While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which 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 PS4: Community Health, Safety and Security The expansion will be installed inside the current plant boundary. No land acquisition is required, nor will the expansion cause economic displacement. The state environmental regulatory agency confirmed that there are no natural protected areas or endangered species at or near Paradeep site. Indigenous Peoples are not present in the project area. Cultural Heritage was not identified in the project area. Therefore issues relating to Performance Standards 5, 6, 7 and 8 are not considered relevant to this project.

The expansion projects will be installed inside the current plant boundaries. The state regulatory agency confirms no natural protection area or protected species at or near the plant site. The findings in the environmental impact assessment and quantitative risk assessment indicate that the current and expansion operations will meet both local regulatory and IFC requirements upon successful implementation of the proposed mitigation methods. The normal operations have limited impacts to Paradeep colony and community to the southeast of the plant. Mitigation measures for the potential environmental and social impacts have been identified and are incorporated into an attached Environmental and Social Action Plan (ESAP). The potential adverse E&S impacts of this project are therefore few in number and limited to the project site and may be readily mitigated. This is therefore an E&S Category B project.

The key environmental and social issues for this project include the following: - Wastewater treatment, recycling , and discharge - Air emission control - Solid waste management - Hazardous material management, operational hazards and emergency response - Occupational health/safety (OHS) - Community health and safety - Community engagement and development Paradeep 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 Environment and Social Performance Standards and the World Bank Group (WBG) Environmental, Health and Safety (EHS) guidelines. The information about how these potential impacts will be addressed by Paradeep is summarized in the paragraphs that follow. Further information is provided in the attached ESAP, which has been agreed between IFC and Paradeep and which address the compliance gaps with IFC’s requirements. 1. Social and Environmental Assessment and Management Systems Land and natural environment: Paradeep has 2,283 acres land in the coastal area of Orissa State, India. Within the land, there are 165 acres for manufacturing plant site, 100 acres for gypsum storage site, 50 acres for its own residential colony, two large water storage ponds, which can supply 2-month water consumptions for Paradeep operations while the remaining land area is reserved for future development. Paradeep port is located 2 km east of the plant site. There are other chemical industries along the coastal area. There are communities to the southeast of Paradeep site. All the other sides of Paradeep’s site are bounded by coastal salt marsh. Environmental and Social Assessment: Paradeep contracted external experts to conduct environmental impact assessment (EIA) and quantitative risk assessment (QRA) for the expansion projects in 2010. The findings in the assessments indicate that the current and expansion operations will meet both local regulatory and IFC requirements upon successful implementation of the proposed mitigation methods. Environmental, health, and safety (EHS) management and organization: Paradeep has effective quality assurance, environmental and occupational health and safety management systems which have ISO 9000, ISO 14001, and OHSAS 18001 certifications respectively for the whole operations.. There are eight full time employees in the EHS department, which reports to the general manager of technical services. Paradeep divides its plant into 11 functional zones. There is one part time EHS coordinator for each zone, who helps the EHS department to manage the daily EHS performances. EHS department also conduct internal EHS audits quarterly to monitor the EHS performances. Training, monitoring, and reporting: Paradeep has an established program to provide necessary training for all its employees in the field of environmental and social performances related to its operations. Each employee has average 28 hr professional training per year, including 9 hours EHS training. Paradeep conducts comprehensive routine EHS monitoring for its operations. Paradeep keeps its environmental and social performance records through its internal reporting structure and discloses some general EHS performance data to the state regulatory authority. The EHS issues are reported and discussed at each monthly management meetings. The top management is knowledgeable about current E&S performances. 2. Labor and Working Conditions Human Resources Policy and Management: Paradeep has a Human Resources (HR) policy which specifies the terms of employment and working conditions. These include procedures for hiring and recruiting, probation, training, performance review, promotion, insurance, salary and compensation, resignation, lay-off and firing, leave and vacation, and retirement. The human resources function is a corporate function and apply to all Paradeep’s employees and contractors. The employees are provided a copy of the HR policy and procedures when hired and receive the HR training during the orientation. Paradeep has a formal grievance mechanism. Each unit holds monthly employee meeting to hear the concerns. If the employees would not like to speak up in the meetings, they can make individual meeting with Personnel manager or report their concerns anonymously. The employee concerns are reported to Personnel and Administration Office, which summarizes the monthly feedbacks, briefs the top management, and follows up with the corrective actions. In accordance with ESAP, Paradeep will also establish an anonymous grievance procedure based on suggestion box at each operation unit. Worker’s Organization: There are three labor unions in Paradeep. All non-managerial employees and contractors are union members. Five year collective bargaining agreements are negotiated to cover the salary structure and benefits, with the last agreement made in 2007. Unions also provide an alternative the grievance mechanism, representing members’ concerns to management. Non-Discrimination and Equal Opportunity: Paradeep HR policy states it is an equal opportunities employer. IFC’s review did not identify discrimination unrelated to job requirements. Hiring and promotion are merit-based only. Retrenchment: Retrenchment is not expected for this project. The company will hire approximately 126 new employees and contract workers for the expansion projects. An undetermined number of workers will be hired for constructions through contractors. Protecting the Work Force: Paradeep complies with national law and does not hire its employees and direct contractors below the age of 18. The Personnel Department also inspects its external contractor labor force to ensure compliant. No forced labor practices are used by Paradeep. Workers can move freely in and out the premises of the plant. Occupational health and safety (OHS): There are effective OHS procedures and adequate personal protection equipment for each working position, though as indicated in ESAP, Paradeep will improve the enforcement of these OHS procedures. OHS trainings include both new employee trainings and annual refreshers. All employees need to pass OHS tests as qualifications for work. The monitored workplace conditions meet both local regulatory requirements and good international industry practice. There is continuous monitoring for ammonia, which is a major safety concern onsite, both around storage tanks and in the workplace. There are detailed handling procedures for hazardous materials onsite, including ammonia, sulfuric acid, and phosphoric acid. Material safety data sheets for hazardous materials are available for employees onsite. Adequate Personal protection equipment, including respiratory masks, is available. Employees are provided annual training for hazardous material handling and enforcement for hazardous material PPE is strict. There have been no fatal accidents in the manufacturing processes in the past three years. Paradeep records both near-miss and recordable accidents, which are accidents that need first aid or further medical cares. The incidence rate in the past three years are between 3.5 – 7.5 per million hours, which are among the range of industrial norms (<11.3 – US OSHA). 3. Pollution Prevention and Abatement Raw materials and resource consumption: After expansion, the major raw material used, and raw material and energy consumption rates will be sulfur (1,500 tonnes/day (t/d)), phosphate rocks (4,900 t/d), ammonia (1,125 t/d), water (22,000 t/d), and electricity (38 MW). Sulfur, phosphate, and ammonia are imported through the jetty at Paradeep Port and transferred to site through a 2 km closed conveyor and pipelines. Water is supplied by government through nearby canal and supplemented by the onsite water harvest/storage ponds. Steam for process heating and co-generation of electricity is generated by heat recovery from the sulfuric acid manufacturing process. The onsite steam turbines will supply 36 MW electricity, with the remaining 2 MW purchased from grid. Fuel oil is stored onsite for startup or emergency. Environmental Compliances: The wastewater from manufacturing processes is treated at an onsite effluent treatment plant (ETP). All the treated wastewater is reused in the phosphoric acid plant, except 50 m3/d of demineralization device blow-down, which is discharged to the sea. The sanitary water from the residential colony is treated at onsite sewage treatment plant. There is online monitoring system for discharged wastewater and storm water, which shows the discharged wastewater/storm water meet both local regulatory requirements and World Bank Group (WBG) EHS guideline limits. The air emissions from production processes meet both local regulatory requirements and WBG EHS guideline limits, with the exception of particulate matters (PM) from DAP/NPK plant, which exceed WBG EHS guideline limit. Paradeep will do their best efforts to reduce particulate matters emissions to meet both local regulatory requirements and WBG EHS guideline limits. The ambient air quality and noise levels meet both local regulatory and World Health Organization (WHO) requirements. Solid and hazardous wastes: The major solid waste is gypsum generated from phosphoric acid manufacturing. After expansion, Paradeep will generate approximately 2 million ton gypsum per year. Currently, there is about 7 million ton gypsum stored at a gypsum landfill with a capacity of 10 million tons. Paradeep sells about 0.5 million gypsum per year as a construction raw material. The sanitary solid wastes are picked by municipal contractor for disposal. The landfill is constructed with impermeable clay bottoms. The leachate from the landfill is recovered for phosphoric acid manufacturing. The groundwater monitoring data show compliant with local regulatory requirements. Paradeep plans to invest for further recovery of fluorides from wastewater streams, which will reduce the fluoride content in the gypsum. Paradeep will build a new gypsum landfill adjacent to the existing one with 16 million ton capacity and geotextile/HDPE impermeable lining system, which meet the good international industry practice. Used catalysts are the main hazardous waste onsite, which is stored in a covered area as per state EHS requirement and will be sent back to licensed company for re-generation or disposal. Hazardous materials and operation hazard: Paradeep’s raw materials and intermediate products comprise significant amount of hazardous materials. The manufacturing, storage, handling, and transportation of these materials pose potentially serious dangers to the employees and nearby communities. Process safety is always among the management’s top concerns. Hazard operability (HAZOP) studies are required for all new processes and major process modifications. The ammonia is stored in refrigerated double wall full containment tanks with automatic leaking detection system and backup electricity supply. Online ammonia vapor sensors are installed at both tank farm and workplace. The tanks are thoroughly inspected for integrity every five years. Ammonia pump is running maintenance free so far, necessary maintenance will be taken as required. The sulfuric/phosphoric acid tanks are also inspected for integrity periodically. Fire prevention and emergency response: There are dedicated fire water storage tanks onsite and adequate firefighting equipment onsite with proper maintenance. Paradeep has its own onsite hospital with emergence response (ER) capacity. Paradeep also has its own fire fighting brigade with fire trucks and other appropriate equipment. In case of ER, fire trucks from nearby chemical companies can also be called for help. Fire prevention and emergency response are included in new employee trainings and annual refreshers. Paradeep conducts quarterly onsite drills for fire fighting and potential chemical explosion/releases. Paradeep also conducts annually offsite ER drills with other companies in the coastal industrial region. Greenhouse gases (GHG) and energy efficiency: Currently, Paradeep consumes around 28 MW power supply, of which 16 MW is from onsite generation and the remaining 12 MW purchased. On site steam generation is based on heat recovered from sulfuric acid manufacturing. The GHG footprint of Paradeep’s existing operation is around 83,000 tonnes per annum CO2 equivalent (tpa CO2-eq). As part of the proposed Project, Paradeep will increase sulfuric acid production and internal power generation, adding 20 MWe. Electricity imports will reduce to around 2 MW which will have a GHG footprint of around 14,000 tpa CO2-eq. The energy consumption rates for main products are lower than the industrial benchmarks, listed in WBG EHS guidelines. As part of IFC project, Paradeep will invest $30 million to increase energy efficiency, including the acid heat recovery for the existing and proposed processes. Based on Paradeep’s calculation, the acid heat recovery can save 9.5 MW power, which equals to 65,000 ton/y CO2 equivalence GHG reduction. 4. Community Health, Safety, and Security Community health, safety and security: There is a Paradeep housing colony onsite and communities to the southeast of Paradeep site. The normal operations at Paradeep have limited impacts to these communities. However, the colony and southeast communities could be impacted in case of serious ammonia leaks or other catastrophic accidents. As required in ESAP, Paradeep will prepare an emergency response plan to minimize potential impacts to the communities in case of catastrophic accident. Paradeep will also add online ammonia detection along the southeast plant border and add an ambient air quality monitoring location in colony and southeast community, respectively, to observe air quality normal operations. The raw materials are transferred from nearby port through closed conveyor and pipelines, and the products are transported out through dedicated railroad with a terminal onsite. Emergency preparedness and response: Paradeep has ER plans available and conducts routine drills for fire fighting and potential chemical explosion/releases. Paradeep also holds annual offsite ER drills along with other industries in the region. Security personnel requirement: Paradeep hires external agencies for site security, which mainly conduct routine ID check at the gates and security monitoring. There is also an onsite police station at Paradeep. For serious security issues, Paradeep reports directly to the local police station.

Paradeep has a full time community liaison working with the local communities. The general manager of Personnel and Administration also holds monthly meetings with local village council members to hear their concerns. Paradeep has long-term contracts with several non-government organizations (NGOs) to promote the local community development. The NGOs identify the girls from poor families are the vulnerable group. Paradeep invests in the local girl school and provides vocational training focusing on young ladies. Besides these, Paradeep also works with NGOs to improve the sanitation and healthcare facilities in the local communities. Paradeep held a public hearing during the preparation of EIA and the concerns of the local communities are addressed in the final reports. The EIA/QRA reports were also disclosed at the website of India Ministry of Environment and Forest for six months. In accordance with ESAP, Paradeep will do their best efforts to keep local communities informed of the environmental performances at Paradeep through its community liaisoning.

The EIA is available for public review at the library of State Pollution Control Board. Paradeep will also make necessary announcement of the project prior to commissioning of the project in local language. The contacting officer for enquiring environmental and social impact would be under: Dr. Ramakrishna Iyer Paradeep Phosphates Limited, Paradeep Phone: +91-9937097621 Fax: +91- 06722-229625