25065 - Suguna

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Environmental & Social Review Summary

Project Number

25065

Company Name

Suguna Foods Private Limited

Date ESRS Disclosed

Jul 21, 2006

Country

India

Region

South Asia

Last Updated Date

Nov 30, 2016

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Sep 27, 2006
Signed : Oct 3, 2006
Invested : Nov 8, 2006

Sector

Poultry Farming

Industry

Agribusiness and Forestry

Department

Regional Industry - MAS Asia & Pac

Project Description

Suguna Poultry Farms Ltd. (Suguna or the company) is India’s largest poultry with its headquarters in the city of Coimbatore in the south Indian state of Tamil Nadu. The company follows an integrated model of poultry rearing wherein it works with around 10,500 contract poultry farmers. Suguna’s operations are currently concentrated in southern and western India, with a small presence in the eastern part of the country.

The company’s operations is spread over five regions, which are Tamil Nadu (HQ in Udumalpet), Karnataka (HQ in Bangalore), Andhra Pradesh (HQ in Hyderabad), Maharashtra and Gujarat (HQ in Pune) and West Bengal (HQ in Kolkata). The company has recently commenced operations in Northern India with its regional HQ in Chandigarh. Typically each region has a set of feed mills, breeder farms, hatcheries and broiler farms (out-growers).

Going forward, the company’s strategy is to expand breeder farm, hatchery and feed mill capacity. In order to achieve its strategy, over the next three years, the company proposes to implement an investment program and has requested IFC to provide debt and equity financing towards funding this program. The key components of this program are:

- Expansion of breeder capacity;
- Expansion of hatcheries capacity; and
- Expansion of feed-mill capacity.

Overview of IFC's Scope of Review

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 of appraising technical, environmental and social information submitted by the project sponsor, including Tamil Nadu Pollution Control Board consents for Suguna’s feed mill.

The appraisal team interviewed the corporate and plant level finance, operations and other officials at the feed mill and hatchery.

Further, the appraisal included sites visits to the company’s existing feed mill, one hatchery and two contract poultry farmers, all at and near Udumalpet, near Coimbatore in Tamil Nadu, India. The following potential environment, health and safety and social aspect of the project were analyzed:

- environment and social assessment and corporate environmental, social, and health and safety management systems;
- national and local government permitting requirements;
- land acquisition, compensation and physical and/or economic resettlement;
- community consultation and disclosure;
- management of contract poultry farming;
- management of resources including energy, water, hazardous and other materials;
- management of emissions, discharges, hazardous and other wastes;
- management of occupational health and safety;
- management of bio-safety risks;
- management of environmental, occupational health, safety and community impacts during construction; and
- corporate social responsibility efforts, including HIV/AIDS awareness.

E & S Project Categorization and Applicable Standard

The project received CIC approval in April 2006, hence is being assessed under IFC’s environmental and social safeguard policies. The following IFC/WBG policies are applicable to the project:

- OP 4.01 Environmental Assessment dated October 1998;
- OD 4.30 Involuntary Resettlement dated June 1990;
- OPN11.03 Cultural Property dated September 1986;
- Policy on Forced Labor and Harmful Child Labor dated March 1998; and
- Guidance for Project Sponsor on Disclosure of Information dated December 1998.

The project involves:

- setting up of feed mills (grinding and blending with limited use of steam and power);
- breeder farms (maintenance of parent chicken for egg production);
- hatcheries (incubation/hatching of eggs obtained from breeder farms and transport of one day old chicks); and
- increase in number of outgrowers.

The key aspects associated with the project would pertain to:

- emissions to air and water;
- management of hazardous materials and wastes;
- land acquisition and compensation;
- biosecurity and its potential impact on human populations;
- occupational health and safety; and
- community health and safety during construction and operation.

In view of the nature and size of the projects, it is unlikely that land acquisition will result in large-scale involuntary resettlement. Further, the proposed project locations may be selected so as to avoid adverse impacts on environmentally sensitive areas. The nature of operations are such that it is possible to readily design and implement engineering and management measures to mitigate adverse impact due to:

- emissions to air and water;
- management of hazardous materials and wastes; and
- employee as also community health and safety during construction and operations.

Further, bio-security measures can be readily designed to mitigate potential adverse impacts on employees and human populations. In view of the above, since mitigation measures can be readily designed and since any adverse impacts are not likely to be diverse; are not likely to be irreversible; most likely will be limited to project site; and not likely to impact environmentally sensitive areas, the project has been classified as a Category B project.

Environmental and Social Mitigation Measures

The company has presented plans to address these impacts to ensure that the proposed project will, upon implementation of the specific agreed measures, comply with the host country laws and regulations and the World Bank/IFC (WBG) 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.

- Environment and Social Assessment and Corporate environmental, social, and health and safety management systems:

The company’s management is sensitive to environmental, social, occupational health and safety (EHS) aspects of their operations. The company has reviewed IFC operational policy (OP) 4.01 (Environment Assessment) and will, prior to commencing work on new feed mills, breeder farms and hatcheries, undertake an environment and social assessment (ESA) of appropriate complexity and make copies of the same available to IFC for review. The company will agree with IFC and implement an environment and social management plan (ESMP) based on the outcome of the ESA. The company is certified to ISO 9001. The company will, within a timeframe agreed with IFC, deploy a certified integrated EHS management system (IMS) based on ISO 14001 and OHSAS 18000 standards at its existing and proposed feed mills, breeder farms and hatcheries. The company sources feed from 30 leased feed mills. The company will institute a program to build awareness of and encourage the operators of leased feed mills, to adopt EHS practices consistent with Suguna’s EHS practices.

- National and local government permitting requirements:

The company’s existing operations have valid “Consents to Operate” or the company has applied for renewal of consents. The company will, prior to commencement of project construction work at the proposed new plants and facilities, obtain all relevant permits and authorizations as applicable, including a “No Objection Certificate” (NOC), “Consent to Establish” and, prior to commencement of operations, “Consent to Operate” under Air Act, Water Act and Hazardous Waste (Management and Handling) Rules (HWMH Rules). The company will make copies of these permits and authorizations available to IFC as annexes to the Annual Monitoring Reports.

- Land acquisition, compensation and physical and/or economic resettlement:

Where land acquisition for the proposed new facilities is involved, the company will adhere to World Bank Group (WBG) Operational Directive (OD) 4.30 (Involuntary Resettlement) and maintain a written report that describes in detail the acquisition process, consultations undertaken, number of people affected, and outcomes achieved. The company has reviewed the WBG Operational Policy note (OPN) 11.03 (Management of Cultural Property in Bank Financed Projects) and will, where applicable, ensure compliance with it in all new plant and facility development.

- Management of contract poultry farming (out-grower program):

There are nearly 10,500 contract poultry farmers (out-growers) raising chicken for the company. The out-growers associated with the company invest in the infrastructure, which comprises of a well ventilated shed with wire mesh side walls, electricity, water, rice husk/coconut choir, and labor. The company provides one day old chick, feed, medicines, other consumables and feed & water equipment to the out-growers. Additionally, the company’s line supervisors visit each out-grower on alternate days, provide technical advice, carry out a process audit and collect data on mortality, feed and medicine consumption and balance stocks. Each out-grower maintains a log book (provided by the company) into which all relevant information is entered by the line supervisor during these visits. The company pays a growing charge for a 42 day chicken (linked to weight of the 42 day old chicken) and a buyback guarantee. The growing charge is calculated based on the input cost incurred by the out-growers plus a profit component. In addition to the minimum growing charge, the company also pays a productivity incentive to out-growers based on the 42 day weight. After 42 days, retailers pick up the chicken from the farmers premises as per a roster maintained by the company. The company makes payment to the out-growers directly. Monitoring data is entered by Line Supervisors into the ERP system everyday and this eventually forms the basis for rating/assessment of out-grower’s performance as also the basis for payments to out-growers.

- Management of resources including energy, water, hazardous and other materials:

The principal source of energy at the existing feed mill is grid electricity. However, there are standby diesel generator (DG) sets at the feed mill (1000 and 250 KVA). The feed mill has wood fired boilers, of 3 tph each, for steam generation. At the proposed new plants/facilities, the company will construct only above-ground tanks for fuel storage with adequate secondary containment. Further, the company will assess techno-commercial feasibility of migrating from wood to agri-waste/residue as fuel for its boilers. The company will, within a timeframe to be agreed with IFC, construct appropriate facilities with secondary containment, for storage of hazardous materials including lubricating oils and process chemicals, at the existing plants (feed mill and hatcheries). Water requirement at the feed mill (only for steam generation and domestic use) and hatcheries is met through ground water extraction. The company will install water meters at each of its facilities, to monitor groundwater extraction. Further, the company will implement a rain water harvesting program, which will be progressively rolled out across all of its existing and proposed facilities. The company will undertake benchmark testing of drinking water to ascertain if it meets WHO and/or GoI standards.

- Management of emissions, discharges, hazardous and other wastes:

The principal point source of air emissions in the existing plants are the boilers and DG sets. The company does not currently monitor stack emissions from boilers and DG sets, ambient air quality and ambient noise levels at the feed mill. The company will, within a timeframe agreed with IFC, undertake benchmark monitoring of stack emissions, ambient air quality and ambient noise at the feed mill, to demonstrate compliance with WBG emission limits and where required, will implement appropriate mitigation measures to meet WBG requirements. The company will ensure that the refrigerant used in chillers/air conditioning system and fire extinguishers comply with the Ozone Depleting Substances Rules set by the GOI under Montreal Protocol requirements. The company will, in accordance with host country regulations and within a timeframe agreed with IFC, undertake acoustic treatment of DG set/DG set room to ensure a 25 dB (A) insertion loss in noise levels at all of its plants and facilities. No process effluent is generated at the feed mill. The feed mill generates hazardous wastes particularly, used lubricants, lubricant drums and chemical carbuoys. There is a need to improve management of hazardous wastes. All wastes need to be segregated and stored in designated areas and disposed off appropriately. The company will obtain authorizations for handling and storage of hazardous wastes, provide appropriately contained storage areas for all hazardous wastes and dispose these through authorized entities only. The company will comply with IFC guidelines on hazardous materials management in the existing and proposed plants. Solid waste generated by out-growers essentially rice husk/coconut choir with bird droppings is sold by out-growers as manure.

- Occupational health and safety:

Occupational health and safety in the feed mill in particular needs to be significantly improved. The company will, within a timeframe agreed with IFC, undertake a fire and safety audit of the feed mill and develop an action plan based on the outcome of the audit. Further, the company will:

- ensure that all employees and contract labor are provided environmental and occupational health and safety training, including on potential exposure to hazardous conditions and materials;
- provide training on defensive driving and road safety to truck/vehicle drivers as also line supervisors;
- provide appropriate personal protective equipment and actively enforce its use;
- improve general housekeeping;
- post safety signage at appropriate locations in a culturally appropriate language;
- undertake annual monitoring of work place environment including noise levels, particulates, and conduct benchmark hearing tests for all employees exposed to high levels of noise;
- constitute a safety committee comprised of management and worker representatives, to conduct periodic health and safety audits and identify areas where improvements are needed; and
- develop and implement an emergency response plan and communicate its contents to all relevant stakeholders.

- Management of bio-safety risks:

A full bio-security program is in place at Suguna. This addresses human and vehicle movements and entry to farms. Visitors are strictly prohibited from breeding operations and there are set procedures for vehicle and staff in respect to disinfection and wearing of protective clothing. Rules exist for transfer of bags, eggs and egg trays. There are procedures for rodent and bird control including anti-rooms and human sprays on company owned farms. In order to implement global best in class practices, Suguna proposes to undergo a bio-security audit and implement the measures to address the audit findings.

- Management of environmental, occupational health, safety and community impacts during construction:

During plant/facility construction, the Company will make appropriate provisions in plant design and the construction contracts to ensure that environment, labor health and safety, and community impacts are effectively managed. Specifically during construction, the company will ensure that its employees and construction contractors:

- provide appropriate barriers and lighting at excavation sites, especially where such sites have open access or are likely to be accessed by members of local community;
- maximize reuse of excavated earth and rubble wherever possible and ensure that all remaining solid wastes generated are appropriately segregated and disposed of as per regulatory authorizations;
- ensure the stability of all structures and slopes in the vicinity of construction site that may be impacted by excavations, movement of heavy equipment, dumping of excavated earth and rubble, seepage/leakage or landscape changes;
- train equipment operators and drivers in safe driving techniques and develop a materials movement plan to ensure that vehicle movement during construction has minimal impact on life patterns of nearby communities;
- implement appropriate measures to reduce fugitive emissions from storage and transport of excavated earth and other construction material.

The company will ensure that:

- all construction rubble and excavated earth is transported in covered trucks only;
- undertake dust control measures such as sprinkling of water on access roads, excavated earth and open unpaved ground, to ensure that ambient air quality complies with WBG guidelines and host country requirements;
- store and handle hazardous materials and wastes in accordance with best engineering practices to minimize leaks and spills;
- ensure safe electrical equipment and engineering practices; and
- provide all relevant personal protective equipment to laborers and ensure its usage.

- Corporate social responsibility efforts, including HIV/AIDS awareness:

The company has several CSR initiatives underway, which are targeted at communities in its hinterland/catchments including:

- career counseling for college and school graduates from rural backgrounds;
- academic performance awards for students in government schools;
- blind relief camps; health care camps;
- blood donation camps for government hospitals;
- artificial limb camps;
- technical assistance to communities on rainwater harvesting; and tsunami relief.

IFC will provide details of its AIDS program to the sponsor for distribution to its employees, contractors, truckers/drivers and among nearby communities, in a culturally appropriate manner.

Stakeholder Engagement

To ensure effective engagement with local and potentially affected communities, the company will, for locations where a new facility/plant is proposed and in consultation with IFC, develop and implement a community consultation and disclosure program.

The Client will make this Environment and Social Review Summary including the Environment and Social Action Plan available at Corporation Bank, Industrial Finance Branch, Trichy Road, Coimbatore, Tamil Nadu, India, where it will be available for public review for a period of 30 days.

Client Documentation

File Name	Actions
Final Suguna ESAP July 21 2006.pdf

**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability

IFC supports its clients in addressing environmental and social issues arising from their business activities by requiring its real sector clients to set up and administer appropriate grievance mechanisms and/or procedures to address complaints from Affected Communities in relation to environmental and social issues arising from IFC's clients' business activities. Since 2012, IFC's Financial Intermediary clients applying the Performance Standards are required to develop External Communications Mechanisms to receive and review inquiries or complaints from any interested party regarding the E&S risks and impacts of their operations.

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