IAL’s Jamshedpur facilities, safety signage was inadequate and, at the Pune facilities, safety signage was present but printed in English rather than the local language which is more widely spoken. The key occupational health and safety issues that were noted during the site visits and which IAL will redress include: - Installing a vent/chimney for flue gases from heat treatment ovens. - Annual monitoring of the work place environment, which would include, in addition to items specified in Schedule II of the Factories Act, the presence of VOCs and asbestos fibers. - Monitoring of work place noise levels, identifying opportunities for reducing noise levels at the work place, conducting hearing benchmark testing for all employees exposed to high levels of noise, making available hearing protection to all employees and enforcing the use of this protection. - Undertaking measures for improved ventilation, including installation of a fume exhaust system in the work areas. - Annual general health monitoring currently conducted will be supplemented by a targeted health monitoring program for employees exposed to hazardous conditions. The company will ensure that the contractors implement a health surveillance program for the contract labor as well. - Enforcing the use of relevant PPE, improve signage, conduct periodic occupational health and safety audits to identify opportunities for improvement together with education and training. - Developing and implementing emergency response plan and communicating its contents to all relevant stakeholders. Corporate social responsibility efforts, including HIV/AIDS awareness: IAL proposes to explore the feasibility of working with industrial area development authority and local communities to promote rainwater harvesting in the vicinity of its operations. Further, IAL has also agreed to discuss with IFC the possibility of undertaking community development activities in the vicinity of its operations including on HIV/AIDS. Timely reporting on environmental and social performance to IFC: The company will submit Annual Environmental and Social Monitoring Reports (AMRs) timely within 90 days of the end of its financial year.

The following supporting documents provide further details of environmental and/or social issues: - Environmental and social corrective action plan.

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 upon successful implementation of the agreed mitigation measures.

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: - the status of implementation of any measures contained in the Environmental and Social Action Plans; and - ongoing performance of project-specific environmental, health and safety and social activities as reflected in the results of periodic and quantitative sampling and measuring programs. Periodic site supervision visits will also be conducted.