ENVIRONMENTAL AND SOCIAL REVIEW
SUMMARY
Disclaimer
This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’
consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document
should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project
sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of
adequate quality to be released to the public but does not endorse the content.
Project Identification:
Country:
Project Name:
Project No.:
India
WEG Industries (India) Pvt. Ltd.
29053
Region:
Environment Category:
ASIA
B - Limited
Dept./Div.:
Company Name:
CGMS1 - Global Manufacturing &
WEG S.A.
Services/CGM Sector Group
Project Business Sector: M-BA - Electrical Machinery,
Project Status: Active
Equipment and Components (Electric Lighting, Motors,
Batteries, Insulated Wires and Cables, Fiber Optic Cable,
Carbon and Graphite Products, etc.)
Parent Project Identification:
Parent ID:
Parent Short Name:
Parent Relationship:
No Relationship
IFC’s Disclosure Requirements:
Sent For
Approval
Date ESRS
sent
to InfoShop
& posted on IFC Web site:
Date of revision (if
appropriate):
Date of clearance by client
for factual accuracy
Local Disclosure Date
Local Disclosure Date of
revised ESRS
04/27/2010
04/19/2010
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Overview of IFC’s scope of review:
IFC’s review of this proposed investment in WEG Industries (India) Pvt. Ltd. (WII or the Company) consisted of: a
site visit to WEG S.A.’s corporate headquarters in Brazil, discussions with corporate management regarding WEG
S.A.’s social, environmental, health and safety policies and practices at the corporate level; a site visit to the WII
greenfield project in Hosur, Tamil Nadu, discussions with project management and staff regarding the management
of the social, environmental, health and safety impacts during construction, and a review of environmental and risk
assessments and management plans prepared for the plant’s operations; and related discussions with representatives
of the industrial complex authority in which the project is being developed.
Project Description:
WEG S.A. engineers and manufactures electrical motors and components that are used in power generation and
transmission, water distribution and other infrastructure applications, industrial plants, and in home appliances
around the world. WEG was founded in 1961 in Jaraguá do Sul, in the southern Brazilian state of Santa Catarina,
and has expanded to include production facilities in Argentina, Mexico, Portugal and China.
WEG Industries (India) Pvt. Ltd., a wholly owned subsidiary of WEG S.A., is constructing a greenfield plant near
Hosur, Tamil Nadu, India, to produce high voltage motors and generators (the Project). Production is expected to be
ramped-up by the end of 2011 and in its initial years of operation, the plant is expected to produce an average of
about 250 motors and generators per year. Sales will be largely to the Indian market, although there will also be
exports from India to neighboring countries. WII will produce motors and generators that are large, technologically
sophisticated and typically used in infrastructure (small, electric generation stations and water pumping stations),
agriculture (irrigation), as well as mining and industry.
WEG is seeking IFC financing for the Project, which is constructing a 33,000 m2 plant on a 141,000 m2 area allotted
to the Company by the State Industries Promotion Corporation of Tamil Nadu (SIPCOT). The land allotted for the
plant lies within the boundaries of the SIPCOT Industrial Complex, Phase II at Hosur, located approximately 40 kms
south of Bangaluru (Bangalore) on National Highway 7 linking Bangalore and Chennai. WII commenced
construction of the plant in 2009 and commissioning is expected by end July, 2010.
Identified Applicable Performance Standards:
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 System;
- PS2: Labor and Working Conditions;
- PS3: Pollution Prevention and Abatement;
- PS4: Community Health and Safety
The Project is being constructed within well demarcated boundaries of the SIPCOT Industrial Complex (Phase II
Expansion), which provides all services to the factory site, including access roads, water and sewer hookups, and
electrical connections. The SIPCOT Industrial Complex was established in the 1980s and the Phase II Expansion in
which the Project is located was initiated in 2007. Land for the expansion was acquired on a willing buyer/willing
seller basis from residents of Monarpalli village, with landowners being compensated for land and lost assets at
established government rates through the office of the District Commissioner, Krishnagiri District. According to
SIPCOT sources, no physical displacement of village residents was entailed in the acquisition of the land area
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allotted to the Company. However, a small group of informal settlers (17 households) had established themselves in
temporary shelters on the site before WII took possession of the area. With the assistance of WII, the informal
settlers were provided legal title to house lots less than 1 km distance from the original site. WII provided assistance
to the settlers to move and to construct permanent houses on the site. As such, the requirements of IFC’s
Performance Standard on Land Acquisition and Involuntary Resettlement (PS5) have been satisfied.
The Project is located in a long established industrial complex previously utilized as mixed agriculture and grazing
land by a population of mixed farmer and service castes, hence impacts on biodiversity are not expected (PS6) nor
on Indigenous Peoples (PS7) or Cultural Heritage (PS8) in the absence of sites, structures, natural relief or resources
of cultural importance to surrounding communities.
E & S Categorization Rationale:
This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because
a limited number of environmental and social impacts may result that can be avoided or mitigated by adhering to
generally recognized performance standards and guidelines.
Key risks and issues related to this project include: adequate social and environmental assessment of the impacts of
the Project during both construction and operations; the Company’s capacity to manage its social, environmental,
health and safety performance, and engage with local communities in accordance with local requirements and IFC
Performance Standards and applicable EHS Guidelines; assurance of fair, safe and healthy working conditions
during construction and operations; utilization of equipment and operational practices that maximizes conservation
of energy, water and process materials including recycling and reuse initiatives; management of air emissions,
wastewater treatment and discharge, and solid and other waste disposal; handling and management of hazardous
materials and hazardous wastes; management of the impacts of the influx of construction labor, the impacts of
operations on local ambient air quality, and impacts on transport infrastructure during construction and operations;
and, with regard to site selection, management of land acquisition, physical/economic displacement and
compensation as required.
Description of key Environmental and Social Issues and Mitigation:
Company has demonstrated a capacity to manage the issues identified during construction to date and has presented
plans to manage anticipated impacts as described below.
PS 1: SOCIAL AND ENVIRONMENTAL ASSESSMENT AND MANAGEMENT SYSTEMS – IFC’s review
considered the Company’s management of its environmental, health and safety performance in the establishment and
operation of its facilities; compliance with national and local permitting requirements; and the Company’s
engagement with local communities regarding environmental, health and safety performance.
The WII operations are confined to the fabrication and machining of metal components and assembly of electric
motors and generators utilizing materials – copper wire, steel plate, iron bars, aluminum pipes and paint – sourced
on the open market. No primary processing of materials will be undertaken at the WII plant.
As a light industry in an established industrial zone, WII was exempted by India’s national environmental protection
rules from undertaking a formal Environmental Impact Assessment of its construction and operations. However, in
accordance with the requirements the Tamil Nadu Pollution Control Board (TNPCB), WII did commission an
Environmental Management Plan to assess the characteristics of the plant’s resource requirements and waste streams
(emissions to air, waste water and solid waste) and ensure that operations meet standards prescribed by TNPCB.
While this Management Plan provides predicted levels of the performance for the plant’s operations based on
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pollution control equipment design specifications (e.g., process air emissions filtration and wastewater treatment), it
lacks any details on how this predicted performance will be monitored, internally reported and corrective action, if
any, will be undertaken and audited. WII is required to submit annual reports on its performance to the TNPCB and
submit to periodic inspections by TNPCB officials to maintain its operating licenses. However, a more regular
environmental monitoring regime, similar to that in place at WEG’s more complex central manufacturing facility in
Jaraguá do Sul, Brazil, will be required to ensure continuous compliance with good industry practice, as specified in
the IFC Environmental Health and Safety Guidelines for Metal, Plastic and Rubber Manufacturing.
In addition to an Environmental Management Plan, WII was also required by the SIPCOT authority to commission a
Risk Analysis for its use of LPG and hydrogen gas in its production processes by independent consultants. The
report provides a detailed assessment of risks associated with the handling and storage of these gases and clear
guidelines on what safety measures are required to minimize the risk of fire, explosion and worker exposure to these
hazardous materials.
WEG Brazil maintains an ISO 14001 certified environmental management system, which includes an environmental
policy and a Company management commitment to continuous environmental performance through assessment, gap
analysis, objectives and goals setting, monitoring, training, reporting and performance review. The incoming
operations management of WII intends to operate the plant with similar systems and will aim for ISO14001
certification within two years of operation. Consistent with ISO standards, WEG extends its commitment to
responsible environmental performance to its supply chain by incorporating quality assurance and compliance with
established environmental laws and regulations into its materials procurement contracts. WII will adopt the same
procurement procedures.
PS2: LABOR AND WORKING CONDITIONS – IFC’s review considered BPC’s operations with regard to fair,
safe and healthy working conditions in its operations.
Human Resource Policy, Management and Training – WII currently employs a staff of approximately forty
expatriate and Indian national professionals in engineering design and operational planning as well as construction
supervision, sales and marketing. The WII manufacturing plant will require up to 600 full time employees once it is
in full operation. WII commissioned a Bangalore-based human resource consultancy to design a human resource
management system that is both consistent with WEG’s corporate HR policies and compliant with local labor laws
and requirements. The outcome of this effort is an Administration Manual, which is provided to all WII employees
at the time of their induction. The manual details Company core values, organization, policies for recruitment,
progression and termination terms of employment, such as working conditions, wages and benefits, hours of work,
overtime arrangements and overtime compensation, annual and sick live, maternity, vacation or holiday are
established by local labor regulations. As does WEG’s Corporate HR policies, WII policies prohibit the
employment of underage workers and discrimination in hiring, training, promotion and benefits.
The incoming WII operations management does not anticipate that labor unions will be active in its plant. While it
does not intend to discourage the formation of unions, it prefers to foster cordial relations between management and
the workforce through clear channels of grievance and grievance redress, which are detailed in the WII
Administration Manual.
WEG applies a broad range of its labor policies to its supply chain through its procurement contracts under the
rubric of “Social Responsibility”. Suppliers are required to comply with local labor and tax obligations, are
prohibited for using child labor in the production cycle and are required to develop internal policies against
discrimination in the workplace in accordance with the standards of international labor conventions. Moreover,
suppliers are required to extend these policies to their own business partners. WII will incorporate the same
requirements into its own procurement contracts.
Occupational Health and Safety during Construction and Operations – Approximately 400 construction
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workers are employed on the site of the WII plant. Good housekeeping and safety practices were in evidence during
the site visit, including the use of personal protective equipment (PPE, e.g., hard hats, gloves, safety glasses,
harnesses for men working at height) and protective barriers to restrict access to excavation areas. Six contractors
are at work under the coordination of a general construction contractor that is an affiliate of one of India’s largest
engineering and construction companies (Larsen & Toubro). Each contractor employs a safety officer to promote
safety awareness, monitor worker observance of safety policies and procedures, and record and take corrective
action for any near miss or lost time accidents. Each safety officer reports to the WII Factory Manager, who is
responsible for day-to-day site supervision. In over 900,000 person hours worked, there have been only 12
reportable incidents (including near misses) resulting in a total of eight lost time person hours between June 1, 2009
and March 15, 2010. Site management is instructed to prevent the access of workers contracted to materials
suppliers unless they are equipped with appropriate PPE.
Construction workers employed at the Project site are housed off site, outside of the boundaries of the SIPCOT
industrial complex, in rented housing or temporary labor camps established by their contractors. At the current stage
of construction (erection and electro-mechanical outfitting), the majority of the workforce is highly skilled and
typically moves with contractors from building site to building site.
The incoming WII operations management is committed to Good International Industry Practice in the occupational
health and safety (OHS) of its workers. Once the plant is commissioned, WII will undertake an audit of its
manufacturing processes to assess the risk of worker exposure to chemical and physical hazards, heat and noise. On
the basis of this audit, WII will develop an OHS management system compliant with OHSAS 18001that, at a
minimum meets IFC’s OHS guidelines as contained in the IFC Environmental, Health and Safety General
Guidelines and Guidelines for Metal, Plastic and Rubber Products Manufacturing.
PS3: POLLUTION PREVENTION AND ABATEMENT – IFC’s review considered the Company’s plans for
controlling the impact of the Project’s construction and operations on the surrounding natural environment.
Pollution Prevention, Resource Conservation, Energy Efficiency – As a condition of its consent to establish
operations within the SIPCOT industrial complex, WII must meet the standards established by the TNPCB
governing control of fugitive dust (during construction), ambient and point source air emissions, wastewater and
process effluent discharge, solid waste disposal and noise. The WII plant will be equipped with the most modern
and resource (water and energy) efficient equipment available on the market. Rainwater harvesting and storage has
been integrated into the factory design and a five meter perimeter of the project site, amounting to 24% of the entire
site, has been reserved as a “green belt” for vegetation.
Air emissions - The main source of air emissions from the WII plant will be from shot blasting to remove surface
impurities from metal components before assembly and painting. Shot blasting units will be equipped with a high
efficiency cyclone separators combined with a bag filters to capture particulate emissions. The separators are rated
to remove nearly 100% of particulates of 5 microns and larger and maintain a dust emission from a 12 m stack
height of less than 50 mg/Nm3, well within the standards set by TNPCB and nearly matching the maximum
efficiency target established by the IFC Environmental, Health and Safety Guidelines.
WII will import electricity from the grid and consume an estimated 12, million kWh at full operating capacity. The
WII factory will be equipped with 3 x 750 KVA diesel generators as standby power supply during periodic power
supply interruption (currently estimated at 2-3hrs per day).
Solid Wastes – WII estimates that in full operation, the factory will generate up to 50 tons of scrap metal waste
(e.g., copper wire, steel plate, and aluminum), and much smaller amounts of wood and paint sludge, which will be
sold to TNPCB approved recyclers. Sewage treatment sludge, generated at an estimated 10 kg per day, will be used
as fertilizer for the factory’s green belt. Chemical sludge, generated by the factory’s painting and metal coating
processes at an estimated 2 kg per day, will be disposed in a land fill within the factory site lined with an impervious
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membrane. Used oil generated at an estimated 6.5 liters per day, will be stored in designated areas constructed to
contain spills for eventual sale to authorized recyclers.
Wastewater – WII will consume an estimated 64 m3 per day and generate 58 m3 of wastewater per day at full
operation. The Environmental Management Report estimates that 9 m3 will be consumed by process requirements
(painting, cooling, hydraulic testing) and 55 m3 will be consumed by domestic requirements. Process wastewater
containing oils, grease, solvents and metals will be separately treated with oil skimming, flash mixing and
flocculation, and the precipitate dried and disposed in a secure on-site landfill. The remaining chemically treated
effluent will be combined with domestic wastewater for aerobic biological treatment including chlorination and
filtration (sand and activated carbon). Treated wastewater will be used for irrigation of the factory’s green belt and
treated sludge will be used as fertilizer.
The predicted quality of the combined treated effluent will be well within the parameters established by the TNPCB
and IFC’s Environmental, Health and Safety Guidelines for those same parameters. To conform with IFC’s
Guidelines, WII will periodically test this treated effluent for trace metals, acids, alkaline, oils and solvents to ensure
the integrity of its process wastewater treatment system.
Hazardous Materials – WII will use small quantities of hydrogen and liquid petroleum gases in its production line.
The Risk Analysis undertaken by the Company indicated that these gasses have an “intermediate” degree of hazard
based on indices established by the U.S. National Fire Protection Association. A supply of 5,000 kgs of LPG and 20
cylinders of hydrogen (equivalent capacity of 47 liters of water) will be maintained on site. Based on the
recommendations of the Risk Analysis Report, the Company has determined the safest location within the plant for
the construction of its hydrogen and LPG storage areas, and it is outfitting these areas with the recommended
safeguards to control fire and explosion in the storage and handling of these materials, including a sprinkler systems,
gas leak detectors, an evaporation basin (for LPG storage) and concrete enclosures (for hydrogen). The Risk
Analysis Report indicates that in the event of gas explosion or fire, the event will be contained within the perimeter
of the WII plant. There is no risk from gas explosion or fire to any community or industry located beyond the walls
of the plant.
In coordination with the SIPCOT authority, WII will develop an emergency response and management plan to
manage the potential for explosion and fire associated with its gas storage or with any other accident that requires
the support of public services (e.g., police, fire department, local hospitals).
GHG Emissions – WII will consume approximately 12 million kWh of electricity on an annual basis at full
production. Sixty percent of Tamil Nadu’s installed power capacity is coal-based. It is estimated that at full
production, WII will emit approximately 12,000 tons of carbon dioxide on an annual basis.
PS 4: COMMUNITY HEALTH AND SAFETY – IFC’s review considered the risks and impacts to health and
safety of neighboring communities during the construction and operation of the Project, including emergency
preparedness and response, as well as the security measures put in place by the client to safeguard its personnel,
property and assets.
WII operations are entirely contained within the SIPCOT Hosur (Phase II Expansion) industrial complex. The plant
site boundary, as are the boundaries of neighboring industrial plants, is walled and fenced to prevent access by
residents of the nearby Moranapalli village. An all weather two lane service road links the plant directly to the
National Highway. There are no residential or commercial settlements within the industrial complex. Since the
commencement of construction in June 2009, the construction labor force has been housed offsite in rented
accommodations or temporary labor camps provided by each major contractor. Workers are transported between
their accommodations and the project site by bus and work a single daylight shift. All construction activities at the
site cease at sunset and only security guards remain on site through the night.
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WII commissioned a Risk Analysis of the storage of hydrogen and LPG within the plant as a condition of its
permission to establish within SIPCOT. As noted above, the Risk Analysis Report indicates that in the event of gas
explosion or fire, the event will be contained within the perimeter of the WII plant. There is no risk from gas
explosion or fire to any community or industry located beyond the walls of the plant.
Client’s Community Engagement:
As the agency responsible for land acquisition and administration of the industrial complex, SIPCOT has the
responsibility for engaging, and managing relations with surrounding communities. Community grievances with
any tenant of SIPCOT can be brought to the attention of SIPCOT management for resolution. However, IFC will
require WII to establish a line of communication with local communities to enable them to raise grievances directly
with Company management and receive a response.
WII has established and maintained relations with the neighboring Moranapalli village since construction began on
an informal basis through its site managers. The Company has constructed a new water tank for the village and
intends to provide support for community activities such as the maintenance of a local temple and a community
center. The Company will also give preference to local villagers in employment according to their qualifications.
Local access of project documentation
The Company will disclose a document summarizing the measures it proposes to implement to manage social and
environmental risks associated with its operations its Hosur office (location details provided below) and on its
website (www.weg.net):
Plot E-20
Moranapalli Village,
SIPCOT Phase II, Exp II,
Krishnagiri,
HOSUR, Dist 635 109
Tamil Nadu
Any queries and/or comments about the Project may be directed to:
Mr. Laurence Beltrão Gomes
Financial Director
Av. Prefeito Waldemar Grubba, 3300
89256-900 – Jaraguá do Sul – SC
Telephone: 47 3276-7917
Fax: 47-3276-4011
e-mail : laurence@weg.net
Approval Status:
Env Specialist Clear - Cleared by John Graham at 04/27/2010 04:38:31 PM
Comment : Clearing on behalf of Richard English
CES TeamLeader - Cleared by John Graham at 04/27/2010 05:21:02 PM
Comment :
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CRU Clear - Cleared by Vincent Yemoh at 04/27/2010 06:13:40 PM
Comment : Clients letter obtained - April 19, 2010 (VY)
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WEG INDUSTRIES INDIA PRIVATE LIMITED
Environmental and Social Action Plan
Date: April, 2010
#
Action
1.
WII to prepare a supplementary Environmental Management Plan that specifies
monitoring protocols, reporting, corrective action and auditing consistent with
WEG, Indian national standards and international industry good practice .1
2.
Indicator of task
completion
Completion date
1) Prepare plan
1) A Supplementary
Plan accepted by
IFC
1) Within three months of
financial closing.
2) Implement plan
2) IFC Supervision
2) Within six months of
plant commissioning.
WII to commission an Occupational Health and Safety assessment of risk and a
management plan (modeled on OHSAS 18001) for all operations.
1) Identification and engagement of consultant to advise on design and
implementation of system.
2) Implementation of system.
3) Certification of system.
1
1) TOR acceptable to
IFC; consultant
engagement letter
1) Prior to first financial
disbursement.
2) IFC supervision
2) Prior to second financial
disbursement.
3) Certification
3) Within two years of plant
commissioning.
Reference documents will include : applicable host-country laws, procedures and standards; IFC’s Performance Standard 1: Social and
Environmental Management Systems and its accompanying Guidance Note; IFC’s Environmental, Health and Safety General Guideline s; and IFC’s
Environmental, Health and Safet y Guidelines for Metal, Plastic and Rubber Products Manufacturing.
Page 1 of 2
#
Action
Indicator of task
completion
3.
WII to conduct periodic testing of combined waste water treatment effluent for
trace metals, acids alkaline, oils and solvent wastes and corrective action
undertaken to meet IFC EHS General Gu idelines.
Test results submitted to
IFC
Within three months of plant
commissioning and either
quarterly or annually
thereafter as determined from
the results of the first testing
4.
WII to develop an Emergency Response and Management Plan that specifi es
actions to be undertaken in the event of an emergency by plant personnel and in
coordination with local public services, including fire service, police and
medical services. Prior to plant commissioning.
Plan satisfactory to IFC
Prior to plant commissioning
5.
WII to establish a community hot-line to management of WII to receive
complaints from neighboring communities and develop protocols for managing
and resolving those complaints.
Details provided to IFC
Prior to plant commissioning
Page 2 of 2
Completion date