27161 - DSCL Bharuch Expansion

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Environmental & Social Review Summary

Project Number

27161

Company Name

DCM SHRIRAM LIMITED

Date ESRS Disclosed

May 28, 2008

Country

India

Region

South Asia

Last Updated Date

Nov 30, 2016

Environmental Category

B - Limited

Status

Completed

Previous Events

Approved : Nov 4, 2008
Signed : Dec 11, 2008
Invested : Feb 23, 2009

Sector

Alkalies and Chlorine

Industry

Manufacturing

Department

Gbl Ind, Manufact, Agribus & Services

Project Description

DCM Shriram Consolidated Limited (DSCL or the company) is a diversified mid-tier Indian company, with an annual turnover of $620 million. DSCL has four main businesses – caustic soda/chlorine, polyvinyl chloride (PVC), urea and sugar. DSCL’s chemicals facilities include a large integrated unit in Kota, Rajasthan and a chlor-alkali plant in Bharuch, Gujarat. DSCL is a strong regional player, capitalizing on its low cost integrated production facilities and close proximity to raw material. The company primarily serves the northern and western Indian markets, where it also has a freight cost advantage relative to other domestic players and imports. The proposed transaction comprises a corporate loan plus loan equivalent exposure to convert DSCL’s existing and proposed IFC loans into Indian rupees to hedge the company’s US dollar exposure. The corporate loan is proposed to be used primarily for DSCL’s ongoing expansion of its chlor-alkali capacity at Bharuch from 200 tons per day (tpd) to 435 tpd, modernization projects at its Kota facility, and refinancing an existing loan. IFC has an existing investment in DSCL (project #23385), which was made in 2005.

Overview of IFC's Scope of Review

The review of this project consisted of appraising technical, environmental and social information submitted by the project sponsor including. In May 2008, IFC visited the Bharuch plant to tour the project site and meet with the E&S management. As an existing client (project #23385), DSCL reports annually to IFC regarding the ongoing management of its environmental and social performance. These reports have demonstrated that the company’s E&S management systems, procedures, and management team are able to ensure sound environmental, social and health and safety management. The annual reports and appraisal mission confirmed that the company is meeting the requirements of the original investment agreement and continues to demonstrate that its activities comply with applicable Indian laws and regulations, as well as IFC requirements.

E & S Project Categorization and Applicable Standard

While all Performance Standards (PS) are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts that must be managed in a manner consistent with the following Performance Standards:

- PS1: Social and Environmental Assessment and Management Systems;
- PS2: Labor and Working Conditions;
- PS3: Pollution Prevention and Abatement; and
- PS4: Community Health, Safety and Security.

The appraisal also assessed the applicability of PS5: Land Acquisition and Involuntary Resettlement, PS6: Biodiversity Conservation and Sustainable Natural Resource Management, PS7: Indigenous Peoples, and PS8: Cultural Heritage. In regard to PS5, no new land is being acquired for the capacity expansion project. Because all land on which project facilities have been or will be developed are located in heavily modified areas, PS6 does not apply. With respect to PS7 and PS8, no indigenous peoples or significant cultural heritage sites are expected to be impacted by the project.

Key environmental, social, health and safety issues associated with this project include air emission, wastewater treatment and discharge, solid and hazardous waste management, operation hazard and hazardous material management, employee health and safety, fire protection and emergency response, community health/safety, and community relationship and development.

This is a repeat investment with an existing client for a capacity expansion to increase existing product volumes, rather than introduce new product lines. IFC’s ongoing review and supervision of its existing investment in DSCL has demonstrated that the company is meeting all environmental, health and safety, and social obligations, including relevant IFC PSs and guidelines. No land acquisition is being undertaken in the context of the project. In light of the fact that mitigation measures can readily be designed, adverse impacts are not expected to be diverse or irreversible and will be limited to the project site, the project has been classified as Category B. The Environmental and Social Risk Rating (ESRR) for IFC’s existing DSCL investment is B-1 - Good.

Environmental and Social Mitigation Measures

The sponsor has presented plans to address these impacts to ensure that the proposed project will upon implementation of the specific agreed measures, comply with the environmental and social requirements - the host country laws and regulations and the IFC Pass and relevant Environmental, Health and Safety guidelines. The information about how these potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow. Further information is provided in the attached Environmental and Social Action Plan (ESAP).

- Social and Environmental Assessment and Management Systems

DSCL has adopted a corporate Safety, Health and Environmental (SHE) policy and all DSCL plants have in place quality, environmental and occupational health and safety systems that have been certified against ISO 9001:2000, ISO 14001:1996, and OHSAS 18001:1999 respectively. In addition, the Bharuch plant has adopted a Social Accountability System certified against SA 8000:2001. The management system is overseen by the SHE General Manager, who had been responsible for corporate wide SHE issues, was recently named to DSCL’s Board of Directors, to ensure that SHE issues are effectively represented and considered at the highest level of the company. Each location/plant has a SHE cell, staffed by a team of SHE officers who report to the location head as well as coordinate with Director (EHS)/Board member. DSCL has developed a detailed written implementation procedure to ensure that the corporate SHE policy and system are effectively rolled out at all DSCL into increase the SHE managerial efficiency. All employees and contract laborers receive training on SHE policies and procedures. Consistent with Government of India requirements, detailed Environmental Impact Assessments (EIAs) were prepared by independent consultants for both the Kota and Bharuch plants in order to receive environmental consent to construct and operate. IFC reviewed these EIAs at the time it appraised the earlier investment and DSCL has made copies of these documents available for review at both plants. The company has provided copies of all current required permissions, including Environmental Clearances from the Ministry of Environment and Forests (MoEF), and No Objection Certificates (NOCs) from the relevant state Pollution Control Board (PCB).

- Labor and Working Conditions

DSCL has well established Human Resources (HR) and occupational health/safety management systems and procedures. Wages/salaries and benefits offered by the company are well above both government-mandated levels and industry norms. DSCL’s HR Department has reviewed PS2 and confirmed that its HR policies and procedures conform to all PS2 requirements. DSCL has good industrial relations at all of its facilities. Several labor unions are represented at the Kota plant; the company negotiates with the union every three years. There has been no interruption of production due to labor actions for 35 years. At DSCL’s other plants, elected worker committees are responsible for negotiating wage and benefits adjustments with management. Recent reports submitted to IFC and the relevant State Pollution Control Boards (PCBs) confirm that workplace air quality meet both host country and IFC standards. All onsite employees, including contract workers and construction laborers, are required to participate in SHE trainings, including regular fire fighting and first aid refresher courses. DSCL has made a strong commitment to continually improve its health and safety performance by strengthening the SHE team’s monitoring role, increasing the frequency of trainings, and extending these efforts to contract workers.

Daily safety briefings are held every morning. Certain equipment (crushers, mills, blowers/compressors, and pumps) at both the Bharuch and Kota facilities generates elevated noise levels. As part of its ongoing SHE management program, DSCL has constructed sound absorption walls and other barriers to reduce the workplace noise levels and conducts annual hearing tests for employees working in high noise areas. Personal protective equipment (PPE) including ear muffs, safety helmets, dust masks and steel toed boots are provided to employees and contract workers, and their use is strictly enforced. DSCL has Incident investigation and corrective systems at all plants, including for near-miss cases and its accident rates are consistent with good practice for the sector.

The company has a fully equipped occupational Health Centre that is open 24 hours a day, staffed by a qualified doctor with a specialization degree in occupational health. All employees are given annual examinations including pulmonary and audiometry tests. DSCL has won several awards for its OHS performance, including awards from the Gujarat Safety Council for achieving a million accident-free hours worked in 2005 and 2006, the Greentech Foundation’s Safety Award (2004-2005) as well as numerous national safety awards. The company has made a strong corporate commitment against the use of underage labor in any of its operations, including among contract workers. Security staffs screen all laborers entering the plant premises on a daily basis; in case where a worker’s appearance indicates they may be under the age of 18, guards are instructed to request documentation confirming the age. Where no document can be produced a medical examination is undertaken. A standard provision in all contracts gives DSCL the right to terminate a contract on the spot if the use of underage labor is found.

- Pollution Prevention and Abatement

DSCL has a strong record in all aspects of pollution prevention and environmental performance. Annual monitoring reports received by IFC as part of the earlier investment, as well as reports submitted to relevant PCBs confirm that air emissions at the Bharuch and Kota plants routinely meet all local regulatory requirements and IFC guideline limits. Both plants are equipped with bag filters and electrostatic precipitators (ESP) to control air emissions. As part of the capacity expansion at Bharuch, DSCL will convert its power plant from 24 MW currently supplied by heavy furnace oil fired generators to a 61 MW coal fired plant. To comply with permit requirements of the Gujarat PCB, DSCL must ensure that there is no net increase in air emissions despite the change in fuel type and a 27% increase in power generation. To meet this requirement the company will upgrade its existing electrostatic precipitators, which will ensure that particulate matter (PM) emissions continue to meet all local and IFC limits. The net increase in SO2 and NOx emissions will be negligible. DSCL estimates that the power plant expansion/fuel switching will result in a net increase of greenhouse gases (GHG) of 200,000 t/y. DSCL has installed 70 MW of bagasse-based cogeneration at its sugar units and additional 24 MW generation is under implementation which also offsets its overall carbon footprint. With financial and technical support from IFC, DSCL is developing a comprehensive Sustainability mapping and monitoring effort, which will include a procedure for annual quantification, monitoring and reduction of total GHG emissions. The objective of this effort is to produce an annual Sustainability Report that meets Global Reporting Initiative (GRI) standards, which will be one of the first such reports to be produced by the company. The first report will be released by November 2008.

DSCL monitors ambient SO2, NOx and PM levels in the neighborhood of the Bharuch and Kota plants, including residential colonies, and at plant boundaries. Results confirm that ambient air quality meets all IFC and PCB limits and will continue to do so after the expansion. Given the energy intensive nature of its operations, DSCL has established internal committees at both the Bharuch and Kota plants to identify energy efficiency and energy conservation opportunities. Projects implemented over the past 15 years to increase the productivity and reduce energy consumption have reduced specific energy consumption 15% to 50% for different products during this period. In the past five years, DSCL has received a number of awards for these efforts, including being ranked second out of 34 chlor alkali plants for overall environmental performance by the Center for Science and Environment’s “green rating” project (2002), first prize in the Ministry of Power’s National Energy Conservation Award for the chlor alkali sector (1999-2004) by the Ministry of Power, the Greentech Foundation’s Environment Excellence Award (2004 and 2005), and a special award for unique and innovative efforts in Energy conservation by the Government of India’s Petroleum Conservation Research Association (2000-2002).

DSCL has installed effluent treatment plants at Bharuch and Kota and treated effluents at both plants meet both local regulatory requirements and WBG/IFC guideline limits. As part of its EHS improvement program, the company has instituted aggressive water minimization and recycling programs at both Bharuch and Kota. Rainwater harvesting programs at both Bharuch and Kota contribute save approximately 65,000 m3 of water at Bharuch and 450,000 m3 at Kota per year. As a result, despite a proposed 37% capacity increase at Bharuch, which includes installation of a second cooling tower, there will be no increase in wastewater generation enabling DSCL to stay within its current permitted volume of 460 m3/day.

Hazardous gases and liquids at Bharuch and Kota are stored in tanks onsite. All tank storage areas are well maintained and consistent with good industry practice. The chlorine and ammonia storage tanks are tested by independent licensed tank-testing companies for comprehensive integrities every two and five years, respectively. All tanks are equipped with secondary containment structures. As part of IFC’s original investment, DSCL replaced mercury cells with membrane cells for all of its chlor-alkali production; as a result, mercury sludge is no longer produced at either Kota or Bharuch. Both plants have on-site landfills have multiple asphalt/concrete layers, leachate collection system, and leachate treatment facility. An additional secured landfill will be constructed at Bharuch as part of the expansion. Treated leachate at both plants is tested regularly and meets local regulatory requirements and WBG/IFC guideline limits. Three groundwater monitoring wells have been installed around each of the landfills at both plants to monitor groundwater contamination. Tests have consistently indicated that no soil or groundwater contamination has resulted from any of the landfills. Domestic solid wastes generated on site are sold to licensed disposers, who transport them outside the Kota and Bharuch plants. Ash from the ESPs, wastewater treatment sludge, and wastes from calcium carbide manufacturing are sent to the cement kiln as final disposal and produce cement. The waste petroleum products and waste heavy-metal catalysts are recorded and sent to the licensed recyclers.

- Community Health, Safety and Security

DSCL has established fire prevention and response programs at both the Bharuch and Kota plants, and is compliant with all relevant local firefighting regulations. The Bharuch and Kota plants regularly update their hazard and operability studies (HAZOPs). Detailed emergency preparedness and response plans in place at both Bharuch and Kota are consistent with best industry practice for the sector and include features such as one liquid chlorine storage tank always kept empty in case of need for emergency evacuation; double safety valves on each liquid chlorine storage tank; remote isolation valves, online chlorine sensors at 10 locations, emergency chlorine neutralization system in place, customer training on responding to chlorine emergencies, a chlorine emergency team for handling impacts outside the plant premises; four levels of communication (telephone, PA system, walkie talkies, siren system), and 24-hour full size fire tenders and ambulances. For both the Bharuch and Kota locations, mathematic modeling has been undertaken to estimate the maximum impact zone of influence of different release scenarios, which have been incorporated in the Emergency Response Plans. Chlorine monitors are provided at key locations throughout both plants. As there are no residential areas located near wither of the plants, no additional sensors have been installed near the plant boundaries. SHE staff conduct onsite ER drill every six-month, and conducts off-site ER drill every year. Local authorities at Bharuch and Kota have developed a comprehensive off-site emergency plan to mitigate the effect of any toxic gas release or fire. DSCL is a team member of the District Crisis Groups in both Kota and Bharuch, which are chaired by the District Collector, the most senior district official. DSCL also participates in Mutual Aid agreements, and comprise include representatives of key industrial facilities in each area. The plan addresses mutual aid amongst industries and support from local administration. Necessary medical information has also been documented and distributed, which will be useful during an emergency.

Stakeholder Engagement

DSCL actively engages in ongoing communications with both nearby industrial tenants and communities in the vicinity of its plants. No social issues or concerns associated with DSCL’s operations or proposed expansions were identified during the three site visits that IFC social and environmental specialists have made to the Kota and Bharuch plants. Signboards outside each plant contain information about products and wastes produced; these will be modified to include 24-hour contact details where queries from the general public may be directed.

The company has developed several community development programs to help the local communities at both Bharuch and Kota. The major community development projects include establishing medical centers in the communities that provide free medical care and medicines to nearby villagers; funding new community school buildings, and promoting education – particularly among girls - by sponsoring scholarships; providing drinking water to local communities during the dry season; sponsoring various culture activities in the Bharuch Kota area; and technical support to farmers through seminars, field demonstrations and meetings.

For further information please contact:

Dr. N.J. Singh, Director (EHS):
DCM Shriram Consolidated, Limited (corporate office)
5th floor, Kanchenjunga Bldg, 18 Barakhamba Road, New Delhi
Telephone: +91-2331-6801

Office:
Shriram Nagar, Kota 324004, Rajasthan
Telephone: +91-744-2480901-04 (Extn. 2462)

Mr. KK Kaul, Executive Director & Resident Head
Shriram Nagar, Kota 324004, Rajasthan (Kota plant)
Telephone: +91-744-2480991-98

Mr. SC Mittal, Unit Head
Shriram Alkalis & Chemicals
749, Industrial Estate, Jhagadia District, Bharuch 393110, Gujarat
Telephone: +91-2645-226021-23

Client Documentation

File Name	Actions
ESAP_DSCL_27161.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.

For IFC projects that are active or under consideration, individual(s), or their authorized representative(s), who allege they have been or will be adversely affected by E&S risks or impacts arising from IFC's clients' business activities, may submit a complaint to IFC directly for consideration. When receiving an E&S complaint, IFC engages with complainants and works with its clients to find solutions to E&S concerns as quickly and efficiently as possible.

Complaints can be submitted to IFC online at www.ifc.org/escomplaints or by email to EScomplaints@ifc.org.

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Affected communities have unrestricted access to the Compliance Advisor Ombudsman (CAO), the independent accountability mechanism for IFC and MIGA. CAO facilitates the resolution of complaints related to IFC and MIGA projects and sub-projects, undertakes reviews of IFC’s and MIGA’s environmental and social compliance, fosters public accountability for their commitments, and enhances the environmental and social performance of IFC and MIGA.

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Complaints can be submitted by any of the following methods:

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