Environment and Social Safeguards Framework for Microenterprises in the Missing Middle Segment

Transcription

1 Environment and Social Safeguards Framework for Microenterprises in the Missing Middle Segment May 2012 Submitted by Kalyani Kandula

2 Acknowledgement The development of this Environment and Social Safeguard Framework for Microenterprises has been supported by the GIZ. The GIZ supports the Government of India s Micro, Small and Medium Enterprise Financing and Development Project being executed by the Small Industries Development Bank of India (SIDBI). 2 P a g e

3 Contents Acknowledgement... 2 Contents... 3 Introduction... 8 Box 1: SIDBI s Environment and Social Policy... 8 Environmental and Social Safeguards Framework for Microenterprises... 9 A. Integration of Environmental and Social Safeguards into Appraisal Process of Loan Applications from Microenterprises... 9 Preliminary Screening... 9 MEL Application by Client MEL Client Review MEL Credit Committee Meeting Loan Sanction End-use Verification Figure 1: Process Flow for Integration of Environmental and Social Safeguards into MEL Sanctioning Process Tool 1: Classification of MEs on the basis of potential Environmental and Social Safeguard Risk Tool 2: Environmental and Social Safeguards Checklist Tool 3: Environmental and Social Safeguards Compliance Verification Checklist B. Institutional Arrangement for Implementation of E & S Safeguards C. Capacity Building of SFMC Staff and Awareness Building in MEL Beneficiaries. 24 Trainee profile Training needs Communication materials On-site mentoring D. Monitoring of Compliance with E & S Safeguard Requirements Monitoring of compliance by the MEs Monitoring of implementation of procedures on E & S Safeguards by SIDBI E. Grievance Redressal System F. Public Disclosure G. Budget H. Way Forward on Environmental and Social Safeguards Periodic updating From Compliance to Proactive Management Annex I - A: Involuntary Resettlement / Indigenous People Categorization Form A. Screening Questions for Resettlement Categorization P a g e

4 Remarks Annex I - B: ADB Prohibited Investment Activities List Annex A: Sources of Information on Categorization of Enterprises by Various States and by the Central Government Annex B: Details of National, State and International Regulations Relevant to the Environmental and Social Safeguards Framework for MEs A. Regulations of the Government of India Environmental Safeguards Regulations concerning establishment of an Industry Regulations concerning Water Pollution Regulations concerning Air Pollution Regulations concerning Noise Pollution Regulations concerning Hazardous Materials and Wastes Regulations other Wastes Regulations concerning Coastal Areas Regulations concerning Forests, Wetlands, Wildlife and Cruelty to Animals Social Safeguards Regulations concerning Land Acquisition, Resettlement and Rehabilitation Regulations concerning Wages Regulations concerning Child Labour Regulations concerning Employee Insurance B. Regulations of the State Governments Karnataka Orissa Tamil Nadu Assam Andhra Pradesh West Bengal Uttar Pradesh Maharashtra Madhya Pradesh Rajasthan Gujarat Jharkhand Punjab Haryana Chhattisgarh P a g e

5 Jammu and Kashmir Uttarakhand Himachal Pradesh Tripura Meghalaya Manipur Nagaland Goa Arunachal Pradesh Mizoram Sikkim C. International Regulations and Standards International Environmental Regulations Convention on International Trade in Endangered Species of Fauna and Flora (CITES) Convention on Wetlands Stockholm Convention on Persistent Organic Pollutants (POPs) Basel Convention on the Control of Transboundary Movement of Hazardous Waste and their Disposal Montreal Protocol (on Ozone Depleting Substances) International Environmental Standards ISO International Social Regulations International Labour Organization (ILO) conventions: Human Rights Conventions Annex C: Categorization of enterprises in States Karnataka RED Category of Industries ORANGE Category of Industries GREEN Category of Industries Orissa Red (High Pollution Potential) ORANGE (Medium Pollution Potential) GREEN (Low Pollution Potential) Non-Polluting Industrial Activities (exemption from Consent) Tamil Nadu Categorization of Industries - RED P a g e

6 Categorisation of Industries - ORANGE Assam Andhra Pradesh List of Polluting SSIs Uttar Pradesh List of non-polluting SSIs exempted from obtaining NOC from State Pollution Control Board Criteria for SSIs to require Consent to Establish / NOC West Bengal Special Red Category Ordinary Red Category Orange Category Green Category Exempted Category Maharashtra List of Industries under RED category List of Industries under ORANGE category List of Industries under GREEN category Categorization of industries for Consent Management by the Ministry of Environment and Forests, Government of India I. List of Industries under RED Category II. List of Industries ORANGE Category III. List of Industries under GREEN category Annex D: List of Hazardous and Toxic Chemicals List of chemicals and processes for application of Hazardous Chemical Rules, Schedule I Schedule IV List of chemicals with quantities for application of Public Liability Insurance Act PART - I PART-II Chemicals subject to the Prior Informed Consent procedure under the Rotterdam Convention Listing of POPs in the Stockholm Convention Annex E: List of Banned Dyes List of amines banned by Germany and Netherlands List of 42 Benzidine Based Dyes Prohibited from List of 70 Azo Dyes Prohibited from June Annex F: List of Ozone Depleting Substances and Phase-out Dates P a g e

7 Production and Consumption Control Schedule as per Montreal Protocol List of Ozone Depleting Substances (ODS) Annex G: Asian Development Bank s Social Safeguard Policies ADB's Policy on Involuntary Resettlement ADB s Policy on Indigenous Peoples Annex H: National Policy on Resettlement and Rehabilitation, P a g e

8 Introduction As the apex institute with the responsibility of promotion, finance and development of Small Scale Industries (SSI) in India, SIDBI strives to promote sustainable development for all micro, small and medium enterprises. The SIDBI Foundation for Microcredit (SFMC) has seven specialized microfinance branches (Kolkata, Bhubaneshwar, Guwahati, Bangalore, Chennai, Hyderabad and Lucknow) and finances the microenterprises (MEs) from these branches as well as from its New Delhi office. The MEs are provided with credit of ` 50,000 to ` 10,00,000. SIDBI applies a robust process for appraising loan applications from MEs. In tune with its stated Environment and Social Policy (Box 1), SIDBI now plans to integrate E & S Safeguards considerations into the appraisal process for ME loans (MELs) and into the implementation of the ME activities. This document describes the E & S Safeguards Framework for MEs supported by SIDBI. It describes the procedures and tools for integration of the E & S Safeguards requirements with the MEL sanctioning process, as well as the strategies for capacity building and monitoring. The same Framework shall also be applicable to bought-out portfolio if any, for considering it eligible for coverage under ADB. Box 1: SIDBI s Environment and Social Policy SIDBI s initiatives in the past and future are aimed to reduce environmental and social risks by promoting: compliance to applicable Indian environmental and labour legislations, cleaner production methods, energy and water saving methods, utilization of appropriate technologies and no use of child labour and forced labour. SIDBI will ensure this by: capacity building its staff on environmental and social risk management procedures through regular training and awareness, creating awareness for industry borrowers, strengthening Environment and Social (E & S) Safeguards procedures by integrating these considerations into all phases of life cycle, and by updating E & S Management Framework at regular intervals. 8 P a g e

9 Environmental and Social Safeguards Framework for Microenterprises A. Integration of Environmental and Social Safeguards into Appraisal Process of Loan Applications from Microenterprises The integration of the E & S Safeguards requirements with the MEL sanctioning process is described in this section. Preliminary Screening At the Preliminary Screening stage of the MEL sanctioning process, the SIDBI Loan Officer determines if the ME is permissible for support. For MEs that are permissible for support, the SIDBI Loan Officer advises the client on the E & S Safeguards requirements for the remaining stages of the MEL sanctioning process. The Tool 1: Classification of MEs on the basis of potential Environmental and Social Safeguard Risk is to be used by the SIDBI Loan Officer for the Environment & Social Safeguard Risk Categorization of ME at the Preliminary Screening Stage. MEs that are likely to involve the following are considered PROHIIBITED ACTIVITIES and are not to be supported: displacement of people (loss of assets and livelihoods), impact on indigenous people, forced labour or child labour, production or trade in illegal products or activities, slaughter houses, tanneries, wildlife products, weapons, ammunition, alcohol, tobacco products, gambling, radioactive materials, unbounded asbestos fibre, commercial logging, and harmful fishing practices (refer to Tool 1 on page 10 and to Annexe I). MEs that are classified in the RED category in the state (and those involving use of chemicals, PCB manufacture, dyeing and electroplating) are considered to be in the HIGH risk category. In considering these cases for MEL, investments in cleaner production technology will be encouraged. The client is informed that the proof of valid Consent for Establishment and Operation from the State Pollution Control Board are required to be submitted prior to the disbursement of the loan. The client is also informed that Social Safeguards compliance would be checked at the MEL Client Review/Appraisal stage. MEs in ORANGE category (and those involving lead-acid batteries, health care establishments, brick manufacture, and plastics manufacture) are considered to be in the MEDIUM risk category. For these, the client is informed that the proof of Consent for Establishment and Operation from the State Pollution Control Board are required to be submitted prior to the disbursement of the loan. The client is also informed that Social Safeguards compliance would be checked at the MEL Client Review/Appraisal stage. MEs in GREEN category are considered to be in the LOW risk category, and for these the client is informed that Environmental Issues and Social Safeguards compliance would be checked at the MEL Client Review/Appraisal stage. For states where there is a requirement of valid Consent for Establishment and Operation from the State Pollution Control Board (or from another designated authority) for the GREEN category, the client is informed that the proof of such Consent is required to be submitted prior to the disbursement of the loan. Details of the categorization of the MEs for the 7 States with SFMC presence can be obtained from the Annex C to this document. In view of SFMC s possible expansion of MEL to other states in future, the sources to obtain details of the categorization of the MEs for the other states have been provided in the Annex A. For states with no specific categorization of MEs, 9 P a g e

10 the categorization suggested by the Ministry of Environment and Forests, Government of India is to be followed. This categorization is also provided in the Annex C. In case the ME is not listed in the MoEF classification, the Loan Officer determines if it has potential to cause air and/or water pollution (on the basis of information provided by the MEL applicant on the nature and scale of the activity). MEs with potential for causing air/water pollution are considered to be in the HIGH or MEDIUM risk category (depending on the significance of the pollution caused) while those not having potential for causing pollution are considered to be in the LOW risk category. MEL Application by Client At the stage that the client is provided the blank MEL Application Form, the SIDBI Loan Officer informs the client about the E & S Safeguards requirements that will be checked at Review/Appraisal stage. When the filled in MEL Application Form is submitted by the client, any necessary documentary evidence is also enclosed. For MEs in the RED and ORANGE categories (and in the GREEN category if required in the state), a copy of the Consent for Establishment and Operation from the State Pollution Control Board are to be submitted before the disbursement of the loan. MEL Client Review At the MEL Client Review stage, the SIDBI Loan Officer conducts the Environment & Social Safeguards Appraisal of the ME. The Appraisal is done on the basis of (a) the documentary evidence provided with the MEL Application Form (b) the information provided by the borrower during discussion with the SIDBI Loan Officer, and (c) the site visit by the SIDBI Loan Officer to the location of the ME involving observation of the ME location and activity; discussion with the entrepreneur, the ME employees as well as the community members. The Tool 2: Environmental and Social Safeguards Checklist is to be used by the SIDBI Loan Officer for conducting the Environment & Social Safeguards Appraisal. The SIDBI Loan Officer will check if (a) the ME has valid consents to establish and operate; (b) the ME activities are in compliance with the conditions specified in consents to establish or operate; and (c) if there is any significant discharge of untreated liquid or solid or hazardous wastes, air emissions, and noise levels. The purpose of the appraisal is to determine if the Environment & Social Safeguards requirements are met. During appraisal the SIDBI Loan Officer also identifies any required conditionality that needs to be included in Letter of Intent (for example, inclusion of conditions such as submission of Consent to Establish and Operate the unit from State Pollution Control Board prior to loan disbursement, and, no use of child labour ). The SIDBI Loan Officer will refer to the laws and regulations of the State concerning land acquisition, involuntary resettlement and indigenous people in case the issues are relevant for the ME being supported. MEL Credit Committee Meeting The SIDBI Loan Officer will include information on whether Environmental and Social Safeguard requirements for Review/Appraisal stage are fully met with in the MEL Credit Committee Summary. The MEL Credit Committee will ensure that only MEs that satisfy the Environmental and Social Safeguard requirements are considered for MEL sanction. Loan Sanction The SIDBI Loan Officer will ensure that any required conditionality on Environmental and Social Safeguards, agreed with client during Review/Appraisal, is included in Letter of Intent. This will pertain to inclusion of conditions such as submission of Consent to Establish and Operate from State Pollution Control Board prior to loan disbursement, no land acquisition, resettlement and rehabilitation involved, no impact on indigenous peoples 10 P a g e

11 involved, and, no use of child labour in MEs in which such a risk is identified during the MEL Client Review stage. End-use Verification The SIDBI Loan Officer will ensure that there is continued compliance with Environmental and Social Safeguards by the ME especially with respect to the conditions included in the Letter of Intent. The end-use verification visit and discussions of the SIDBI Loan Officer with the borrower as well as with ME employees and community members in the proximity of the ME, help to check on continued compliance and on providing any required guidance. The SIDBI Loan Officer will use Tool 3 for this purpose. During end-use verification, the SIDBI Loan Officer will check if (a) the ME activities are in compliance with the conditions specified in consents to establish or operate; and (b) if there is any significant discharge of untreated liquid or solid or hazardous wastes, air emissions, and noise levels. Further, the Officer shall also ask the beneficiary to submit a certificate stating compliance with the conditions specified in consents to establish/ operate. The end-use verification of compliance with Environmental and Social Safeguards will be done for all MELs irrespective of the risk categorization. The Table 2 summarizes the above steps in integration of the E & S Safeguards requirements with the MEL sanctioning process and with post-sanction follow-up. Table 2: Integration of the E & S Safeguards with the MEL sanctioning process No. MEL Processing Stage Key actions on E & S Safeguards at this Stage 1 Preliminary Screening 2 MEL Application by Client 3 MEL Client Review 4 MEL Credit Committee Meeting 5 Loan Sanction Determine if the activity is permissible for support Determine the level of environmental and social safeguard risk Inform the client about the E & S Safeguards requirements Inform the client about the E & S Safeguards requirements Determine if E & S Safeguards requirements are met Identify any required conditionality on E & S Safeguards that needs to be included in Letter of Intent Inform Credit Committee if E & S Safeguards requirements are satisfied through inclusion of relevant information in MEL Credit Committee Summary Ensure that any required conditionality on E & S Safeguards, agreed with client during Review/Appraisal, is included in Letter of Intent Ensure that documentary evidence of any necessary valid Consent to Establish and Operate from State Pollution Control Documents and Tools to be used Tool 1 None Tool 2 Include in MEL Credit Committee Summary Include in Letter of Intent 11 P a g e

12 6 End-use Verification Board is submitted by the client prior to the disbursement of the loan Ensure that there is continued compliance with E & S Safeguards Tool 3. Include observations in End-use Verification Report. Three tools have been developed to be used to assess compliance by MEs with E & S Safeguards. These are: Tool 1: Classification of MEs on the basis of potential Environmental and Social Safeguard Risk (to be used at Preliminary Screening Stage of the MEL) Tool 2: Environmental and Social Safeguards Checklist (to be used at Review/Appraisal Stage of the MEL) Tool 3: Environmental and Social Safeguards Compliance Verification Checklist (to be used during End-use Verification) The tools are presented in the following pages. The process flow has been depicted in Figure 1 in the following page. 12 P a g e

13 Figure 1: Process Flow for Integration of Environmental and Social Safeguards into MEL Sanctioning Process Determine Risk Category using Tool 1 PROHIBITED Activities High Risk RED Category Medium Risk ORANGE Category Low Risk GREEEN / EXEMPT Category Non-Specific Risk Do not consider for MEL Go to # # Check E & S Safeguards using Tool 2 Go to # Determine Risk Category using MoEF categorization Use Step 1 of Tool 2 If ME does not feature in MoEF categorization, determine Risk Category based on pollution potential If all ticks are under 'No' - E & S Safeguard requirements are satisfied If there is any tick under 'Yes' - use Step 2 of Tool 2 Proceed as per identified Risk Category If all ticks are under 'Yes' - E & S Safeguard requirements are satisfied If there is any tick under 'No' - E & S Safeguard requirements are not satisfied 13 P a g e

14 PROHIBITED ACTIVITIES 2 Tool 1: Classification of MEs on the basis of potential Environmental and Social Safeguard Risk (To be used at Preliminary Screening stage) Risk Category MEs in this Risk Category Justification for Categorization Universal list of MEs to be considered in this risk category for all States 1 (Note: In case an ME in the universal list is accorded a higher risk category in the State, the higher risk category will apply) MEs involving: Displacement of people (loss of assets, loss of livelihoods) 3 Impact on indigenous people Forced labour or child labour Production or trade in illegal products or activities 4 Slaughter houses, tanneries Wildlife products Weapons, ammunition Alcohol, tobacco products Gambling enterprises Radioactive materials Unbonded asbestos fibres Commercial logging Harmful fishing practices 5 Specific list of MEs as per the State s categorization (Refer to Annex C for details of RED, ORANGE and GREEN categories) None Risk of displacement and involuntary resettlement Risk of impacts on indigenous people High pollution and safety risk Information to be given to the MEL Applicant SIDBI Loan Officer will inform the MEL applicant that MELs for these activities are NOT permissible. 1 For detailed assessment refer to Annex I-A for Involuntary Resettlement Categorization and Indigenous People Categorization 2 Also refer to Annex I-B for ADB Prohibited Investment Activities List. 3 Check for the following: Will the ME involve: physical construction work; upgrading/rehabilitation of existing physical facilities; loss of housing, other assets, resource use or incomes/livelihoods (loss of agricultural plots, crops, trees, fixed assets, business or enterprises); land acquisition; loss of access to facilities, services or natural resources. 4 Production of or trade in any product or activity deemed illegal under national laws or regulations or international conventions and agreements or subject to international phaseouts or bans, such as (a) pharmaceuticals (refer to: pesticides and herbicides (refer to: Annex D), (b) ozone-depleting substances (refer to: Annex F), (c) polychlorinated biphenyls and other hazardous chemicals (refer to: Annex D), (d) wildlife or wildlife products regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (refer to: and (e) transboundary trade in waste or waste products (refer to: Annex D). 14 P a g e

15 MEDIUM RISK HIGH RISK Chemicals PCB manufacture Dyeing Electroplating Lead-Acid Batteries Health care establishments 6 Brick manufacture Plastics manufacture All MEs in RED category in the State (In case of Andhra Pradesh List of Polluting SSIs; In case of Uttar Pradesh SSIs meeting any one of the specified criteria for obtaining Consent for Establishment from SPCB) All MEs in ORANGE category in the State High pollution and safety risk Moderate pollution and safety risk SIDBI Loan Officer will inform the MEL applicant that these activities will be considered for MEL only after the following are checked during Appraisal (using Tool 2): Checking for Social Safeguards Confirming that a valid Consent for Establishment and Operation have been obtained from State Pollution Control Board SIDBI Loan Officer will inform the MEL applicant that these activities will be considered for MEL only after the following are checked during Appraisal (using Tool 2): Checking for Social Safeguards Confirming that a valid Consent for Establishment and Operation have been obtained from State Pollution Control Board 5 Such as use of drift nets, fine mesh nets, explosives, etc., that are harmful to a wide range of aquatic species and habitat. 6 For example, diagnostic labs. 15 P a g e

16 LOW RISK Vehicles All MEs in GREEN or EXEMPTED category in State Low pollution and safety risk SIDBI Loan Officer will inform the MEL applicant that these activities will be considered for MEL only after the following are checked during Appraisal (using Tool 2): Checking for Social Safeguards If so required in the state, confirming that a valid Consent for Establishment and Operation have been obtained from State Pollution Control Board Checking that the vehicles comply with the prescribed emission norms (BS III and IV as applicable) 7 7 Refer to Regulations Concerning Air Pollution in Annex B 16 P a g e

17 NON-SPECIFIC RISK MEs in States that do not have categorization of industries into RED, ORANGE, GREEN categories; and, MEs which are not listed in the State s categorization of industries into RED, ORANGE, GREEN categories Possibility of pollution and safety risk SIDBI Loan Officer will inform the MEL applicant that these activities will be considered for MEL only after the following are checked during Appraisal (using Tool 2): Check Classification of Industries for Consent Management 8 of Ministry of Environment and Forests (MoEF), Government of India and identify Red, Orange, or Green category. Then, use this table (Tool 1) to determine the risk category. If the ME is not listed in the MoEF classification, the SIDBI Loan Officer will determine if it has potential to cause air and/or water pollution (depending on the nature and scale of activity). If yes, the risk will be categorized as HIGH or MEDIUM (depending on the significance of the pollution caused). If no, the risk will be categorized as LOW. Checking for Social Safeguards 8 Refer to Annex C or to 17 P a g e

18 Contd. of Tool 1: Preliminary Screening Stage: Environment & Social Safeguard Risk Categorization of ME Name of MEL Applicant: Nature of Business/Service: Risk Category assigned to the ME: High / Medium / Low / Non-specific Justification for the categorization: Information provided to MEL applicant on further requirements of E & S safeguards in MEL sanctioning process: Name of Loan Officer: Signature of Loan Officer: Date: 18 P a g e

19 Tool 2: Environmental and Social Safeguards Checklist (To be used at Review/Appraisal stage) STEP 1 S.No. Items to check in STEP 1 1 Does the ME belong to Prohibited Category? 2 Does the ME belong to High Risk Category (RED category)? 3 Does the ME belong to Medium Risk Category (ORANGE category)? 4 Does the ME (a) belong to GREEN category and (b) is in a state where Consent for Establishment and Operation are required for this category? 5 Does the ME involve use of any of the following: Chemicals 9 Hazardous substances (including hazardous wastes) 10 Bio-medical wastes Dyes 11 Occupational and community health and safety issues Discharge of effluents Risk of air and/or noise pollution 6 Does the ME involve any of the following: Area in the Coastal Regulation Zone 12 Wetland area Proximity to cultural/historical heritage sites (including Protected Monuments) 7 Does the ME involve any commercial pest control operation? 8 Does the ME involve any Ozone Depleting Substances 13? 9 Does the ME involve land designated as forest, or forest products? 10 Does the ME involve or likely to involve child labour or forced labour? Please tick ( ) Yes No No info. If there are all ticks ( ) under No for all the S.No, E&S safeguard requirements for Review/Appraisal stage ARE SATISFIED. (No need to proceed to STEP 2.) If there is any tick ( ) under Yes for any S.No, proceed to the same S.No in STEP 2 (overleaf). If there is any tick ( ) under No info for any S.No, get the required information and reuse this Checklist. 9 For the list hazardous and toxic chemicals see: Annex D or 10 For the list hazardous and toxic chemicals see: Annex D or 11 For the list of Banned Dyes see: Annex E or 12 For details on the Coastal Regulation Zone see: 13 For the list of Ozone Depleting Substances see: Annex F or (specifically see: 19 P a g e

20 11 Does the ME involve displacement of people (loss of assets, loss of livelihoods)? Does the ME involve impact on indigenous people? Source of information for filling Step 1 of Tool 2 (tick as applicable): Observations on site Discussion with ME entrepreuner Discussion with ME employees Discussion with community members in proximity of ME location Name of Loan Officer: Signature of Loan Officer: Date: 14 Check for the following: Will the ME involve: physical construction work; upgrading/rehabilitation of existing physical facilities; loss of housing, other assets, resource use or incomes/livelihoods (loss of agricultural plots, crops, trees, fixed assets, business or enterprises); land acquisition; loss of access to facilities, services or natural resources. 20 P a g e

21 STEP 2 S.No. Items to check in STEP 2 Please tick ( ) Yes No NA* No info. 1 MELs for activities in the Prohibited Activities Category are NOT permissible. X X X 2 If the ME belong to High Risk Category (RED category): Has a valid Consent for Establishment and Consent for Operation been obtained from the State Pollution Control Board? Are the ME activities in compliance with the conditions specified in consents to establish or operate? 3 If the ME belong to Medium Risk Category (ORANGE category): Has a valid Consent for Establishment and Consent for Operation been obtained from the State Pollution Control Board? Are the ME activities in compliance with the conditions specified in consents to establish or operate? 4 If the ME (a) belongs to GREEN category and (b) is in a state where Consent for Establishment and Operation are required for this category: Has a valid Consent for Establishment and Consent for Operation (or its equivalent) been obtained from the State Pollution Control Board (or the designated entity)? Are the ME activities in compliance with the conditions specified in consents to establish or operate? 5 If the ME involves chemicals, hazardous substances, bio-medical wastes, dyes, occupational and community health and safety issues, discharge of effluents, air and noise pollution: Has a valid Consent for Establishment and Consent for Operation been obtained from the State Pollution Control Board? Are the ME activities in compliance with the conditions specified in consents to establish or operate? 6 If the ME involves the: Coastal Regulation Zone has permission been taken from the State Coastal Zone Management Authority? Wetland area has permission been taken from the State Wetland Authority? Area around Protected Monuments (up to 300 metres) has permission been taken from the ASI? Other cultural / historical heritage sites has permission been taken from the relevant If there are all ticks ( ) under Yes for all the S.No, E&S safeguard requirements for Review/Appraisal stage ARE SATISFIED. If there is any tick ( ) under No for any S.No, E&S safeguard requirements for Review/Appraisal stage ARE NOT SATISFIED. If there is a tick ( ) under No info for any S.No, get the required information and reuse this Checklist. 21 P a g e

22 Government authority? 7 If the ME involves any commercial pest control operation: Has a valid Consent for Establishment and Consent for Operation been obtained from the State Pollution Control Board, and, licence obtained for the commercial pest control operation? Are the ME activities in compliance with the conditions specified in consents to establish or operate? 8 If the ME involves any Ozone Depleting Substances: Has a valid Consent for Establishment and Consent for Operation been obtained from the State Pollution Control Board, and, registration for ODS use obtained from SIDO? Are the ME activities in compliance with the conditions specified in consents to establish or operate? 9 If the ME involves land designated as forest or forest products: Has written permission been taken from the Forest Department? 10 Has entrepreneur agreed to include that micro-enterprise will not involve any child labour or forced labour as a condition for sanction of loan? This is a prohibited activity. MELs for activities in the Prohibited Activities Category are NOT permissible. 12 This is a prohibited activity. MELs for activities in the Prohibited Activities Category are NOT permissible. * NA: Not Applicable X X X X X X Source of information for filling Step 2 of Tool 2 (tick as applicable): Observations on site Discussion with ME entrepreuner Discussion with ME employees Discussion with community members in proximity of ME location Name of Loan Officer: Signature of Loan Officer: Date: 15 Refer to Regulations Concerning Child Labour in Annex B 22 P a g e

23 Tool 3: Environmental and Social Safeguards Compliance Verification Checklist (To be used at End-Use Verification stage) S.No. Items to check in STEP 1 Remarks of Loan Officer Source of Information (tick) 1 Does the ME involve use of any of the following: Chemicals 16 Hazardous substances (including hazardous wastes) 17 Bio-medical wastes Dyes 18 Pesticides Ozone Depleting Substances 19 Forest products 2 Environmental issues: Occupational and community health and safety issues Discharge of effluents Risk of air and/or noise pollution 3 Social issues: Displacement of people (loss of assets or livelihoods) 20 Impacts on indigenous people Involvement of child labour or forced labour 4 Is the ME in compliance with the conditions specified in the Consent for Establishment and Consent for Operation obtained from the State Pollution Control Board? Yes No Not applicable Not checked Details: Observation MEL applicant Name of Loan Officer: Signature of Loan Officer: Date: ME employee Community 16 For the list hazardous and toxic chemicals see: Annex D or 17 For the list hazardous and toxic chemicals see: Annex D or 18 For the list of Banned Dyes see: Annex E or 19 For the list of Ozone Depleting Substances see: Annex F or (specifically see: 20 Check for the following: Will the ME involve: physical construction work; upgrading/rehabilitation of existing physical facilities; loss of housing, other assets, resource use or incomes/livelihoods (loss of agricultural plots, crops, trees, fixed assets, business or enterprises); land acquisition; loss of access to facilities, services or natural resources. 23 P a g e

24 B. Institutional Arrangement for Implementation of E & S Safeguards The institutional arrangements for the integration of E & S Safeguards into the appraisal process for loan applications from MEs will be in tune with the existing Delegation of Power in SIDBI. C. Capacity Building of SFMC Staff and Awareness Building in MEL Beneficiaries Capacity building needs of the SFMC staff on E & S Safeguards need to be catered to through training, exposure visits and through access to relevant communication materials. Awareness building needs of the ME entrepreneurs on E & S Safeguards need to be catered to through on-site mentoring. Trainee profile Loan Officers/Outsourced Staff who are the front-line staff at SFMC Microfinance Branch Offices. Branch Managers who are responsible for the management of MELs. Training needs Awareness of environmental and social issues relevant to MEs. Understanding of procedures for integration of E & S Safeguards appraisal as part of the appraisal process of MELs. Understanding of procedures for monitoring of compliance on E & S Safeguards appraisal as part of the verification process of MELs. Understanding of safeguard policies of relevant partners (including ADB, World Bank) for example, policies regarding Environmental Assessment, Involuntary Resettlement, Indigenous People. Communication materials Copy of this document along with all relevant Annexes is to be made available to all SFMC Microfinance Branch Offices for reference. Copy of the Tool 1 and Tool 2 along with all relevant Annexes is to be made available on the website of SIDBI for easy access by SFMC staff. On-site mentoring Follow-up field visits by the staff of SFMC Microfinance Branch Offices to the MEs are an opportunity for providing on-site advisory support for adoption of better E & S Safeguards practices. D. Monitoring of Compliance with E & S Safeguard Requirements Monitoring of compliance with E & S Safeguards requirements will be at 2 levels: 24 P a g e

25 Monitoring of compliance by the MEs This will be done during the end-use verification visit by the staff of SFMC Microfinance Branch Offices to the MEs. A report on compliance with E & S Safeguards will be part of the end-use verification report. Non-compliance with E & S Safeguards will be followed up through on-site mentoring emphasizing that the ME needs to implement the required mitigation measures. Monitoring of implementation of procedures on E & S Safeguards by SIDBI Compliance of SFMC with the procedures for E & S Safeguards while processing MELs will be covered as part of the regular internal audit by SIDBI s Internal Audit Team. E. Grievance Redressal System SIDBI s existing Complaints and Grievance Redressal Policy would be applicable on receipt of any written complaint or grievance from any customer or member of the public. F. Public Disclosure This ESSF document will be publicly disclosed through the website of the SIDBI. It will also be available on the SIDBI intranet for ease of access by the SIDBI staff. Hard copies of the ESSF (English and local language versions) will be available at the SIDBI SFMC branch offices for access by beneficiaries. G. Budget The annual budget for ESSF implementation is as follows: S. No. Budget Head Budget Sub-head Unit Unit Cost in Rupees 1 Capacity building of SFMC staff Training of Loan Officers (all Branch Offices) Training of Outsourced Staff (Lucknow) Training of Branch Managers (all Branch Offices) Communication materials (including English and local language versions) Training program Training program Training program Materials set No. of Units Sub-total in Rupees P a g e

26 2 Consultant /s for technical inputs on E & S safeguards (depending on requirement) (all Branch Offices) Consultant /s fee and travel expenses Lumpsum TOTAL H. Way Forward on Environmental and Social Safeguards The provisions of this ESSF are viewed as important initial steps in mainstreaming of E & S safeguards in ME operations. Periodic updating SIDBI will periodically review the effectiveness of ESSF implementation (as described in the section E) and take required measures to strengthen the same. The Annexes to the ESSF contain dynamic information (on relevant state, national and international regulations) that needs to be updated on a half-yearly basis to capture any developments that have a bearing on the ESSF (for example, a state may issue a revised list of RED, ORANGE and GREEN categories). From Compliance to Proactive Management It is envisaged that over time, with implementation experience, the ESSF will evolve in its focus from ensuring compliance to encouraging proactive E & S safeguard management in MEs. Examples of the environmental opportunities that SIDBI could expand its support to in future are encouraging waste minimization and cleaner production by MEs. 26 P a g e

27 Annex I - A: Involuntary Resettlement / Indigenous People Categorization Form Involuntary Resettlement Categorization Form A. Screening Questions for Resettlement Categorization Probable Involuntary Resettlement Effects* Yes No Not Known Will the project include any physical construction work? Does the project include upgrading or rehabilitation of existing physical facilities? Are any project effects likely to lead to loss of housing, other assets, resource use or incomes/livelihoods? Is land acquisition likely to be necessary? Is the site for land acquisition known? Is the ownership status and current usage of the land known? Will easements be utilized within an existing Right of Way? Are there any non-titled people who live or earn their livelihood at the site or within the Right of Way? Will there be loss of housing? Will there be loss of agricultural plots? Will there be losses of crops, trees, and fixed assets? Will there be loss of businesses or enterprises? Will there be loss of incomes and livelihoods? Will people lose access to facilities, services, or natural resources? Will any social or economic activities be affected by land use-related changes? If involuntary resettlement impacts are expected: Are local laws and regulations compatible with ADB s Involuntary Resettlement policy? Will coordination between government agencies be required to deal with land acquisition? Are there sufficient skilled staff in the Executing Agency for resettlement planning and implementation? Are training and capacity-building interventions required prior to resettlement planning and implementation? *Whenever possible, consider also any future subprojects or investments. Possible Remarks 27 P a g e

28 Information on Affected Persons: Any estimate of the likely number of households that will be affected by the Project? [ ] No [ ] Yes If yes, approximately how many? Are any of them poor, female-heads of households, or vulnerable to poverty risks? [ ] No [ ] Yes If yes, please briefly describe their situation Are any APs from indigenous or ethnic minority groups? If yes, please explain? Additional Information Requirements for Private Sector projects: [ ] Resettlement and land acquisition completed [ ] PSOD is lending to a Financial Intermediary [ ] Resettlement to be completed [ ] The project is an Equity Investment [ ] Project entails risk by association (e.g associated [ ] The project is a Partial Credit /Political Risk facilities are part of the project but not funded Guarantee by the proponent) [ ] Others, please describe Indigenous Peoples Impact Categorization Form A. Identification of indigenous peoples in project area Impact on indigenous peoples (IPs)/ ethnic minority(em) Are there IPs or EM groups present in project locations? Do they maintain distinctive customs or economic activities that may make them vulnerable to hardship? Will the project restrict their economic and social activity and make them particularly vulnerable in the context of project? Will the project change their socioeconomic and cultural integrity? Will the project disrupt their community life? Will the project positively affect their health, education, livelihood or social security status? Will the project negatively affect their health, education, livelihood or social security status? Will the project alter or undermine the recognition of their knowledge, preclude customary behaviors or undermine customary institutions? In case no disruption of indigenous community life as a whole, will there be loss of housing, strip of land, crops, trees and other fixed assets owned or controlled by individual indigenous households? Not known Yes No Remarks or identified problems, if any B. Anticipated project impacts on indigenous peoples Project activity and output Anticipated positive effect Anticipated negative effect P a g e

29 4. 5. C. Decision on Categorization After reviewing the answer above, the Mission Leader and Social Development Specialist agree that the project: Should be categorized as an A project, an Indigenous Peoples Development Plan (IPDP) is required or, for sector/fi projects, an Indigenous Peoples Development Framework (IPDF) is required Should be categorized as a B project, a specific action favorable to indigenous peoples/ethnic minority is required and addressed through a specific provision in RRP and in related plans such as a Resettlement Action Plan, a Gender Action Plan or a general Community Participatory Plan Should be categorized as a C project, no IPDP/IPDF or specific action required 29 P a g e

30 Explanation of IP Impact Categorization A. Summary of Categorization The IP categorization depends on the nature and magnitude of the project s potential positive and negative impact on indigenous peoples, which may result from its location, the type and scale of the project, and sensitivity of indigenous peoples issues. Category A - Indigenous Peoples Development Plan (IPDP) and/or Indigenous Peoples Development Framework (IPDF) is required Category B - Specific action is required, but not within the framework of an IPDP Category C - No impact B. Definition of Categories Category A A proposed project is classified as Category A if it is likely to have significant positive or negative impacts on indigenous peoples. An Indigenous Peoples Development Plan (IPDP) and/or Indigenous Peoples Development Framework (IPDF) is required for Category A Project to avoid negative impacts and ensure appropriate benefits. The circumstances where an intervention is considered having a significant impact on indigenous peoples include: (i) (ii) (iii) (iv) (v) (vi) positive or negative effects on their customary rights of use and access to land and natural resources; positive or negative effects on their socioeconomic and cultural integrity; positive or negative effect on their health, education, livelihood, and social security status; impacts that may alter or undermine indigenous knowledge, preclude customary behaviors or undermine customary institutions; project will be located in, or pass through, areas of significant indigenous peoples settlement and/or use; and project proposes to specifically target indigenous peoples in one or more of its main activities; or is anticipated to have significant negative effects on indigenous peoples (Appendix 7 21 ). In terms of community impacts, the impact area may be considerably broader than the immediate area physically affected by a project. Category A applies to project and its impact area where indigenous peoples maintain distinctive customs or economic activities that may make them particularly vulnerable to hardship. It also applies to project that is likely to adversely affect or disrupt community life. A full-blown IPDP should include specific deliverables, budget and schedules. An IPDF is required for a project if it is financed under sector investment loans, financial intermediary loans, or a credit line or equity investment to a third party, and other ADBassisted project with multiple sub-projects, which are anticipated to have either positive or negative significant impacts on indigenous peoples but where the nature of the impacts cannot be determined until the sub-projects are prepared or until after the detailed technical/engineering design is completed, or following a process of community consultation. 21 An appendix of the Handbook for Poverty and Social Analysis (ADB Handbook on Poverty and Social Analysis. Manila).

31 Other projects that require an IPDF include program, sector development program, and sector loans that are likely to cover an area where indigenous peoples live. An IPDF sets out the indigenous peoples policy together with the screening and planning procedures, which apply to subprojects, components, or investments that are to be approved during loan implementation. An IPDF provides a strategy to ensure that the requirements of the Policy on Indigenous Peoples are met. Category B A proposed project is classified as Category B if it will have limited impacts on indigenous peoples or when there is a risk that the project may not bring the intended benefits to the affected indigenous peoples within a specific plan. Specific action in favor of indigenous peoples is required in order to ensure appropriate benefits and mitigate adverse impact, which action is not necessarily within the framework of a full-blown Indigenous Peoples Development Plan. The favorable action does not require specific deliverables, budget and schedules since it can be embedded in project components or dealt with through the Resettlement Action Plan, the general Community Participatory Plan, or any other appropriate means. Category C A project is classified as Category C if it is likely to have very minimal or no adverse or significant impact on indigenous peoples. For this category of project, no IPDP or specific action is required although impact on indigenous peoples still needs to be properly reviewed. 31

32 Annex I - B: ADB Prohibited Investment Activities List The following do not qualify for Asian Development Bank financing: (i) production or activities involving harmful or exploitative forms of forced labor 22 or child labor; 23 (ii) production of or trade in any product or activity deemed illegal under host country laws or regulations or international conventions and agreements or subject to international phaseouts or bans, such as (a) pharmaceuticals, 24 pesticides, and herbicides, 25 (b) ozone-depleting substances, 26 (c) polychlorinated biphenyls 27 and other hazardous chemicals, 28 (d) wildlife or wildlife products regulated under the Convention on International Trade in Endangered Species of Wild Fauna and Flora, 29 and (e) transboundary trade in waste or waste products; 30 (iii) production of or trade in weapons and munitions, including paramilitary materials; (iv) production of or trade in alcoholic beverages, excluding beer and wine; 31 (v) production of or trade in tobacco; 10 (vi) gambling, casinos, and equivalent enterprises; 10 (vii) production of or trade in radioactive materials, 32 including nuclear reactors and components thereof; (viii) production of, trade in, or use of unbonded asbestos fibers; 33 (ix) commercial logging operations or the purchase of logging equipment for use in primary tropical moist forests or old-growth forests; and (X) marine and coastal fishing practices, such as large-scale pelagic drift net fishing and fine mesh net fishing, harmful to vulnerable and protected species in large numbers and damaging to marine biodiversity and habitats 22 Forced labor means all work or services not voluntarily performed, that is, extracted from individuals under threat of force or penalty. 23 Child labor means the employment of children whose age is below the host country s statutory minimum age of employment or employment of children in contravention of International Labor Organization Convention No. 138 Minimum Age Convention ( 24 A list of pharmaceutical products subject to phaseouts or bans is available at 25 A list of pesticides and herbicides subject to phaseouts or bans is available at 26 A list of the chemical compounds that react with and deplete stratospheric ozone resulting in the widely publicized ozone holes is listed in the Montreal Protocol, together with target reduction and phaseout dates. Information is available at 27 A group of highly toxic chemicals, polychlorinated biphenyls are likely to be found in oil-filled electrical transformers, capacitors, and switchgear dating from 1950 to A list of hazardous chemicals is available at 29 A list is available at 30 As defined by the Basel Convention; see 31 This does not apply to project sponsors who are not substantially involved in these activities. Not substantially involved means that the activity concerned is ancillary to a project sponsor's primary operations. 32 This does not apply to the purchase of medical equipment, quality control (measurement) equipment, and any equipment for which ADB considers the radioactive source to be trivial and adequately shielded. 33 This does not apply to the purchase and use of bonded asbestos cement sheeting where the asbestos content is less than 20%. 32