E- 311

Environmental and Social Report (ESR) Public Disclosure Authorized

of the

Tamil Nadu Urban Infrastructure Financial Services

(TNUIFSL) Public Disclosure Authorized

(Finai Draft) Public Disclosure Authorized

Preparedby

Tamil Nadu Urban Infrastructure Financial Services, Chennai

in collaborationwith

Development Alternatives, New Delhi Public Disclosure Authorized

January1997: As in November1998 AI Project Team

TNUIFSL: Dr. K. Rajivan, Anita Mathew

DevelopmentAlternatives:

Core: EBV Kumar,Susan M Mathew,Aswini Pai, GeorgeC.Varughese

Secondary: K.Laxmikanthan,P RatnaPrasad, Dr. K Vijayalakshmi Sasi M, SanjayKumar, Devinder Giri, BinduAnthony, Neeraj Sharma

Advisory Panel: Dr AshokKhosla and Mr SantoshK Sharma

DevelopmentAltematives is a non-profit corporate organisationwith a mission to promote sustainabledevelopment through appropriatetechnology, institutional design and environment management.

EnvironmentSystems Branch focuses on key environmentalconcems related to basic needs fulfilment, industrialisation and urbanisation, living resources conservation and global environment. Our activities include research and design, programme formulation, policy influence,education and training and groundlevel implementation. * DevelopmentAlternatives B-32, Tara Crescent Qutab InstitutionalArea New Delhi - 110 016 Phone: 66-5370,696-7938 Fax 91 + 11 + 686-6031 Email: [email protected] I CONTENTS

Page No

ExecutiveSummary i-x

PART I

TNUIFSL'sPolicy Statement 1

PART II

Section1 Environmentaland SocialIssues 2

Typical MunicipalInfrastructure Projects 2 Environmentaland Social Issues 5 Categorisationof TNUIFSLProjects 9

Section2: Policyand RegulatoryFramework 12

RegulatoryFramework: Urban InfrastructureProjects 12 RegulatoryFramework - Environment 14 RegulatoryFramework - Social 17 Implicationsto TNUIFSL 22

Section3: TNUIFSLEnvironmental and SocialAssessment Framework 23

TNUIFSLProject Appraisal Process 24 Environmentaland Social Assessment and ManagementFramework 28 Environmentaland SocialRisk Management 34

Section4: OrganisationalSupport Structure 37

OrganisationalStructure 37 ResponsibilityAllocation Framework 38 CapacityBuilding 39

Appendix 43 LIST OF TABLES

Page No

Section 1

Table 1.1 Profile of Typical TNUIFSL Projects 3-4

Table 1.2 Environmentalcategorisation of Urban Infrastructure Projects 9-11

Table 1.3 Categorsation of TNUIFSL's Projects based on Social Sensitivity

Section 2

Table 2.1 Social Impact & EntitlementFramework for World Bank Financed Projects 21

Section 3

Table 3.1 TNUIFSL Project Cycle 26-27

Table 3.2 Environmentaland Social Assessment and ManagementFramework 32-33

Table 3.3 Environmentaland Social Risk Management Framework 36

Table 3.4 Risk Allocation Framework 36

Section 4

Table 4.1 Training Programme 40-41 ACRONYMSUSED IN TEXT

AMC Asset ManagementCompany CEO Chief ExecutiveOfficer CPR CommonProperty Resource CRZ CoastalRegulation Zone DPR DetailedProject Report EAR EnvironmentalAssessment Report EIA EnvironmentalImpact Assessment ESAR Environmentaland Sociai AssessmentReport ESR Environmentaland Social Report Fl FinancialInstitution GF Grant Fund GOI GovemmentOf India GoTN Govemmentof Tamil Nadu HDFC HousingDevelopment Finance Corporation HH Household ICICi IndustrialCredit and InvestmentCorporation of India Limited IDA IntemationalDevelopment Agency IL&FS InfrastructureLeasing and FinancialServices Limited ISR Initial ScreeningReport MoEF Ministryof Environmentand Forest MRTS Mass RapidTransport System MUDF MunicipalUrban Development Fund NGO Non GovemmentalOrganization OD OperationalDirectives PAP ProjectAffected Person PMG ProjectManagement Group RMP Risk ManagementPlan R&R Resettlementand Rehabilitation SAR Social AssessmentReport TC TrusteeCompany TNPCB Tamil Nadu PollutionControl Board TNSCB Tamil Nadu Slum ClearanceBoard TNUDF Tamil NaduUrban DevelopmentFund TNUDP Tamil NaduUrban DevelopmentProject TOR Terms of Reference TRAMP Traffic and TransportProgramme ULB Urban Local Body WB World Bank I Executive Summary

xecuvDve Summary EXECUTIVE SUMMARY

BACKGROUND

1. The TamilNadu Urban Infrastructure Financial Services Limited (TNUIFSL) has beenset up to managea Trustfund -Tamil NaduUrban Development Fund (TNUDF). The trust has been establishedto manageurban infrastructureprojects in Tamil Nadu. The deploymentof funds will be on the basis of a managementcontract and will be managedby TNUIFSL. Eligible borrowers include Urban Local Bodies (ULBs), StatutoryBoards, Public Undertakings and potentialPrivate Investors.

2. The fundhas a corporateTrustee Company (TC) with shareholdingsfrom Govemment of Tamil Nadu(GoTN) and three leadingFinancial Institutions - ICICI (IndustrialCredit and InvestmentCorporation of India), HDFC (HousingDevelopment and Financial Corporation)and IL&FS (InfrastructureLeasing and FinancialServices Limited). To continuewith the emphasison povertyalleviation, a new Grant Fund (GF) has been established.

3. TNUDFwill channelincreased financial resources, including private financing, into high priorityinfrastructure investments. Specifically the fundwould: a fundviable urban infrastructure projects; O mobiliseresources from capitalmarkets; O facilitateparticipation of privatesector in infrastructuredevelopment through direct investmentand joint deliverymechanism of infrastructureservices; O wouldeam retums for contributorsand ensure sustainability of the fund; O improve financialmanagement of ULBs, enablingthem to access debt finance from markets

4. The projectsfinanced would: 0 ensurethat investments are commensuratewith servicedemands; O eam stipulatedeconomic and financial retums; O be institutionallyviable so that the borrowersare capable of implementingthe managementarrangements to do so; O ensurethat no adverseenvironmental and socialimpacts are generatedor thatthe borrower will be taking corrective measures to minimise such impacts in consonancewith the Environmentand Social Report (ESR).

5. Typicalurban infrastructureprojects eligible for fundingwould includewater supply, sanitation,solid waste management,roads, transportation, sites and services,area developmentand other remunerative/non-remunerativeurban infrastructureprojects. Powerand telecommunication projects are excludedbecause of the magnitudeof such projectsin relationto the size of the fund as well as the regulatoryissues involved. txecuDve summary 6. Recognising the environmentaland social issues that can arise in urban infrastructure projects. TNUIFSL has evolved an ESR. The ESR provides TNUIFSL an overall framework to guide it in identification.assessment and management of environmental and social concerns at the project level. The ESR outlines the policies, assessments and procedures that will enable TNUIFSL to ensure that a project that it funds is developed in consonancewith ESR and is adequately protected from attendant risks. The ESR also aims to sensitise borrowers to assessment and management of environmental and social issues arising in urban infrastructureprojects.

7. The ESR has been prepared by TNUIFSL with the assistance of Consultants - Development Altematives - specialised in the field of environment and social issues. The process of preparing this report has included desk research on the legal and institutional framework, analysis of priority issues in the infrastructure sector, consistency checkswith operationaldirectives of the World Bank and other multilateral agencies. There have also been a series of discussions within and outside TNUIFSL for the preparation of the Report. The project team acknowledges the Project Management Group (PMG) of the Govemment of Tamil Nadu, the Directorate of MunicipalAdministration, the World Bank Task Force and several other institutions and individuals for their contribution in evolving this ESR.

8. The Environmentaland Social Report (ESR) for TNUIFSL is in two volumes:

Volume 1: consists of an Executive Summary; and, a Social and Environmental Assessment Framework

Volume II: consists of the Environmental and Social Information package for borrowers of TNUIFSLL loans

While the ESR includes both volumes, appropriate parts of Volume 11will form part of the Information Package to be given to the borrower along with the Loan Application Form.

9. The ESR has been formally approved by the Board of Directors,TNUIFSL.

TNUIFSL POLICYSTATEMENT

TNUIFSL has adopted the Environmental and Social Policy of the TC to promote environmentally sound, socially acceptable and commercially viable urban infrastructure projects. TNUIFSL, like the TC of TNUDF, believes that each of its projects will improve the standard of living of populations in and around project locations.

TNUIFSL -ESRI Final Draft! January'97 i Development Alternatives txecurve .Summary

10. The Policystatement of the TC andTNUIFSL commits all projectsto

- Environmentalsoundness by conserving natural resources, preserving bio- diversityand ecologicalequilibrium; minimising release of pollutingwastes and integratingwaste management mechanisms within projects.

O Social relevance and acceptabilityby avoiding or minimising resettlement, ensuringresponsible reseHtlement and rehabilitationof projectaffected persons; and addressinglegitimate concerns of relevantstakeholders.

11. TNUIFSLexpects that most of the projectsthat it funds will be small and medium urban infrastructureprojects. It is possible that limited resources available for mitigatingenvironmental and social issuesarising within projectscould affect their economicviability. Therefore mitigatorymeasures to deal with environmentaland socialissues such as bestpractices available would be encouraged.

12. While adoptingthe environmentaland socialpolicy of the TNUDFTC, TNUIFSLhas reflectedits own commitmentsthrough detailed operational procedures illustrated in its Environmentaland Social Report (ESR).

ENVIRONMENTAL AND SOCIAL ISSUES

13. To evolve its environmentaland social managementprocedures for mitigatingthese issues,TNUIFSL has carefullyexamined the portfolioof possibieurban infrastructure projects.

14. Basedon the magnitudeand implicationsof environmentalissues that can arise in them,TNUIFSL has categorisedurban infrastructure projects into threecategories viz. E-1,E-2 andE-3.

15. E-1 projectsare thosewherein TNUIFSL foresees major environmentalimpacts thus necessitatingEnvironmental Assessment Reports (EAR).

16. E-2 projectsare expectedto have moderateenvironmental issues. Borrowerswill submit a simple EnvironmentalManagement Plan for E-2 projects based on a catalogueof environmentalmanagement measures made available by TUNIFS.

17. No environmentalissues are expectedin E-3 projects and hence can be termed Ienvironmentallybenign'.

18. Based on the number of households#that may be affected by the project and magnitudeof socialimpacts, TNUIFSL has categorisedprojects as eitherS-1, S-2 or S-3 projects.

TNUIFSL-ESRI Final Draft/January97 * DevelopmentAlternatives ixecuDve Summary 19. S-1 projects are those that will affect more than 40 households# and will require a detailed Social Assessment Report (SAR).

20. S-2 projects are those which will affect between one to forty households. In this case the borrower can submit a simple Social Management Plan (SMP) for which formats are provided by TNU IFSL.

21. S-3 projects, on the other hand will not have any housholds affectedat all i.e. they can be classified as 'socially benign'.

NATIONALAND STATEPOLICY AND REGULATORYFRAMEWORK

RegulatoryFramework - UrbanInfrastructure Projects

22. ULBs, are distinct from other undertakings due to their 'body politic' character. The

7 4th Constitutional Amendment, 1992 empowers municipal bodies to take necessary steps for management of areas under them, including protection of environment. ULBs are considered 'state" as per Article 12 of the Constitution. This implies that municipal bodies can be proceeded against under a writ, for violations to Fundamental Rights or Directive Principles, as their actions are state actions.

23. The Tamil Nadu Town and Country Planning Act, 1971 appoints local planning authorities and empowers them to plan for an urban area and/or designated areas. This law empowers local planning authorities to assess, levy and recover development charges. The Act envisages three classes of authorities: regional planning authorities; local planning authorities; and new town development authorities and the constitution of a Town and Country Planning Board.

24. The Tamil Nadu Municipalities Law and Building Bye Laws derived from the Madras District Municipalities Act, 1920 extends to the whole of the Presidency of Madras except the City of Madras. The law essentially deals with establishment, constitution and govemment of District Municipalitiesand authorities; taxation and finance; public health,safety and convenience.

Regulatory Framework-Environment

25. Mandatory environmental laws applicable to TNUIFSL financed projects are both pollution and natural resource related. Key Mandatory environmentallaws are; O Water (Prevention And Control of Pollution) Act, 1974 and Tamil Nadu Water (PreventionAnd Control of Pollution) Rules, 1974 O The Water (PreventionAnd Control of Pollution) Cess Act, 1977 O Environment (Protection)Act, 1986 O Forest (Conservation)Act, 1980

TNUIFSL-ESRI Final Draw January97 iv* DevelopmentAftematives txecuuve ssummary 1 WiidlifeProtection Act. 1972 13 CoastalRegulation Zone (CRZ) Notification. 1990

26. World Bank's OperationalDirective 4.01outlinesBank policy and proceduresfor environmentalassessment (EA) of bank investmentlending operationsand related types of environmentalanalysis. Small scale municipalinfrastructure and services projectsenvisaged to be financedby TNUIFSLare not clearlycategorised in OD 4.01. Theymay be consideredthe lowestlevel of CategoryB i.e. projectswith comparatively lesssignificant impact; not as sensitive,numerous or diverseimpacts.

27. Key prescriptiveenvironmental laws andpolicies are:

Legislations O Air (Preventionand Control of Pollution)Act 1981and Tamil NaduAir (Prevention of Controlof Pollution)Rules 1983 O HazardousWaste (Management and Handling)Rules, 1989

Policies O National ConservationStrategy and Policy Statement on environment and Development,1992 n PolicyStatement for Abatementof Pollution1992

Compliancewith environmentalrequirements laid down by the policy,legal and regulatory frameworkwill not pose a problemin a majorityof projectsthat are envisagedto be financedby TNUIFSL.However, in most casesthe regulatoryagency is the municipal authority. Henceit will be essentialfor the municipalbody requesting the financesto clearlyseparate the projectexecution function and regulatoryfunction. It will be the responsibilityof the MunicipalCommissioner to fumish the necessaryundertaking of compliancealong with the projectproposal. Categorisationof projectswill be done so thatassessments can be donespeedily and remedialmeasures can be adopted.

Regulatory Framework - Social

28. MandatorySocial Laws are: O LandAcquisition Act, 1894as amendedin 1984 O GovemmentOrder dated 21.09.95 from the Commissionerof Land Administration describingprocedures for acquisitionthrough negotiation O BoardStanding Orders (Standino Orders of the Commissionfor RevenueBoard) basedon the RevenueAct 1884of the MadrasPresidency (for Rayatwaristates), regardingassignment of land,lease and cancellation and encroachments. 0 Tamil NaduLand Encroachment Act, 1905 0 TheTamil NaduSlum Areas (Improvement and Clearance) Act, 1971

TNUIFSL-ESRIFinal Draftl January'97 v DevelopmentAlternatives txecuDve summary 29. This World Bank OD 4.30 describes Bank policy and procedures on involuntary resettlement as well as conditions that borrowers are expected to meet in operations involving resettlement. The objective of the Bank's policy is to ensure that populations displaced by a project also benefit from the project and that standards of living are improved, or at a minimum, restored. TNUIFSL as a borrower of credit would ensure that Bank policies are followed.

TNUIFSL'sSOCIAL ENTITLEMENTFRAMEWORK

30. TNUIFSL will ensure that the Policies and procedures described in the ESR will be applicable to all World Bank supported projects. An entitlement framework has been evolved along guidelines provided by the World Bank Operational Directives. The social entitlement framework is shown in Table 1.

31. In contrast to the environmental legislation which exists in India and provides a reference for the environment part of the ESR, no similar framework or legislation exists for general social impacts of urban infrastructure projects - resettlement and rehabilitation(R&R) in particular. In order to provide a framework for the R&R process in projects where World Bank financing is involved, this ESR provides a list of entitlements for project affected individuals, families and establishments. Detailed exposition of the social entitlement framework for World Bank financed projects is provided in Appendix 5. Seven basic categories of issues/impact are foreseen under this entitlementframework: (a) Loss of land (b) Loss of structure (c) Loss of source of livelihood (d) Loss of accessto common resources and facilities (e) Loss of standingcrops and trees (f) Losses during transition of displaced persons/establishments (g) Losses to host communities

TNUIFSL -ESRP Final Dra/ January'97 vi* Development Alternatives txecJurve summary

Table 1: Social Impact & Entitlement Framework For World Bank Financed Projects* Type of Issuewlmpact 1 Entitlement i Entitlernent Options Respon _ Beneficiary I_I sibility 1. Loss of land a. Homestead (i) with valid title, or customary or (i) Household (i) equivalentarea of lana or cash compensation at Govt. usufruct nghts replacementvalue Sponsor (ii) squatters (ii) Household (ii) altemativesite as per Govemment norms b. Agricultural land (i) with valid tRtle,or customary or (i) Titleholders (i) alternateland of equiv.productivrtypotential or usufruct nghts cash payment at replacementvalue (ii) tenants, sharecroppers, leaseholder, (ii) Individual (ii) local standards for minimum economic encroachers landholding or cash payment for minimum economic iandholding c. CommerciaVIndustriaUlInstitutional (i) with valid title, or customary or (i) Titleholder (i) equivalent land or cash at replacementvalue usufruct rights (ii) tenant, leaseholder (ii) Unit (ii) equivalent leased land, reimbursementfor unexpiredlease, transition alowance equivalentto 6 months income (iii) squatter (iii) Unit (iii) equivalent land and transition allowance equivalent to 2 months income 2. Lossof structure a. House (i) with valid title, or customary or (i) Household (i) structure of equivalent standard or cash GovtU usufruct rights compensationat replacementvalue Sponsor (ii) tenant, leaseholder (ii) Household (ii) transition allowanceequivalent to 6 months rent to (iii) squatters, pavementdwellers (iii) Household re-establish residence (iii) basic dwelling unit as per governmentnorms or cash payment for basic dwelling und

b. Commerciall IndustriaVInstitutional (i) with valid title, or customary or (i) Unit (i) structure of equivalent standard or cash usufruct rights compensationat replacementvalue (ii) tenant, leaseholder (ii) Unit (ii) reasonabletransition allowanceequivalent to 6 months income (iii) squatters, pavementdwellers (iii) Unit (iii) basic unit as per governmentnorms or cash .______payment for basic unit 3. Loss of livelihood/ trade/ occupation (i) Individual (i) employment in reconstructed enterprise or (I) Wage employment/agriculture/ package for re-employmentor starting a business, Sponsor commerciaU industriaVinstitutional and transition allowance equivalentto 1 year wages in case of permanentclosure and equivalent to closed time in case of temporary closure. 4. Loss of access to comrnon resources and facilities (i) Rural common property resources (i)HH/community (i) replacementCPRs/amenities or providing Govt/ minimum Governmentstandard Sponsor (ii) Urban civic amenities (ii)HH/community (ii) access to equivalentamenities/services 6. Loss of standing crops/trees (i) With valid title (i) Household al categories entitled to cash compensation Sponsor (ii) Tenant/essee (ii) Household equivalent to market value for crops and market value (iii) Encroachers/Squatters (iii) Household of the tree products for the remaining life of the tree

6. Losses during transition of displaced persons/establishments (i) Shifting/Transport (i)Household/Unit (i) provision of transport or cash equivalent Govt/ (ii) Maintenance (ii)Household/Unit (ii) cash payment for 3 months Sponsor (iii) Construction (iii)Household/Unit (iii) cash payment for cost of labour 7. Losses to Host commnunities (i) Amenities/Services (i) Community (i) Restore losses as a result of re-settlementor Govt/ amenities/services equivalent to those provided Sponsor to PAPs *Tobe read in conjunction with Appendix 5 *The choice of the entitlement lies with the PAPs

TNUIFSL-ESRI Final Draftl January'97 vii* DevelopmentAlternatives txecuvve iummary

TNUIFSL ENVIRONMENTALAND SOCIAL ASSESSMENT FRAMEWORK

35. TNUIFSL,as a financialintermediary, will ensurethe financialviability of eachproject thatit funds.TNUIFSL will catalysemunicipalities into attractingprivate investments on their own. The project cycle for appraisingand monitoring projects forms the backgroundfor assessmentand managementof environmentaland social issuesthat couldarise within projects financed by TNUIFSL.

TNAIUFSLProject Cycle

36. Duringscreening and scopingof projects,levels of detail to which each aspectof a projectneeds to be assessed,will be determined. After a projecthas gone through successfulappraisal and approval, TNUIFSL will closely monitor construction, operationand maintenance phases.

37. Duringproject screening,TNUIFSL will assessthe eligibilityof a project based on TNUIFSL'slending policies. The assessmentwill form a part of the InitialScreening Report(ISR) andwill decidewhether or not the projectshould be takenup for detailed appraisal.The borrowerwill prepareand submita DetailedProject Report (DPR) as per guidelinesprovided to him in the InformationPackage.

38. During Project Appraisal, TNUIFSL along with the borrower will vet the DPR. Environmentaland social aspectswill be cross-checkedagainst standards set in the ESR. The loan officer will submit the appraisal report for approval with a recommendationto accept the project as submitted;accept with modifications;or rejectit.

39. After requisiteapprovals and concurrenceare obtained,the loan officer will discuss basic terms of agreement such as rate of interest; repayment schedule; security/guarantee;and environmentaland social commitmentswith the borrower. TNUIFSLthen preparesand signs the loan agreementwith the borrower. The first loaninstallment is thendisbursed.

40. TNUIFSL will monitor all projects they finance to ensure conformity to agreed standards during construction,operation and maintenance. Quarterly Progress Reports will be submitted ty Borrowers. All projects above Rs.15 crores and approximately25% of the other projectswill be auditedannually through interaction with borrowers, local user groups, govemment,etc. The Audit Report will be submittedto the TC Boardthrough the CEO.

TNUIFSL-ESRI Final Draf January97 viii DevelopmentAltemative txecuuve summary

Environmental And Social Assessment And Management Frame Work

41. The environmentaland social assessmentprocedures evolved by TNUIFSLare in consonancewith its project cycle. The various steps for environmentaland social assessmentand managementof TNUIFSLprojects have been dovetailedinto the TNUIFSLproject cycle. Initialscreening criteria have been evolved for projects,based on magnitudeand sensitivity of environmentaland social issues.

EnvironmentalAnd Social Risk Management Framework

42. TNUIFSLwill carry out environmentaland social risk managementas a part of its projectmanagement strategy. TNUIFSL's risk managementprocess will comprisethe following steps - Risk ManagementPlan, Risk Appraisal,Risk Allocationand Risk Monitoring.A risk allocationframework for the key roleplayers has been evolvedby TNUIFSL.

OtGANISATIONAL SUPPORT STRUCTURE

43. In order to ensure that the policy obligationsand associatedprocedures in the Environmentaland Social Report (ESR) are operationalised,TNUIFSL has outlinedan organisationalsupport structure. Besidesfixing responsibilityon key actors in the process,the organizationalsupport structure also outlines the capacitybuilding that is essentialfor TNUIFSLstaff andborrowers.

Organisational Structure

44. TNUIFSLwill deploysix professionalsheaded by a Chief ExecutiveOfficer (CEO) in the first year. Six professionalswill consistof two Vice Presidents(projects), one CompanySecretary, one Manager(Technical) and two Managers(Accounts).

ResponsibilityAllocation Framework

45. TNUIFSLwill selectits CorporateConsultants from amongagencies who havethe full range of expertiseto address all the environmentaland social concems relatedto urban infrastructureprojects. TNUIFSLwill ensure sensitivityto environmentaland socialaspects of variousprojects among its projectappraisnl and management staff.

46. One of the two Vice presidentsat TNUIFSLwill overseeappraisal, investments and resourcesof the projectsand will interfacewith MultilateralAgencies. The other Vice President(projects) will appraiseprojects, look after Management Information Systems and auditingof projectsand also interfacewith borrowers. The Manager(Technical) will help the CEO and Vice Presidentsin project specificenvironmental and social

TNUIFSL -ESRI Final Draft January'97 ix * Development AlternatIves txecutve summary assessment and managementissues. The two Managers (Accounts) will help the Vice Presidents in the financial aspects of projects.

Corporate Consultants (Environmental and Social Issues)

47. The Corporate Consultant for environmental and social issues will essentially provide services to TNUIFSL as required.for the following - Advising TNUIFSL on environmentaland social issues - Environmentaland social screening of projects wherever required by the TNUIFSL - Reviewing EAR, SAR and other documents submitted by borrowers for specific environmentaland social project components - Monitoring and evaluatingprojects

48. The Corporate Consultant will also undertake the annual environmental and social audit of all TNUIFSL financed projects.

Capacity Building

49. TNUIFSL envisages capacity building of its own personnel and its borrowers who will include Urban Local Bodies, Statutory Boards, Public Undertakings and Potential Private Operators in order to ensure that the ESR is effectively operationalised. The training programme for various role players will include an orientation programme on the ESR, Municipal Finance, Urban Planning, Project Management and Engineering and Public Health.

50. The training programme is to be co-ordinatedand anchored within a training institution in Tamil Nadu and other local and National Institutions and individuals experienced in various aspects of urban infrastructure projects, will be called upon through an open bid to develop and conduct courses on various modules.

TNUIFSL-ESRI Final DraftlJanuary97 x DevelopmentAltetives Part I I TNUIFSL'sPOLICY STATEMENT

Tamil Nadu Urban Infrastructureand FinancialServices (TNUIFSL), set up to managethe Tamil Nadu Urban Development Fund (TNUDF), aims to promote environmentallysound, socially acceptableand economicallyviable urban infrastructureprojects. TNUIFSL, like the Trustee Company(TC) of the TNUDF, believesthat each of its projectswill improvethe living standards andthe environmentof populationsin and aroundproject locations.

TNUIFSLcommits each projectto:

ENVIRONMENTALSOUNDNESS BY

- Conservingnatural resources

- Preservingbio-diversity and ecologicalequilibrium by reducingpressure on naturalresources - Minimisingrelease of pollutingwastes to amountsthat do not harm the environment

- Integratingwaste managementmechanisms within projects and maintainingenvironmental quality of projectlocations

SOCIALRELEVANCE AND ACCEPTABILITYBY

- Addressinglegitimate concems of relevantstakeholders, especially project affected persons - Avoiding or minimising resettlementdue to land acquisitionthrough appropriatetechnical and managementmeasures - Ensuring responsibleresettlement and rehabilitation of project affected persons through sustainablelivelihood options that at leastrestore, if not improve,their standardof living - Protecting marginalised and vulnerable groups, including the economically and socially disadvantaged - Minimisinghealth and safety hazards

TNUIFSL expects that most of the projects that it funds will be small and medium urban infrastructureprojects. It is possiblethat limited resourcesavailable for mitigatingenvironmental and social issues arising within projects could affect their economic viability. Therefore mitigatory measures to deal with environmental and social issues such as best practices available would be encouraged. Further, TNUIFSL will use the Grant Fund and other funding mechanismsto operationalisethe environmentaland social policy.

While adoptingthe environmentaland social policy of the TNUDFTrustee Company, TNUIFSL has reflected its own commitments through detailed operational proceduresillustrated in its Environmentaland Social Report(ESR).

Part 11

SECTION 1

ENVIRONMENTAL AND SOCIAL ISSUES

1.1 TNUIFSLmanages funds for the TNUDF,one of India'slargest urban development projectswith a multi-city,multi-sectoral focus. TNUIFSLwill extendterm-loans to Urban Local Bodies(ULBs),Statutory Bodies, Public Undertakings,and Private Investorsfor urbaninfrastructure projects in the staeof.Tamil Nadu.

1.2 From the experienceof TNUDPprojects, TNUIFSL recognises environmental and social issues related to urban infrastructureprojects. TNUIFSL will addresstheir mitigationthrough a setof managementprocedures elaborated in its ESR.

1.3 To evolve its environmentaland social managementprocedures, TNUIFSL has carefullyexamined the portfolioof urban infrastructureprojects previously executed by TNUDP and environmentaland social issues arising in each of the projects. Projectswere then categorisedon the basis of environmentaland social impacts. TNUDP projectsin the past have encompassedover 500 sub-projectsincluding roads,bridges, street lights, solid waste plants,storm water drains,bus stations,and marketsin 90 out of 110municipalities in Tamil Nadu(refer AppendixI and 2 for list and locationof municipalities)

ITYPICAL MUNICIPALINFRASTRUCTURE PROJECTS

1.4 TNUIFSLwould finance the followingcategories of urbaninfrastructure projects:

Water Supply and Sewage - SolidWaste Management Transportation Commercial Complexes Noncommercial/Community Amenities lntegrateaarea development

1.5 Physicalscales and typical costs of urbaninfrastructure projects are shownin Table 1.1. Table 1.1: Profile of Typical TNUIFSL Projects'

Project Physical Financial (Rs. in lakhs) I) Water Supply & Sewage A. Water Supply 1. Water supply lines & taps 1 - 10 kms 2 - 20 2. Water tankers 10,000 liters 6 - 7 3. Overheadtanks 10 lakh liters 20 4. Water treatmentplants 1 unit (10,000liters) 20 5. Headworks B. StormwaterDrainage 1. Opendrains 0.5 - 5 kms 5 - 50 2. Closed/ Undergrounddrains 0.5 - 7 kms 10. C. Sewerage/ Sanitation 1. Public conveniences 1 - 5 units( 8 seat) 2 - 10 2. Pay & use latrines 10 - 12 (1 seater) 2.5 - 3 3. Sewagetreatment 1 unit (10000 liters) 20 4. Septictanks 5. Sewageforms 5-20 ha 10-25 II) Solid Waste Management A. CompostYard 4 - 5 acres 20 B. Vehicles 10ton capacity 8 111)Transportation A. Roads 1. Wideningof roads 4 - 20 km (1m width) 12 - 60 2. Improvementof surface 5 - 30 kms (1m width) 15 - 90 3. New roads 2 - 5 km (2 lane) 20 - 50 4. Traffic islands 1 - 5 units 1 - 5 5. Road dividers 1 - 2 km 4 - 10 6. Footpaths B. Street Furniture 1. Traffic signals 1 - 5 junctions 5 - 20 2. Street lights 60 - 600 poles 10 100 3. Sign boards 100 - 500 units 2- 10 C. Road Structures 1. Subways - Pedestrian 1 unit (30 m) 60 - Cycle 1 unit (40 m) 100 - Fast moving 1 unit (2 lanes,400m) 500 - 600 2. ROBs 1 unit (2 lanes,500m) 600 - 1500 3. Culverts 1 - 5 units 4 - 20 4. SmallBridges 1 unit (6 - 10 m) 6- 10 D. Terminals/ Shelter 1. Bus Shelters 1 - 5 units 0.20 - 1.0 2. Bus Terminals/Stands 1 unit (13 busways) 100 3. Truck Terminals I unit ( 30 lorries) 45 4. Workshops 5. Carparkingcomplexes 1 unit (200 cars) 1000 E. Fleet Expansion F. Construction& Maintenance 5-20 equipment G. Inland Water ways IV. CommercialComplexes A. Shopping/Office complexes 30 - 50 shops 30 - 50 B. Vegetable/Fishmarkets 50 - 75 shops 20 - 30 C. Slaughterhouses one unit (6 -10 bays) 5- 6 Project Physical Financial (Rs. in lakhs) D. Marnagehalls I unit ( 500 seats) 10 E. Lodge/ Dormitory 1 unit ( 30 peopie) 10 F. Municipalcommunity compiexes 1unit 10 V. Non Commercial/Community Amenities A. Parks 1 acre unit 20 B. Playgrounds 1 acre unit 2 - 3 C. Maternity& Child Center I unit (Building& 14 equipment) D. Hospitals 10 beds 20 lakhs E. EducationalInstitutions/Reading 1 unit (2 classrooms) 1 - 1.5 rooms F. BurialGrounds 1 acre unit 10 - 12 G. Electriccrematorium 1 unit 30 VI. Integrated Area Development A. Housing(Sites & Services) B. GuidedUrban Development C. TRAMP

*Based on analysisof TNUIFSLsub projects ENVIRONMENTAL AND SOCIAL ISSUES

1.6 While TNUIFSL financed projects improve general living standards within urban localities, they can also have associated impacts on the local environment and people. Based on the experience of past projects carried out by urban local bodies in Tamil Nadu, this document identifies environmentaland social issues that can arise in urban infrastructure projects. Issues that could arise in various urban infrastructure projects are listed below.

I. WATER SUPPLYAND SEWAGE PROJECTS:

(a) Water Supply:

1.7 Water supply projects include augmentation of water lines (about one to ten km in length), purchase of water tankers (capacity of ten thousand litres) and construction of overhead tanks (capacity of ten lakh litres). Typical environmentalissues that may arise are:

- safe drinking water - change in hydrologyand drainage pattems due to the construction - waterlogging due to leakage during operation and maintenance - disturbanceto other service lines due to constructionactivity.

(b) StorrnwaterDrainage:

1.8 Stormwater projects will include constructionof open/closeddrains (about half a km to seven km) which may cause:

- changes in landuse, hydrology and drainage pattems due to the construction - waterlogging, change in surface and groundwaterquality due to leakages - disturbanceto other service lines due to digging and construction activity

1.9 Social issues may arise due to stormwater drainage projects if there is land acquisition or displacement of people, especially squatters.

(c) Sewerage/Sanitation:

1.10 Sewerage projects will include construction of public conveniences (one to five units consisting of eight seaters); pay and use latrines (ten to twelve units of one seaters); sewage treatment plants (with a capacity of ten thousand litres); and septic tanks. Environmentalissues that can arise in these projects are: - changes in hydrology and drainage pattems due to the construction - surface and groundwater contaminationdue to leakages - waterioggingdunng operation and maintenance

I. SOLID WASTE MANAGEMENT:

1.11 Solid Waste Management projects include development of compost yards (with an area of four to five acres) and purchase of vehicles (capacity of ten tonnes) for transport of garbage. These projects may cause

- change in hydrologyand drainage due to garbage dumping,and composting - change in surfaceand groundwater quality due to leaching - smell of decomposinggarbage - public health nuisanceduring maintenance due to decomposinggarbage - change in urban aesthetics

Ill. TRANSPORTATION:

1.12 Transportation projects will include roads, street fumiture, road structures and terminals. a) Roads:

1.13 Road projects include widening of roads (width of one meter to a length of four to twenty kms), improvement of road surfaces (for a length of five to thirty km), laying of intemal roads (for a length of two to five kms), construction of traffic islands (one to five units ) and road dividers (for a length of one to two kms). These projects will be at a very small scale and may cause only minor environmentalissues such as:

- change in hydrology and drainage patterns due to construction - increase in air pollution and noise levels due to traffic congestion - disturbance to other services during construction - destruction of roadsidemicrohabitat/vegetation due to widening and construction

1.14 Social issues may arise in these projects if there is land acquisition or displace squatters or petty roadsideshops or the loss of private structures (such as compound walls, etc.) b) Street fumiture:

1.15 Street fumiture projects will include traffic signals (one to five junctions), streetlights (sixty to six hundred poles) and signboards (hundredto five hundred units) which may cause minor environmentalissues such as:

- disturbance to other services/lines - increase in urban congestion - increase in air pollution and noise levels due to congestion

- effect on urban aesthetics c) Road Structures:

1.16 Road structure projects to be funded by TNUIFSLwill include constructionof subways(for pedestrians,cycles and fast movingvehicles of oneunit of two lanesof 30 to 40 meterswidth), roadoverbridges (two lanesof four hundredmeters width), culverts(one to five units) and small bridges (one unit with a width of six to ten meters). Environmentalimpacts that may arise are:

- changein landuse,hydrology and drainage patterns due to construction - waterlogging due to poordrainage facilities - disturbance to other services/lines - urbancongestion

1.17 Socialissues may ariseif theseprojects involve any land acquisitionor displacement of people d) Bus ShelterslTerminals:

1.18 TNUIFSLwill fund constructionof bus terminals (one to five units), bus shelters (aboutthirteen busways), workshops and truck terminals(one unit for thirty lorries) whichmay causeminor environmental issues such as:

- increasein air pollutionand noise levels - land contaminationdue to oil andgrease - destructionof vegetationdue to construction - sewage due to bus cleaning

1.19 Social issues may arise in these projects if they involve any land acquisitionor displacementof people e) InlandWaterways

1.20 TNUIFSLwill fund constructionof Inlandwaterways

IV.COMMERCIALCOMPLEXES:

1.21 Commercialcomplexes will includeshopping complexes(of thirty to fifty shops), vegetable/fishmarkets (fifty to seventyfive shops)and slaughterhouses (six to ten bays), marriagehalls (each unit aboutfive hundredseats)/townhalls, lodges (thirty rooms) and dormitories (for tnirty people) and tourist complexes (fifteen fo twenty rooms). Environmentalimpacts which may arise are:

- disturbance to other services/linesdue to construction - disposal of solid waste generatedfrom these complexes - air, water and health problems due to slaughterhouses - increase in urban congestion

1.22 Social impacts that may arise if the project involves any land acquisition or displacementof people.

V. NON COMMERCIAUCOMMUNITYAMENITIES:

1.23 Constructionof parks and playgrounds(one acre units), institutions (two classrooms) and hospitals (fifteen beds) and the development of burial grounds (one acre units). Environmentalimpacts will be negligible and those that may occur are:

- change in landuse - solid and hazardouswaste disposal - public health and safety

1.24 Social issues may arise if the projects involve any land acquisition or displacement of people.

VI. INTEGRATEDAREA DEVELOPMENT:

1.25 Under integrated area development will include housing (sites and services), guided urban development and traffic and transport programmes (TRAMPS) whose subcomponents will include combinations of the above projects at various scales. Environmentalissues that may be expected are:

- change in landuse, hydrology and drainage patterns due to construction - waterlogging - solid waste - destruction of vegetation - disturbance to other services/lines

1.26 Social issues may arise if the project involves any land acquisition or displacement of people. CATEGORISATION OF URBAN INFRASTRUCTURE PROJECTS

The urban infrastructureprojects in Table 1.1 have been categorised based on the magnitude of environmentaland social issues.

I. ENVIRONMENTALCATEGORIES OF PROJECTS

1.27 Based on the effects, TNUIFSL has categorised urban infrastructure projects into three categories viz. E-1, E-2 and E-3. a. E-1 projects are those wherein TNUIFSL forsees major environmental impacts thus necessitatingEnvironmental Assessment Reports (EAR).

b. E-2 projects are expected to have only moderate environmental issues. TNUIFSL has laid down generic design guidelinesto mitigate these issues.

c. No environmental issues are expected in E-3 projects and hence can be termed 'environmentallybenign'.

1.28 Tablell.2 illustrates categorisation of urban infrastructure projects based on their environmental sensitivity. TNUIFSL will review this categorisation annually dependingon experience gained from projects funded.

Table 1.2: ENVIRONMENTALCATEGORISATION OF PROJECTS

Project Environmental Category I) Water Supply & Sewage______A. Water Supply 1. Water supplylines & taps E-3 2. Watertankers E-3 3. Overheadtanks E-3 4. Waterdtreatmentrplants E-1 5. Headworks E-3 6. Generators E-3# 7. River Intake Works E-1# B. Storrnwater Drainage 1. Open drains E-2# 2.Closed / Underground drains E-2 _C. Sewerage / Sanitation 1. Public conveniences- E-2# 2. Pay & use latrines E-2 3. Sewerage & treatment E-1 # 4. Septictanks E-2

.Ill Solid Waste Management A. CompostYard E-2 B. Vehicles(more than 5 nos.) E-2# Ill)Transportation Project I Environmental Category A. Roads _ 1. Widenina of roads E-3 2. Improvement of surface E-3 3. New roads E-2 4. Traffic islands E-3 5. Road divider E-3 6. Foot paths E-3 B. Street Furniture 1. Traffic signals E-3 2. Street lights E-3 3. Sign boards E-3 C. Road Structures 1. Subways - Pedestrian E-2 - Cycle E-2 - Fast moving E-2 2. ROBs E-2 3. Culverts E-2 4. Small Bridges E-2 D. Terminals / Shelter 1. Bus Shelters E-3 2. Bus Terminais/Stands E-2# 3. Truck Terminals E-2# 4. Workshops E-2 5. Car Parking Complex E-3 E. Fleet Expansion >100 buses E-2 <100 buses E-3 F. Construction & Maintenance equipment E-3 G. Inland Water Ways E-3 IV.Commercial Complexes A. Shopping /Office complexes E-3 B. Vegetable/Fish markets E-2 C. Slaughter houses E-2 D. Marriage halls E-2 E. Lodge / Dormitory E-3 F. Municipal Community complexes E-3 V.Non Comm./Community Amenities A. Parks E-3 B. Playgrounds E-3 C. Matemity and Child Centers E-3 D. Educational institution/Reading Room E-3 E. Burial Grounds E-2 F. Electric Crematorium E-3 VI.Integrated Area Development A. Housing (Sites & Services) E-1 B. Guided Urban Development E-1 C. TRAMP E-1

VII. General: A. Computer Facilities E-3# B. Weigh Bridge E-3# Note For types of proiecrs that have no, been environmentallv categonzed. they wi/i initiallv be considered as category E-1. uniess otrerwise specified byv e CE5 of TNUIFSL

II. SOCIAL CATEGORISATION OF PROJECTS

1.29 Based on the number of households# that may be affected by the project, i.e. PAPs (refer paragraph 2.39 for definition) and magnitude of impacts, projects have been categorised as either S-1, S-2 or S-3 projects.

a. S-1 projects are those that will affect more than 40 households.#

b. S-2 projects are those which will affect between one to forty households. #

C. S-3 projects, on the other hand will not have any households affected at all i.e. they can be classified as socially benign.

1.30 Table 1.3 provides TNUIFSL's categorisation of urban infrastructure projects based on their social sensitivity.

Table 1.3: CATEGORISATION OF PROJECTS BASED ON SOCIAL SENSITIVITY

Category | Description Type of project Level of issues Managementmeasures S-1 serioussocial issues projectspecific SAR essential >40 householdsinvolved expected # S-2 moderatesocial adopt genericdesign guidelinesand 1-40 householdsinvolved issues expected norms in ESR S-3 no social issues no social mitigationmeasures No householdsinvolved # expectedhence required socially benign

1.31 In the case of projects with moderate environmental and social issues, TNUIFSL will integrate readily available solutions into the project design. SECTION 2

NATIONAL AND STATE POLICY AND REGULATORY FRAMEWORK

2.1 While extending extend term loans to Urban Local Bodies (ULBs), statutory boards, public undertakings and private investors for urban infrastructure projects, the TNUIFSL will ensure compliance to mandatory environmental and social laws and regulations that apply to specific projects. Besides mandatory laws, regulations and policies which are prescriptive will influence management procedures for environmentaland social issues in TNUIFSL financed projects.

JREGULATORYFRAMEWORK - URBAN INFRASTRUCTURE PROJECTS

I. CONSTITUTIONALPROVISIONS

2.2 ULBs, are distinct from other undertakings due to their 'body politic" character. It constitutes the urban democratic grassroots in India. Apart from their statutory

status, and mention in Entry 5 of List II of the 71h schedule of the Constitution, they

have now been given due constitutionalrecognition. This is in the form of the 74 th Constitutional Amendment, 1992 which has inserted provisions in an attempt to

decentralise administration and decisionmaking. The 7 4 th amendment empowers municipal bodies to take necessary steps for management of areas under them, including protection of environment (see Appendix 3 for Articles inserted in Constitution). ULBs are considered 'state' as per Article 12 of the Constitution. This implies that municipal bodies can be proceeded against under a writ, for violations to FundamentalRights or Directive Principles,as their actions are state actions.

2.3 ULBs, in specific projects will act in dual strains, i.e. both project sponsorship /execution and project approvals/ permissions/ monitoring. As a regulatory body, ULBs will also be responsible for ensuring environmental and social compliance. Their local govemment status can expose them to distinct legal recourse, action and claiming of reliefs.

2.4 When acting as regulatory authorities, there is an in-built duty to provide quality amenities and urban facilities and to ensure that these systems function on a sound environmentaland social base. A framework enabling the setting up of infrastructure amenities and delineatingpowers and responsibilitiesis found in various State laws. 11.TAMIL NADU TOWN AND COUNTRY PLANNING ACT 1971

2.5 This Act appoints local planning authorities and empowers them to plan for an urban area and/or designated areas. Typically this involves preparation/implementationof Master Plans specifying uses to which land can be put to. Such zoning ensures functional and ordered development. The plan delineates land for residential, industrial, commercial, agricultural and recreational purposes or forests and mineral exploitation; demarcates objects and boundaries of archaeological/historicalinterest; and identifies new towns/cities, transportation and communication facilities, water supply, drainage, sewerage, sewage disposal and other public utilities and amenities. This law empowers local planning authorities to assess, levy and recover development charges.

2.6 The Act envisages three classes of authorities: regional planning authorities; local planning authorities;and new town development authorities and the constitution of a Town and CountryPlanning Board.

111.TAMIL NADU MUNICIPALITIESLAW AND BUILDING BYE LAWS

2.7 The relevant legislation is the Madras District Municipalities Act, 1920. This law extends to the whole of the Presidency of Madras except the City of Madras. It is under this law that local bodies are empowered to provide and maintain public amenities and facilities.

2.8 The law essentiallydeals with:

- Establishment,constitution and government of District Municipalitiesand authorities - Taxationand Finance - Public Health, Safety and Convenience

2.9 The law delineatesconstitution/election of urban local bodies and demarcates powers and responsibilitiesof these authorities. This law vests properties to be administered in local bodies. The law also vests "works" such as waterworks, lighting, public drainage and garbage disposal. Other activities include maintenance and repair of streets, regulating construction through building regulations and providing other amenities. With zonation as laid down in the Master Plan, building regulations provide for development in consonance with floor space indexes and other rules. ULBs also have powers of inspection and monitoring (See Appendix 4 for main features of this legislation). IV. DEVELOPMENTCONTROL RULES FOR MADRAS METROPOLITANAREA ILLUSTRATIONUNDER THE TOWNAND COUNTRYPLANNING ACT, 1971

2.10 Madras, apart from being a major Metropolitancity, is the only town that has preparedControl Rules underthe Town and CountryPlanning Act. 1971.With its status as an importantborrower, it is essentialto understandthese control rules. Other major cities such as Maduraiand Coimbatoreare also in the process of developingMaster Plans.

2.11 The rules have been developedunder Section9-C, ChapterlI-A of the above Act which prescribesthat the MadrasMetropolitan Development Authority shall carry out a surveyof MadrasMetropolitan Area and preparea MasterPlan. The contentsof the MasterPlan are foundin theserules detailingpolicies and programmesfor the overalldevelopment of Madras.The plan emphasisesregulation of land and building use.

REGULATORY FRAMEWORK - ENVIRONMENT

I. MANDATORY

2.12 Mandatoryenvironmental laws applicableto TNUIFSLfinanced projects are both pollutionand natural resource related. Pollutionlaws in the last decadeimpose strict controlsover industrialand municipaloperations. Despite participation by Statesand other bodies,GOI continuesto have the final say on all mattersconcerning natural resources,even with policiessuch as the NationalForest Policy, 1988 which invites local participation. a) Water (PreventionAnd Control of Pollution) Act, 1974and Tamil Nadu Water (PreventionAnd Control of Pollution) Rules, 1974

2.13 Theselaws seekto controlpollution of water andenhance the qualityof water. Under this law, it is mandatoryto obtainconsent for dischargeof effluentsand pay consent fees to Tamil Nadu State Pollution Control Board (TNSPCB) for any municipal projectscausing water pollution. b) The Water(Prevention And Control of Pollution) Cess Act, 1977:

2.14 This Act providesfor levy and collectionof a cess by local authoritieson water consumedby persons or industriesto augment resourcesfor PollutionControl Boards. c) Environment (Protection) Act, 1986

2.15 This law essentially links pollution ana naturai resource issues. It seeks to supplement existing laws on pollution control and also lays down standards for air quality and noise. The Central Government in pursuance of its rule-making powers under the Act, has passed notifications regulating siting of industry and operations. Environmental Impact Assessment (EIA) is not required for TNUIFSL projects as they do not fall in the categories listed in Schedule I of the Environment Impact Assessment notification,1994. However the law includes a provision for projects that are costed above Rs. 60 crores which have to undergo an EIA. d) Forest (Conservation) Act, 1980

2.16 Forest (Conservation) Act, 1980 was enacted to halt rapid deforestation and environmental degradation. Without approval from the Central govemment, State govemments cannot de-reserve forest land or direct that it be used for non-forest purposes. Municipal projects with activities falling in reserved forest areas need a clearance from MoEF. e) Wildlife Protection Act, 1972

2.17 This Act seeks to protect wildlife, by creating protected areas and controllingtrade in wildlife products. If TNUIFSL activities cross over into protected area regimes then requisite permission must be obtained. f) Coastal Regulation Zone (CRZ) Notification, 1990

2.18 This notification under Environment ( Protection ) Act, 1986 supplements the law on site clearance by declaring certain zones as CRZ and regulates activities in these zones. Further GoTN has also issued orders regulating development within 500 m from the high water mark.

II. PRESCRIPTIVE

Constitutional Guarantees a) Article 48-A of the Constitution

2.19 This directive principle states that the State shall endeavor to protect and improve the natural environment b) Article 51-A of the Constitution

2.20 Thisfundamental duty statesthat it is the dutyof everycitizen to protectand improve the naturalenvironment.

2.21 Courtshave tended to enlargethe scopeof fundamentalrights so that environment dimensionsare recognised.When municipal bodies act as borrowers,TNUIFSL will see to it that checksand balancesare properlyinstituted as these local bodiesare subjectto constitutionalchallenge.

Legislations

c) Air (Preventionand Control of Pollution) Act 1981 and Tamil Nadu Air (Prevention of Control of Pollution) Rules 1983

2.22 Theselaws addressthe preventionand control of air pollution.TNUIFSL projects will not causeany air pollutionhence these laws will not be directlyapplicable. If air pollutionis caused,immediate remedial action will be taken.

d) HazardousWaste (Management and Handling)Rules, 1989

2.23 This law addresseshandling of hazardoussubstances that fall under specified schedules. Projectsenvisaged by TNUIFSLwill not require handlingof specified substances.

Policies

e) National ConservationStrategy and Policy Statement on environment and Development,1992

*f) Policy Statementfor Abatementof Pollution 1992

C. WORLDBANK OD4.01 REQUIREMENTS

2.24 World Bank's OperationalDirective 4.01 outlinesBank policy and proceduresfor environmentalassessment (EA) of bank investmentlending operations and related types of environmentalanalysis. Small scale urban infrastructureand services projectsenvisaged to be financedby TNUIFSLare not clearly categorsedin OD 4.01. They may be consideredthe lowest level of Category B i.e. projectswith comparativelyless significantimpact; not as sensitive,numerous or diverseimpacts. Also consideringthe scale,remedial measures can be easilydesigned. Screening of the projectat the outsetwill identifyenvironment issues if any, suggestappropriate mitigation measures required. and also decide whether any detailed environment studies resulting in an environmentalassessment repor. are required at all.

IV. COMPETENTREGULATORY AGENCIES a) Municipal Bodies

2.25 For most laws applicable to TNUIFSL projects, municipal authorities (who will be recipients of finances) will have to certify that they are abiding by the law they are entrusted to protect and administer. In case of other borrowers, clearances specified in the Acts would have to be obtainedbefore sanctions. b) Pollution Control Boards

2.26 In certain cases like 'consent to discharge' under pollution laws, the TNSPCB and Departmentof Environmentand Department of Forests. c) StatelCentral Ministry Of Environment and Forests

2.27 Only in a few cases such as projects in reserved forests or protected areas will the MoEF of the Central Govemment be involved. d) World Banklother Multilateral Agencies

2.28 The World Bank and other Multilateral Agencies will ensure compliance with their Operational Directives.

REGULATORY FRAMEWORK - SOCIAL

I. MANDATORY a) Land Acquisition Act, 1894 as amended in 1984

2.29 This Act enables the State to acquire private land for public purpose and has provisions for acquisition for industrial purposes. The Act ensures that no person is deprived of land except under law and entitles affected persons (landowner, tenant or licensee)to a hearing before acquisition,with due and adequate compensation made thereafter.

2.30 Only land owners, tenants and licensees are possible compensation recipients. The landless, agricultural and non-agricultural labourers, artisans, forest produce collectors are excluded. The Act deals with cash compensation and provides several methods of valuing compensation.Several States are using negotiationsas a means to fix compensation and acquire land. Grevance/Redressal mechanisms are also in place and affectedpersons may seek the intervention of the High Court and Supreme Court.

b) Government Order dated 21.09.95 from the Commissioner of Land Administration regarding acquisition through negotiation

2.31 The Tamil Nadu Government Order provides for acquisition of land through negotiation and assessmentof land value by a committee. The District Collector has powers to approve amountsless than Rs. 15 lakhs. Approval for amounts above this has to be sought from the Government of Tamil Nadu. The reason for resorting to private negotiation is to implement schemes within a time bound schedule, arrive at an acceptable value, preempt protracted court cases which only delay all processes. Guidelines have been framed for purchase of lands under private negotiation. Implementing and operating agencies for such a scheme are a District level and a State level negotiatingcommittee with ancillary monitoringpowers.

c) Board Standing Orders (Standing Orders of the Commission for Revenue Board) based on the Revenue Act 1884 of the Madras Presidency (for Rayatwari states).

2.32 The Board Standing Orders based on the Revenue Act, 1884 of the Madras Presidency broadly states policy on Government owned lands. This policy covers assignment of land, lease and cancellationsand encroachments.

d) Government of Tamil Nadu (Resettlement and Rehabilitation) Policy applicable to Involuntary Resettlement under the Tamil Nadu Urban Development Project

2.33 GoTN has been implementingthe TNUDP project since 1988. With a view to provide R&R compensation and assistance to PAPs, GoTN has laid down these policy guidelines considering relevant legislation and the World Bank guidelines. This is provided as annex 1.

2.34 Key points in the policy:

- Ensuresthat all PAPs will be compensated and rehabilitated to improve or at least restore their living conditions and income eaming capacity at the pre- project level and will share in project benefits

- When PAPs lose land/structures and will be displaced and/or economically affected adversely,detailed planning will be made along with implementation arrangements in an operational R&R Action Plan Defines PAPs, lists entitlements. details peoples participation, supervision by NGOs and supervisionand monitoring

Mentions an implementation schedule that would be broken up into specific activities and coordinatedwith the chronogram of construction

The cost would be part of the overall project budget and adequate provision would be made for contingenciesand inflation

2.35 Relevant provisions in this policy prepared by GoTN have been incorporated into TNUIFSL's management procedures keeping in view the practical issues related to urban infrastructureprojects.

11.WORLD BANK OD 4.30 ON INVOLUNTARYRESETTLEMENT

2.36 This directive describes Bank policy and procedures on involuntary resettlement as well as the conditions that borrowers are expected to meet in operations involving resettlement. The objective of the Bank's policy is to ensure that populations displaced by a project also benefit from the project and that standards of living are improved, or at a minimum, restored. TNUIFSL as a borrower of credit would ensure that Bank policies are followed.

11l.TNUIFSL's SOCIAL ENTITLEMENTFRAMEWORK

2.37 In contrast to the environmental legislation which exists in India and provides a reference for the environment part of the ESR, no similar framework or legislation exists for general social impacts of urban infrastructure projects - resettlement and rehabilitation (R&R) in particular. In order to provide a framework for the R&R process in projects where World Bank financing is involved, this ESR provides a list of entitlements for project affected individuals, families and establishments. Detailed exposition of the social entitlement framework for World Bank financed projects is provided in Appendix 5. Seven basic categories of issues/impact are foreseen under this entitlement framework:

(a) Loss of land (b) Loss of structure (c) Loss of source of livelihood (d) Loss of access to common resources and facilities (e) Loss of standing crops and trees (f) Losses during transition of displaced persons/establishments (g) Losses to host communities 2.38 For purposes of this framework. the following aefinitionswill be applicable

2.39 Projected Affected Persons (PAP): PAP means those who are:

- physicallydisplaced/economically adverseiy affected as a result of physical re- location; - economically affectedbut not physically re-located; - losing access to community amenitiesand resources.

2.40 Household (HH): A household is a group of persons who commonly live together and would take their meals from a common kitchen.

2.41 Replacement Value: Replacement Value means market value excluding depreciation. In cases where buildings are involved, depreciation will not be taken into account. Replacement value of land should be determined through a land market survey.

2.42 Cut-off date: Cut-off date is used to determine the eligibility of PAPs. The cut-off date will be the date of the baseline survey. The survey will identify the residents or users of the land being acquired.

2.43 Land: The term land refers to land acquired under the Land Acquisition Act or through private transactions. All land provided under the entitlement framework should be provided with securetenure.

2.44 PAPs will be given choices regarding the entitlements provided. If land-for-land is chosen by the PAP, the land should be of equivalent value and/or productivity. Basic units or minimum economic holding will follow the norms of the national, state or local Govemments sufficient to restore or improve the standard of living. Table 2.1: Social Impact & Entitlement Framework For World Bank Financed Projects* Type of lssuellmpact Entitlement Entitlement Options Respon ______Beneficiary ______Benefciary sibility A. Loss of land a. Homestead (i) vith valid ttile, or customary or (i) Household (i) equivalentarea of land or cash compensation at Govt/ usufruct nghts replacementvalue Sponsor (ii) squatters (ii) Household (ii) altemativesite as per Govemrnmentnorms

b. Agriculturalland (i) with valid title, or customary or (i) Titleholders (i) altemate land of equiv.productivitypotential or usufruct rights cash payment at replacement value (ii) tenants, sharecroppers,leaseholder, (ii) Individual (ii) local standardsfor minimum economic encroachers landholdingor cash payment for minimum economic landholding c. CommerciaVIndustnaUlnstftutional (i) with valid title, or customary or (i) Titleholder (i) equivalentland or cash at replacementvalue usufruct rghts (ii) tenant, leaseholder (ii) Unit (ii) equivalent leased land, reimbursementfor unexpiredlease, transition allowance equivalentto 6 months incomne (iii) squatter (iii) Unit (iii) equivalentland and transition allowance equivalent ______to_2_months_income_____ 2. Loss of structure a. House (i) wvithvalid title, or customary or (i) Household (i) structure of equivalentstandard or cash Govtw usufruct nghts compensationat replacementvalue Sponsor (ii) tenant, laseholder (ii) Household (ii) transition allowance equivalentto 6 months rent to (iii) squatters, pavementdwellers (iii) Household re-establish residence (iii) basic dwelling unit as per govemrnmentnorms or cash payment for basic dwelling unit

b. CommerciaVIndustnal/ Institutional (i) with valid title, or customary or (i) Uni (i) structure of equivalent standard or cash usufruct rights compensation at replacementvalue (ii) tenant, leasehokler (ii) Unit (ii) reasonabletransition allwance equivalentto 6 months income (iii) squatters, pavementdwellers (iii) Unit (iii) basic unit as per govemment norms or cash .______payment for basic unit 3. Loss of livelihood/trade/ occupation (i) Individual (i) employmentin reconstructed enterprise or (i) Wage employrnenVagricuiture/ package for re-employmentor starting a business, Sponsor commerciaL/ industrialUinstitutional and transition allowance equivalentto 1 year wages in case of permanentclosure and equivalent to closed time in case of temporary .______closure. ______4. Loss of accessto common resources and facilities (i) Rural common property resources (i)HH/community (i) replacementCPRslamenities or providing Govtl minimum Govemmentstandard Sponsor (ii) Urban cic amenities (ii)HHlcommunity (ii) access to equivalentamenities/services 5. Loss of standing cropsttrees (i) With valid title (i) Household all categories entitled to cash compensation Sponsor (ii) TenanUlessee (ii) Household equivaientto market value for crops and market value (iii) Encroachers/Squatters (iii) Household of the tree products for the remaining life of the tree 6. Losses during transition of displaced persons/establishnents (i) Shifting/Transport (i)Household/Unit (i) provisionof transport or cash equivalent Govt/ (ii) Maintenance (ii)Household/Unit (ii) cash payment for 3 months Sponsor (iii) Construction (iii)HouseholdlUnit (iii) cash payment for cost of labour 7. Losses to Host cornvnunities (i) Amenities/Services (i) Community (i) Restore losses as a result of re-settlement or GovV amenities/servicesequivalent to those provided Sponsor to PAPs

*Tobe read in conjunction withAppendix 5 * The choice of the entitlement lies withthe PAPs IMPLICATIONS TO TNUIFSL

1. MUNICIPAL BODIES AS BORROWERSAND REGULATORS

2.45 The dual nature of municipal bodies brings with it distinct implications. As a govemment agency, its duty is to set up amenities and facilities, to monitor operations and be in charge of approvals. In a project sponsor mode, those same regulations will apply to its operations but in case of violation the repercussions are far greater. TNUIFSL'slending operations are presently focussedon these agencies.

11. CONSUMERPROTECTION

2.46 While the legal framework did not deal with the issue of consumer protection, this area of law has developed rapidly. If municipalities provide sub standard infrastructure or there are deficiencies in service, an affected consumer can take legal action. This will be kept in mind in TNUIFSL financed projects and it will be ensured that the services provided will subscribe to high standardsof quality

Ill. ENVIRONMENT

2.47 Compliance with environmental requirements laid down by the policy, legal and regulatory framework will not pose a problem in a majority of projects that are envisaged to be financed by TNUIFSL. However, in most cases the regulatory agency is the municipal authority. Hence it will be essential for the municipal body requesting the finances to clearly separate the project execution function and regulatory function. It will be the responsibility of the Municipal Commissioner to fumish the necessary undertaking of compliance along with the project proposal. Categorisation of projects will be done so that assessments can be done speedily and remedial measurescan be adopted.

IV. SOCIAL

2.48 Land acquisition is not expected in a majority of TNUIFSL financed projects. Some projects like road widening may have land acquisition or relocation of squatters and hence rehabilitation and resettlement. Provisions for negotiated derivation of compensation rates for land, ensures that problems of acquiring land from private individuals are minimised. However cumbersome procedures for mutation of land from different govemment departmentsneed to be simplified. SECTION3 TNUIFSL ENVIRONMENTALAND SOCIAL ASSESSMENT FRAMEWORK

3.1 TNUIFSL, as a financial intermediary,will ensure the financial viability of each project that it funds. TNUIFSL will catalyse municipalities into attracting prvate investments on their own. The project cycle for appraising and monitoring projects forms the background for evaluation and management of environmental and social issues that could arise within projects that are scrutinised and funded by the TNUIFSL. This section elaborates the project cycie of the TNUIFSL and the environmentaland social assessment and mangement process therein. A risk evaluation and management process that is in consonancewith the project cycle has also been elucidated.

TNUIFSLPROJECT APPRAISAL PROCESS|

3.2 The key task of TNUIFSL will be to appraise project proposals submitted by ULBs, Statutory Bodies, Public Undertakings and Private Investors; to ensure compliance with its operational procedures; consistence with risk management mechanisms; and, enforce loan recovery mechanisms. During screening and scoping of projects, the levels of detail to which each aspect of a project needs to be assessed will be determined. After a project has gone through successful appraisal and approval, TNUIFSL will closely monitor the construction,operation and maintenancephases.

1 PROJECTSCREENING

3.3 A project may be initiated through a formal lefter of intent, a telephonic or personal discussion. TNUIFSL will assess the eligibility of a project based on TNUIFSL's lending policies. The scale and sensitivity of associated issues in a project would determine the categorisation of the project from an environmental and social perspective. The scope of the project document i.e. if it should include EAR and/or SAR, environmental management designs etc. would then be identified. A Loan Application form and an appropriate Information Package will be issued to the Borrower for specific project details. The Loan Application Form will include environmentaland social screening criteria.

3.4 On receiving a completed Loan Application form from the borrower, TNUIFSL will assess the creditworthiness of the borrower. Be3ides this, the financial and economic rate of retum; proportion of Loan to the Grant Fund; environmental and social impacts; and risks will be also be assessed for the project. The assessment will form a part of the Initial Screening Report (ISR) and will decidewhether or not the project should be taken up for detailed appraisal. 3.5 The borrower will prepare a Detailed Project Report (DPR) as per guidelines provided to him in the Information Package and will submit the document to TNUIFSL. Requisite environmental and social detaiis will also form a part of the DPR.

3.6 On receiving the DPR. TNUIFSL will designate a loan officer who will undertake a quick desk review to verify that all requisite information has been furnished in the DPR. The loan officer will then clear the DPR for detailed appraisal and will inform the Borrower about the time period required for detailed appraisal.

11. PROJECTAPPRAISAL

3.7 During Project Appraisal, TNUIFSL (with the help of corporate consultants in the case of E-l/ S-1 projects) along with the borrower will vet the DPR. Technical aspects that will be looked into are eligibility criteria for projects and borrowers; suitability of site; availability of inputs; appropriatenessof, and proven experience with, the technology offered; engineering designs; and construction, operation and maintenance arrangements. Economic aspects will include cost estimates; financial operating' plan; economic and financial viability; and adequacy of proposed financing. Organisational aspects considered will be the institutional, legal and contractual framework; risk analysis; necessary clearances from regulatory agencies; and required covenants. Environmentaland social aspects will be cross-checked against standards set in the ESR. Field investigationsto verify various document components will be carried out when necessary.

3.8 The loan officer will submit the appraisal report for approval with a recommendation to accept the project as submitted; or accept with modifications;or reject it.

Ill. LOAN SANCTIONIDISBURSEMENT

3.9 When project costs are below Rs.15 crores, the loan has to be approved by the TNUIFSL board. Projects above Rs.15 crores will obtain approval for loans from the Trustee Company (TC) Board. The first three loans where resettlement issues are involved, loans over US $ 5 million and loans for which project cost exceeds US $ 20 million are subject to the approval of IDA.

3.10 After requisite approvals and concurrence are obtained, the loan officer will discuss basic terms of agreement such as rate of interest; repayment schedule; security/guarantee; and environmental and social commitments with the borrower. TNUIFSL then prepares and signs the loan agreement with the borrower. The first loan installment will be then disbursed. * First three El/ SI projects will be reviewed and cleared by the Bank.# IV PROJECT MONITORING,AUDIT AND RECOVERY

3.11 TNUIFSL will monitor all projects that it finances to ensure conformity to standards during construction,operation and maintenance. Quarterly Progress Reports will be submitted by Borrowers. Visits to project sites will be undertaken as and when necessary. Based on verification of progress reports, field visits and compliance to loan disbursementconditions, subsequentinstallments will be disbursed.

3.12 TNUIFSL is also setting into place a system of auditing projects. All projects above Rs.15 crores and approximately 25% of other projects will be audited annually with the help of extemal/corporateconsultants. The Audit Report will be submitted to the TC Board through the CEO. TNUIFSL will ensure that there is no default in loan repaymentsby enforcing strict loan recoverymechanisms. Table 3.1: TNUIFSL PROJECT APPRAISAL PROCESS

MiLE Objectives PROCESS RESPONSI i DECISION/PRODL STONES _ _ BILITY CT 1 Project * Receive Letter of Intent ra. Discussions with borrower to * TNUIFSL * Letter of Intent Screening I - assess ei.gibility o oroject * Borrower received based on TNUIFSL lending I * Decision to policies proceed or not - categorise project from with an Initial environmental and Screening social perspective Report (ISR) - identify scope of project report * Loan Applicatior b. Issue Loan Application form for Form issued ISR * Appropriate c. Issue Information Package for Information Detail Project Report (DPR) Package for DPF issued Prepare Initial Screening a. Receive Loan Application form * TNUIFSL * Initial Screening report b. Assess * Borrower report - creditworthiness of borrower * Decision whethe - financial/economic rate of or not to take up return project for - loan: grant proportion detailed - environmental and social appraisal impacts- projectiborrower/other risks * Receive DPR from a. Desk review * TNUIFSL * Project Report borrower - designation of loan officer * Borrower received - check project report against checklist - time period for apprais;al specified 2. Project * Appraise DPR a. Detailed appraisaL.Site * TNUIFSL * Project Appraisal investigation * Borrower Appraisal if necessary, to assess Report with - suitability of site decision to - availability of inputs - accept project - technical and engineering as designs submitted - construction, operation and - accept with maintenance arrangements modifications - environmental and social reject viability - economic and financial viability - financial and operating plan - institutional and legal framework - contractual framework - risk analysis and allocation - clearances from regulatory agencies 3. Loan * Approvals from a. Send Detail Project Report for * TNUIFSL * Approval of the Sanction/ appropriate authorities approval project Disbu - CEO (project costsRs.15 crores)

* Concurrence from a. Obtain concurrence from MA for * MA * MAs Multilateral accepted project report (for first * TNUIFSL concurrence on Agencies (MA) three projects with resettlement accepted projec and all projects where costs . report >Rs.15crores) MILE Objectives PROCESS RESPONSIi DECISIONIPRODt STONES I , BILITY CT

* issueof Sanctionletter a DiscussTerms of Agreement * TNUIFSL I* SanctionLetter (TOA)for the project * Borrower issued - interest rate - repaymentschedule - securitylguarantees - environmentalano social commitment

* FinaliseLoan Agreement a. Prepareand sign Loan * TNUIFSL * Loan Agreement * Borrower Agreements b. Disbursefirst installment signed * First Installment .______disbursed 4.Project * Ensureconformity to a. Preparequarterly progress * Borrower * Quarterly Monitoring standardsduring reports * TNUIFSL Progressreports Audit and construction,operation b. Fieldvisits if required Recovery and maintenance * Ensurecompliance to a. Disbursesubsquent installements * TNUIFSL * Compliance loan disbursement b. PrepareProject completion report * Borrower report conditions * Project completion .______report * Audit project, if sampled a. Audit projectswith the help of * TNUIFSL * Audit report(if External/Corporate consultants. * Extemal sampled) Consultan ______t ______* Ensureno defaultsoccur a. Enforceloan recovery * TNUIFSL * Recoveryof in repayments mechanisim * Borrower payments ENVIRONMENTALAND SOCIAL ASSESSMENT AND MANAGEMENTFRAME WORK

3.13 The environmental and social assessment procedures evolved by TNUIFSL are in consonancewith its project appraisal process. The various steps for environmental and social assessment and managementof TNUIFSL projects have been dovetailed into the TNUIFSL project appraisal process. For each step the objectives, process steps, outputs and responsibilitieshave been identified. Initial screening criteria have been evolved for projects, based on magnitude and sensitivity of environmental and social issues.

3.14 PROJECT SCREENING

Objectives

i. Screen and Scope projects from environmentaland social perspective. ii. Receive environmentaland social components of DPR

Process

a. TNUIFSL will discuss the project with the borrower to identify environmental and social issues based on the checklist in Section 1. An initial screening and categorisation of the project will be carried out depending on the types and magnitudeof environmentaland social issues.

b. After discussions on the project, an Information Package (IP) will be issued as part of will be,issued as a part of the Loan Application Form.

C. The IP will consist of an environmentaland social screening form, information on possible environmental and social issues in urban infrastructure projects and EAR/SAR (which includes Rehabilitation Action Plan) for E-1 and S-1 projects, EMP format, generic environmental management measures and catalogueof environmentalmanagement measures for E-2 projects and SMP format for S-2 projects and the social entitlement framework for S-1 and S-2 projects.

d. Details required in the Loan Application Form will be filled out and submitted to TNUIFSL by the borrower in the Loan Application Form. TNUIFSL will verify the environmental and social issues as part of the Initial Screening Report (ISR), and finally categorise the project as E-1, E-2/ S-1, S-2. e. Based on guidelines issued in the Information Package, the borrower will prepare a Detailed Project Report (DPR) using outlines for E-land S-1 projects andlor EMP ano SMP. The DPR will include a Rehabilitation Action Plan (RAP) as part of the SAR for S-1 projects.

f. On receiving the DPR from the borrower, TNUIFSL will assess whether the environmentaland social details given are adequate. If inadequate, the DPR will be sent back to the borrower for further information. On receiving a DPR complete in all aspects, TNUIFSL will specify a time period to the borrower for environmentaland social appraisal.

DecisioniProduct

Environmentaland Social Screening Report of ISR Environmental and Social input into decision to proceed or not with project Adequacyof environmentaland social details in DPR verified

3.15 PROJECTAPPRAISAL

Objectives

i. Appraise environmentaland social components of DPR

Process

a. During project appraisal, TNUIFSL will appraise environmental and social components of the DPR. While reviewing EARs and SARs with the help of corporate consultants, TNUIFSL will look at the type of environmental and social issues, adequacy of environmental and social management measures provided and the cost of implementing the environmental and social management measures. The proposed project sites will be visited if necessary.

b. TNUIFSL-will discuss any further changes or modifications that have to be made to the environmental and social components of the DPR with the borrower. TNUIFSL will finalise the environmentaland social appraisal report as part of the Project Appraisa, Report.

Decisionl Product

Environmental and Social Appraisal Report as part of Project Appraisal Report with decision to: accept project as submitted; accept project with modifications;or, reject project. 3.16. LOAN SANCTION AND DISBURSEMENT

Objectives

i- Approval of environmentaland social components of DPR from appropriate authority ii. Concurrencefrom MultilateralAgencies iii. Issue of SanctionLetter iv. Finalisationof LoanAgreement

Process

a. Prior to Loan sanction and disbursement, the environmental and social components of the DPR have to be approved by the appropriate authority. Projects that have costs below Rs.15 crores will have to be approved by the AMC board and projects that cost above Rs.15 crore will be sent to the TC board for approval. The first three loans where resettlement is involved and loans for projects where projects costs exceeds US $ 20 million are subject to the approvalof IDA.

b. Sanction letter for the loan will be issued. TNUIFSL will discuss implementationof environmental and social management measures of DPR with the borrower. The Resettlement Plan as approved in the DPR will be implemented by ULB, if the project is sponsored by ULB. The RAP will be implemented by Private Borrower if the project is implemented by Private Borrower. The funding for resettlement would be made out of Grant Fund (GF) in case of ULB sponsored projects. The environmental and social commitments will be then translated into covenants as part of the Loan Agreement. Once the Loan Agreement has been finalised and signed, TNUIFSL will disburse the first loan installment.

Decisionl Product

Final approval Final concurrencefrom MA Environmentaland Social covenants as part of Loan Agreement First installment disbursed 3.18. PROJECT MONITORINGAUDIT AND RECOVERY

Objectives

a Ensure conformity to EAR and SAR during construction, operation and maintenance b Audit projects

Process

a. During Environmentaland Social Monitoring and Audit, TNUIFSL will ensure that the Borrower conforms to the EAR and SAR during construction, operation and maintenance.

b. Monitoring of Environmental and Social components will be carried out through environmental and social compliance reports that form a part of Quarterly Progress Reports. Visits will be carried out to project sites if necessary. The project will also be monitored through interactions with borrowers, local user groups, govemment etc. and where implementation of the EAR and SAR is complete, it will be certified as part of the Project Completion Report.

c. Annual maintenancereports will be submitted by the borrower to TNUIFSL till completion of loan repayments.

d. TNUIFSL with the help of external consultants audit projects on environmentaland social aspects annually. While all projects of E-1 and S- lcategory will be audited, TNUIFSL will sample 25% of the E-2 and S-2 projects. The remainingE-2 and S-2 projects and all E-3 and S-3 projects will be audited through compliance reports.

Decisiorn! Product

- Environmentaland Social compliance Reports as part of Quarterly Progress Reports - EAR/SAR ComplianceCertificate as part of Project Completion Report - Annual MaintenanceReports - Environmentaland Social Audit Reports Table 3.2:ENVIRONMENTAL AND SOCIAL ASSESSMENTAND MANAGEMENTFRAMEWORK Milestones Objectives Process ResRonsibilitP Decision/Product 1. Prtject Screening Environmentaland *Screen and Scope a. Discussproject with Borrowera G EnvironmentalTNUIFSL & Social Screening projectsfrom - Identifyenvironmental and social issuesfrom SectionI *Borrower Social Screening and Scoping environmnentaland b IssueM Environmentaland Social screeningform as part of Loan Reportof ISR socialperspective ApplicationForm for InitialScreening Report (iSR) Environmental & c. Issue appironmental andisoieal s componentsof Socialinput into InformationPackage for DetailedProject Report (DPR) decisionto proceed - EAR and SAR (which includesRAP) outline for E-land S- or not withiproject l categoryprojects - EMP and SMPformats and GenericEnvironmental Management Measuresand Catalogueof EnvironmentalManagement Measures for E-2 and S-2projects d. ReceiveLoan Applicationform e. PrepareISR - verify environmentaland social issues - rinalise categorisationof project

* Receive a. ReceiveDPR from borrower *TNUIFSL *Adequjacy of environmentaland b. Assessif environmentaland social detailsare adequate environmental&social socialcomponents - if adequate,retain reportfor detailedappraisal details in D)PR verified of DPR - if inadequate,send reportback to borrowerfor further information - specifytime periodfor environmentaland social appraisal . 2. ProjectAppraisal Detailed * Appraise a. ReviewDPR with the help of CorporateConsultants in ca se of * TNUIFSL * E&SAppraisal Reportas Environmentaland environmentaland E-11S-1category projects. Conduct site visits, if required.Crosscheck * Borrower part of Project Appraisal SocialAppralsal social components - type of E&S issue Reportwith decisionto of DPR - magnitudeof E&Sissue accept projectas - adequacyof E&Smanagement measures provided submitted - implementationof RAP - accept projectwith - cost of implementingE&S management measures modificatioris b. Discussionswith borroweron - reject project - modificationsto be incorporatedin environmentaland social componentsof DPR - appropriatechanges in other componentsof DPR c. Finaliseenvironmental and socialcomponents as part of project appraisalreport 3. Loan Sanction& Disbursement

TNUIFSL-ESR/ Final Draft' January'97 32 A DevelopmontAlternafives Milestones Objectives Process Responsibility Decision/Product Environmentaland * Approvalof a. Obtain approvalsfor approvalof environmentaland social * TNUIFSL * Final approval Social Report environmentaland componentsof DPRfrom * Borrower Approval social components - CEO (projectcostsRs.15crores)

* Concurrencefrom a. Send environmentaland social components(as part of DPR) for * TNUIFSL * Final concrirrence MA concurrenceto MA * MA from MA - for first three projectswhere reseHtlement is involved - all projectswhere projectcost aboveRs. 15 crores

* Issue Sanction a. Discuss implementationof environmentaland socialmanagement * TNUIFSL * Environmentaland Letter measuresof DPRwith Borrower * Borrower Social covenarntsas - Translateenvironmental and socialcommitments into Terms of part of Loan LoanAgreement Agreerent

* Finalisationof Loan a. Sign agreementand disbursefirst loan installment * TNUIFSL * First installrITerit Agreement * Borrower disbursed 4. ProJect Monitoring, Auditand Recovery Environmentaland * Ensureconformity to a. Environmentaland Socialmonitoring * Borrower * E&S compliance Social Monitoring EAR and SAR during - Environmentaland social compliancereports as part of Quarterly * TNUIFSL Reportsas part of and Audit construction, progressreports QuarterlyP rogress operationand - Fieldvisits if required Reports maintenance - Interactionswith borrower,local user groups,government, etc. . EAR/SARCompliance b. Certificationof EAR and SAR completionas part of Project Certificateas part of Completion Report Project CnompletioniReport c. Annualmaintenance reports till completionof loan repayments * Annual Maintenance Reports * Audit projects a. Audit Projecton environmentaland socialaspects annually with the * TNUIFSL * E&SAudit Reports help of externalconsultants for - all projectsof E-1andS-1category - 25% of E-2 and S-2 category - ComplianceReports for remainingE-2, & S-2 projectsand all E-3 and S-3 projects

TNUIFSL-ESR/ Final Draft/January'97 33 A DevelopmentAltern,atlves ENVIRONMENTALAND SOCIALRISK MANAGEMENT FRAMEWORK

3.19 Environmentaland Social risks could adverselyaffect projectoperations, eamings and henceloan servicingobligations of TNUIFSL. Eventhough projects that will be fundedby TNUIFSLare expectedto be physicallyand financiallysmall (refer Table 1.1), TNUIFSLrecognises the importanceof managingenvironmental and social risks that couldarise in E-1 and S-1 projects. TNUIFSLwill carry out environmental andsocial risk managementas a part of its projectmanagement strategy. In orderto manageenvironmental and social risks which can occur in projects,TNUIFSL has dovetailedenvironmental and social risk managementinto its Environmentaland SocialManagement Process.

3.20 TNUIFSL'srisk managementprocess will comprisethe followingsteps:

* RiskManagement Plan * RiskAppraisal * RiskAllocation * Risk Monitoring

3.21 The frameworkis as shownin Table3.3

RISK MANAGEMENTPLAN

3.22 After receivinga completedLoan Application Form from the borrower,TNUIFSL will identifyrisks from the checklistprovided in Section1 and crosscheckthe same with the LoanApplication Form. TNUIFSLwill carry out a preliminaryenvironmental and social risk assessmentand risk characterisationon the basis of their approximate financialimplications. TNUIFSL will then carry out a preliminaryenvironmental and socialrisk allocationas shownin Table 3.4 and preparean initial Risk Management Planas partof the ISR.

3.23 TNUIFSLwill receivea detailedrisk managementplan from the borroweras part of DPR.The DPRwill be scrutinisedfor adequacyof information. If the informationis adequate,TNUIFSL will retainthe reportfor furtherappraisal. If the informationis not adequate,TNUIFSL will sendback the report to the borrowerfor furtherdetails. 11.RISK APPRAISAL

3.24 TNUIFSL will appraisethe Risk ManagementPlan provided by the borrower in DPR. TNUIFSL will cross-check the environmental and social risks identified in the ISR. TNUIFSL will then appraise the type and magnitude of risk, the characterisation of risk and risk allocation and managementmeasures in consultation with the borrower.

Ill. RISK ALLOCATIONITRANSLATION

3.25 TNUIFSL obtains approval from the CEO for risk management measures in projects which cost less than Rs. 5 crores. TNUIFSL will obtain approval from the AMC board in the case of projects which costs between Rs.5 to 15 crores and from the TC board for projects that cost above Rs.15 crores. TNUIFSL will translate risk allocation into covenants after consultingthe borrower. Finally TNUIFSL and the borrower will sign the covenantsand TNUIFSL will disburse the first installment.

IV. RISK MONITORINGAND PREPAREDNESS

3.26 TNUIFSL will monitor risk through Quarterly Progress Reports and field visits whenever necessary. TNUIFSL will conduct risk monitoring through interactionswith borrower, State Govemment and RegulatoryAgencies.

3.27 The borrowers should at any point in time be prepared to encounter risk even after the best prevention measures are set in place. TNUIFSL will ensure this through a set of protocols that clearly define who has to execute specific tasks. The borrower should ensure that plans are prepared and implemented.

3.28 After the appropriate risk managementsystems are set in place, TNUIFSL will share and transfer the remaining risk and the associated liabilities, through insurance. TNUIFSL will explore the opportunities whereby these risks can be insured.

Insurance Mechanims

3.29 A potential risk for TNUIFSL is the possibility of being held liable by third parties for environmental damage. Protection against this becomes increasingly important as the question of placing liability (fault) for such damage is now more accepted.

3.30 As far as legislation on environmental insurance is concemed, the only law on the matter is the "Public Liability InsuranceAct7, 1991. In case of an accident, payments to victims will be made from the Grant fund and insurance cover.

3.31 TNUIFSL will consider liability limits, deductibles, and self-insurance. The risk analysis process will identify what level of exposure to damages arises from operational proceduresor procucts the institution is exposed to. Limits to the liability TNUIFSL can cope with will be defined in accordance with specific findings and due considerationwould be accordedto the danger of accumulation

Table 3.3: ENVIRONMENTALAND SOCIAL RISK MANAGEMENT FRAMEWORK

Milestones Objectives Process 1. Project Scr ning Risk S InitialRiskIdentification - Receiveloan applicationform Management * Initial Risk Assessment - Prepareinitial RiskAssessment Report Plan * Initial Risk allocation - Identifyenvironmental and social risks from checklist provided in Section1 - Cross-checkinitially with loan applicationform - Preliminaryassessment of risk - Preliminarycharacterisation - Initial allocation of risk * Receiveenvironmental a) ReceiveDPR from borrower and social Risk b) Assessif environmentaland social Risk detailsare adequate Managementplan as - ilf adequatesend for detailedappraisal part of DPR. - If inadequatesend report backto borrowerfor further ______information 11.Project Appr aisal _ Risk * Appraisal of risk a) Appraiseenvironmental and social Risk ManagementPlan Appraisal managementplan of - conformRisk identified DPR - characterisationof risk - allocation of risk - Risk Management Measures b) Finaliseenvironmental and social Risk Management ______measures 111.Loan Sanction and Disbursement Risk * Translationof risk a) Approvalof Risk Managementmeasures Allocation allocationinto b) Translateenvironmental and social Risk Management covenants measuresinto covenants c) Sign environmental and social Risk Management covenants IV. Project Monitoring and Audit Risk * Risk Monitoring a) MonitorRisks Monitoring * Risk Preparedness - Quarterlyprogress reports - Field visits .______.______b) Risk Preparednessvia Institutional Mechanisms

Table 3.4: RISK ALLOCATION FRAMEWORK FOR TNUIFSL PROJECTS KeyRole Players State TC AMC Municipality Contractor/ Insurance Govt. Operator 1) inability to pay _ 2) Non-compliance __= _ - Regulatory _ 7 - Contractual 3) Site Contamination - - 4) MajorHazards - 5) Force Majeure _ . . - Insurance - Non-insurable 6) Unidentifiedimpacts 7) Non-Implementation/delayed c implementationofSocial Plan 8) PublicInterest Litigation ; 7 - 7 SECTION 4

ORGANISATIONAL SUPPORTSTRUCTURE

4.1 In order to ensure that the policy obligations and associated procedures in the Environmentaland Social Report (ESR) are operationalised, TNUIFSL has outlined an organisationalsupport structure. Besides fixing responsibility, the organisational support structure also outlines capacity building essential for TNUIFSL staff and borrowers.

OrganisationalStructure

4.2 TNUIFSL has consciously been designed as a lean organisation with minimal overheads. (Refer Chart 4.1). The personnel and support systems are to be incrementallygeared up as business expands.

4.3 TNUIFSL will deploy six professionals headed by a Chief ExecutiveOfficer (CEO) in the first year. Six professionals will consist of two Vice Presidents (Projects), one Company Secretary,one Manager (Technical)and two Managers (Accounts). Responsibility Allocation Framework

4.4 In the first two years a majority of the projects to be financec are expected to be environmentallyand socialiy benign projects (E-3 and S-3 categories) or those where best practises available can be easily applied (E-2 and S-2 categories - refer Section 3). Very few projects with severe environmentaland social complexities (E-1 and S- 1 categories)will be financed.

4.5 TNUIFSL will ensure sensitivity to environmental and social aspects of various projects among its project appraisal and management staff. TNUIFSL has clearly delineatedthe functions of professionalswithin the organisation.

4.6 Both Vice presidents at TNUIFSL will do appraisals of projects. The Manager (Technical)will help the CEO and Vice Presidents in project specific environmental and social assessmentand management issues. The two Managers (Accounts) will maintain loan accountsof borrowers.

4.7 As the portfolio of projects increase in numbers and complexity of environmentaland social issues, more specialised expertise will be inducted into the TNUIFSL as full- time staff.

Corporate Consultants For Environmental And Social Issues

4.8 TNUIFSL will empanel three to five Corporate Consultantsfrom among individuals or organisations who have the full range of expertise to address environmental and social concems related to urban infrastructureprojects. They will assist in developing, appraising and monitoring E-1 and S-1 category projects. They will also address other project specific environmentaland social issues as and when necessary.

4.9 The Corporate Consultants for environmental and social issues will essentially provide servicesto TNUIFSL as required, for the following

- Advising TNUIFSL on environmentaland social issues - Environmentaland social screening of projects wherever required by the TN UIFSL - Reviewing EAR, SAR and other documents submitted by borrowers for specific environmentaland social project components - Monitoringand evaluating projects

4.10 The Corporate Consultant will also undertake the annual environmental and social audit of all TNUIFSL financed projects. The Terms of Reference for corporate consultants is fumished in Appendix-6. Capacity Building

4.11 TNUIFSL envisages capacity building of its own personnel and its borrowers who will include Urban Local Bodies. Statutory Boards, Public Undertakings and Potential Private Operators in order to ensure that the ESR is effectively operationalised.

4.12 The TNUIFSL personnel have not been exposed to formal training in the management of environmentaland social issues. Thus the training programme for various role players will include an orientation programme on the ESR, Municipal Finance, Urban Planning, Project Management and Engineering and Public Health. Course outline for various modules, the duration and the participation envisaged has been illustratedin table 4.1.

4.13 The training programme is to be co-ordinated and anchored within a training institution in Tamil Nadu (such as Tamil Nadu Institute of Urban Studies) and other local and NationalInstitutions and individuals experienced in various aspects of urban infrastructure projects, will be called upon through an open bid to develop and conduct courses on various modules. These institutions could include Madras School of Economics (MSE), Anna Institute of Management (AIM), Environmental Training Institute of TNPCB, Anna University, Indian Institute of Technology (lIT) Madras, Madras Institue of Development Studies (MIDS), EXNORA, National Environmental Engineering Research Institute (NEERI), National Institute of Urban Affairs (NIUI), Administrative Staff College of India (ASCI), National Institute of Public Finance and Policy (NIPFP), Indian Institute of Public Administration (IIPA), Development Altematives (DA), and Indian Instituteof Management(IIM).

4.14 Based on the experiences gained over the past 2 years, TNUIFSL will modify its training efforts and will make it more practical. The expanded training programme will be supported through the institutionaldevelopment component of TNUDP-II. The generic training programme# is elaborated in Table 4.1 Table 4.1: Generic Training Programme(199-- 199-)# Module CourseOutline Training Duration Participants .1 ______.___.___.______. __._Type 1) TNUIFSL - TNUIFSLConcept Seminar 1 day a) Mayors/electedrepresentatives Concept Main objectives,lending policies (2 sessionsin 199- b) Headsof StatutoryBoards, Public Undertakings and procedures ) and potentialprivate operators - RegulatoryRequirements - ESR Conceptand outline _ ___ _ 2) ESR Profile - TNUIFSLConcept Workshop 1% day a) TNUIFSLProfessionals - ESRConcept (5 sessionsin 199- b) MunicipalCommissioners - RegulatoryRequirements ) (Approx.25 MC/Session) - E&SPriority Issues c) Heads of StatutoryBoards, Public Undertakinigs - ProjectCycle of TNUIFSL and potentialprivate operators - EAJSAProcess Outline - Reports& Formats __ 3) Municipal - ProjectFinance Workshop 1 1/2day a) TNUIFSL FinanceProfessionals Finance * Loan & grant componentsin P.l. (15 sessions b) 4 Financepersonnels from each Corporation - MunicipalFinance in 199-- 9-) c) 3 Financepersonnel from each Municipality - FOP Concept d) Financepersonnel from StatutoryBoards, - ProjectPreparation Criteria or Public Undertakingsand potential private packagingof M.l. projects operators 4) Urban Planning& - LandusePlanning Workshop I day a) All TNUIFSLProfessionals Management - UrbanEnvironmental Issues (20 sessions b) 6 Sr. Engineeringpersonnel from eaci - UrbanPoverty in 199--9-) Corporation - Slum Upgradation c) 4 Sr. Engineeringpersonnel from each Municipality d) Engineeringpersonnel from StatutoryBoards, Public Undertakingsand potentialprivate operators 5) Project - ProjectPreparation Workshop 1 day a) All TNUIFSLProfessionals Management - ProjectImplementation (20 sessions b) 6 Sr. Engineeringpersonnel from each - ProjectMonitoring in 199--9-) Corporation c) 4 Sr. Engineeringpersonnel from each Municipality d) Engineeringpersonnel from StatutoryBoar(ds, Public Undertakingsand potential private ______op era to rs

TNUIFSL-ESR/ Final DraftlJanuary'97 40 DevelopmentAtto"nativos Module CourseOutline Training Duration Participants .______T ype ______Type_ _ 6) Engg.& Public (a) Water SupplyProjects Workshop 5 days a) All TNUIFSLProfessionals Health - Engg.design (20 sessions b) 6 Engineering/PublicHealth personnelfrom - Environmentalissues in 199--9-) each Corporation - Designsolutions c) 4 Engineering/Public Health personrnelfrom (b) Drainage each Municipality - Engg.design d) Engineeringpersonnel from StatutoryBoar(is, - Env. issues Public Undertakingsand potentialprivate - Design solutions operators (c) Roads,Road Structures & Street Furniture - Engg. design - Env. issues - Design solutions (d) Solid WasteManagement - Env. issues - Best practices and solutions (e) Case Studies 7) Social - R&R policiesand procedures Workshop 2 days a) All TNUIFSL Professionals Assessment * National& OD requirements (20 sessions b) 6 Engineering/PublicHealth personnelfrom Process - LAA process in 199--9-) each Corporation - Identificationof PAPs c) 4 Engineering/Public Healthpersonnel flom - Social EntitlementFrameworks each Municipality - SocialAssessment d) Engineeringpersonnel from StatutoryBoards, - RAP Techniques Public Undertakingsand potentialprivate - Risk Assessmentand Management operators Skills

rNUIFSL-ESRIFinal Draft/January9 7 41 * Development Aftornaifvos Appendix I Appendix-I LIST OF MUNICIPALITIESIN TAMIL NADU REGIONWISEAND DISTRICTWISE SNO. NAME OF MULJNICIPALITIES GRADE I Amlapur Sp] Grade 2 Alandur 3 Avadi Spi. Grade 4 Kancheepuram 5 Kathivakkam 6 Thiruvottivur 7 Chengalpattu I Grade 8 Pallavapuram 9 Tambaram 10 Modavaram Ir Grade 11 Tiruvallur 12 Maduranthagam III Grade SOUTH ARCOT-VALLALAR DIST. 13 Cuddalore Spl.Grade 14 Chidambaram I Grade 15 Panruti 16 Nallipuram II Griade 17 Virudhachalam VlLLUPURAM RAMASAMY-PADAYACBIIAR DIST. 18 Villupuram SpI Grade 19 Tinidivanam II Grade VELLORE REGION ARCOT AMBEDKAR DIST. 20 Vellore Spl.Grade 21 Arakkonam 22 Gudivatham I Grade 23 Thirupattur 24 Ambur 25 Arcot I' Grade 26 Ranipettai 27 Vaniyarnbadi 28 Walajapattai m Grade 29 Thiruvannamnalai I Grade 30 Arani II Grade 31 Thiruvathipuran mIGrade 32 Vandavasi SALEM REGION: SALEM DISTRICT: 33 Mattur SpIlGrade 34 Namakkal 35 Atur 36 Thiruchangode I Grade 37 Komarspalayam 38 Idapadi II Grade 39 Basipuram DHARAMPURI DISTRICT S.NO. NANIE OF MUNICIPALITIES lGRADE 40 Dharmapun I Grade 41 Krishnagiri H Grade 42 |Hosur TIRUPUR REGION 43 Erode Spl.Grade 44 Dharapurun I Grade 45 Gobichettipalayarn 46 Sathivamangalam II Grade 47 Bhavanisagar 48 Bhavani m Grade NILGIRIS DISTRICT 49 Udagamandalarn Spl.Grade 50 Coonoor I Grade COIMBATORE DISTRICT 51 Pollachi 52 Tiruppur Spl .Grade 53 Udumalpet Spl.Grade 54 Mettupalayam I Grade DINDIGUIL-ANNADISTRICT 55 Dindigul Spl.Grade 56 Kodaikanal 57 Palani Spl.Grade THANJAVUR REGION: THANJAVUJRDISTRICT 58 Kumbakonam Spl .Grade 59 Thanjavur 60 Pattukottai I Grade NAGAPATTINAM - QUAID-E-MILLETH 61 Maviladuthurai Spl. Grade 62 Mannargudi 63 Nagapattinam I Grade 64 Tiruvarur 65 Sirkazhi 11Grade 66 Koothapallur III Grade 67 Thiruthuval PUDUKOTTAI DISTRICT 68 Pudukottai Spl.Grade 59 Aranthangi III Grade KARURDHIEERANOHINNAMALAI 70 Karur 71 Kulithalai TRICHI PERUMBIDUGU MlTHURAIYAR 72 Manappari PERAMBALUR TBRUVALLUVAR 73 Thuraiyur MADURAI REGION: MADURAI DISTRICT S.NO. I NANIE OF MUNICIPALITIES GRADE 74 Theni-AlhiNagaram I Grade 75 Bodinavakanur 76 Ohinnananur I Grade 77 Cumbum 78 Perivakulam 79 Thirumangalam 80 Melur m Grade 81 Usilampatti m Grade PASUMPON THEVAR THIRUMAGANAR DISTRICT 82 Karaikudi Spl.Grade 83 Devakottai II Grade 84 Divaganga KAMARAJAR DISTRICT 85 Rajapalavam Spl.Grade 86 Aruppukottai 87 Sivakasi I Grade 88 Srivilliputhur 89 Virudhunagar 90 Sattur II Grade RAMANATHAPURAM DISTRICT 91 Ramanathapuram I Grade 92 Paramakudi II Grade TIRUNELVELI KATTABOMMAN DISTRICT 93 Courtallarn I Grade 94 Kadayanallur 95 Sankarankoil II Grade 96 Tonkasi 97 Puliyangudi m Grade 98 Sengottah CHDAMBARANAR DISTRICT 99 Tuticorin Spl.Grade 100 Kovilapatti I Grade KANYAKUMARI DISTRICT 101 Nagarcoil Spl.Grade 102 Colachol 103 Kuzhithunai m Grade 104 Padmanabhapuram LOCATION OF MUNICIPALITIES (map showing municipality locations) Appendix-3

74THAMENDMENT INSERTION OF 243 W, 243 X, 243 Y & 243 ZD CONSTITUTIONARTICLES

243 W Subjectto the provisionsof this Constitution,the Legislatureof Statemay, by law, endovv- a) The Municipalitieswith such powersand authority as may be necessaryto enablethem to function as institutions of self-governmentand such law may contain provision for the devolutionof powersand responsibilitiesupon Municipalities,subject to such conditionsas may be specifiedtherein, with respectto

i) preparationof plansfor economicdevelopment and socialjustice; ii) performanceof functionsand implementationof schemesas may be entrustedto them includingthose in relationto the matterlisted in the Twelfth Schedule; b) The Committeeswith such powersand authority as may be necessaryto enable them to carry out the responsibilitiesconferred upon them includingthose in relationto the matters listed in the Twelfth Schedule.

'7WELFTH SCHEDULE"

1. Urban planningincluding town planning. 2. Regulationof land-useand constructionof buildings. 3. Planningfor economicand socialdevelopment. 4. Roads and bridges. 5. Water supply for domestic,industrial and commercialpurposes. 6. Public health,sanitation conservancy and solid waste management. 7. Fire services. 8. Urban forestry,protection of the environmentand promotionof ecologicalaspects. 9. Safeguardingthe interests of weaker sections of society, including the handicappedand mentally retarded. 10. Slum improvementand upgradation. 11. Urban povertyalleviation. 12. Provisionof urbanamenities and facilities such as parks, gardens,playgrounds. 13. Promotionof cultural,educational and aestheticaspects. 14. Burialsand burial grounds;cremations, cremation grounds and electric crematoriums. 15. Cattle pounds;prevention of crueltyto animals. 16. Vital statisticsincluding registration of births and deaths. 17. Public amenitiesincluding street lighting,parking lots, bus stops and public conveniences. 18. Regulationof slaughterhouses and tanneries."

243 X. The Legislatureof a State may, by law- a) Authorise a Municipalityto levy, collect and appropriatesuch taxes, duties tolls and fees in accordancewith such procedureand subjectto such limits; b) Assign to a Municipalitysuch taxes, duties, tolls and fees levied and collected by the State Govemmentfor suchpurposes and subject to such conditionsand limits; c) Providefor makingsuch grants-in-aidto the Municipalitiesfrom the ConsolidatedFund of the State; and d) Provide for constitutionof such Fundsfor crediting all moneysreceived, respectively,by or on behalf of the Municipalitiesand also for the withdrawalof such moneystherefrom, as may be specifiedin the law. 243 Y(1)TheFinance Commissionccnstituted under Article 243-1 shall also review the financial position of the Municipalitiesano make recommendationsto the Govemoras to- a) The principleswhich should govem - i) the distributionbetween the State and the Municipalitiesof the net proceedsof the taxes, duties, tolls and fees leviable by the State, which may be divided betweenthem under this Part and the allocation betweenthe Municipalitiesat all levels of their respectiveshares of suchproceeds; ii) the determination of the taxes, duties, tolls and fees which may be assigned to, or appropriatedby, the Municipalities; iii) the grants-in-aidto the Municipalitiesfrom the ConsolidatedFund of the State; b) The measuresneeded to improvethe financialposition of the Municipalities; c) Any other matter referred to the Finance Commissionby the Governor in the interests of soundfinance of the Municipalities.

(2) The Govemorshall causeevery recommendationmade by the Commissionunder this article togetherwith an explanatorymemorandum as to the action taken thereon to be laid before the Legislatureof the State.

243 ZD (1)There shall be constitutedin every State at the district level a District Planning Committeeto consolidatethe plans preparedby the Panchayatsand the Municipalitiesin the district and to prepare a draft developmentplan for the district as a whole.

(2) The Legislature of a State may, by law, make provision with respect to -

a) The compositionof the District PlanningCommittees; .

b) The mannerin whichthe seatsin suchCommittees shall be filled:

Provided that not less than four-fifths of the total number of members of such Committee shall be elected by, and from amongst, the elected members of the Panchayatat the district level and of the Municipalitiesin the district in proportionto the ratio betweenthe populationof the rural areas and of the urban areas in the district; c) The functionsrelating to district planningwhich may be assignedto such Committees; d) The mannerin whichthe Chairpersonsof such Committeesshall be chosen.

(3) EveryDistrict PlanningCommittee shall, in preparingthe draft developmentplan, - a) have regardto - i) matters of commoninterest betweenthe Panchayatsand the Municipalitiesincluding spatial planning, sharing of water and other physical and natural resources, the integrated developmentof infrastructureand environmentalconservation; ii) the extent and type of availableresources whether financial or otherwise; b) Consultsuch institutionsand organisationsas the Governormay, by order, specify.

(4) The Chairpersonof every DistrictPlanning Committee shall forward the developmentplan, as recommendedby such Committee,to the Govemmentof the State. Appendix-4

SALIENT FEATURES OF THE MADRAS DISTRICT MUNICIPALITIES ACT, 1920

Part I - Preliminary

It deals with definitions and extents of jurisdiction which is to the whole of the Presidency of Madras, except the city of Madras.

Part II Establishment, Constitution and Governments of District Municipalities

Chapter II - Chapter V deal with Municipal Authorities and their incorporation, elections, qualifications of members powers in respect of property contracts.

Part IlIl - Taxation and Finance

Chapter VI deals with the levy of taxes such as property tax, profession tax, pilgrim tax.

Part IV - Public Health, Safety and Convenience

Chapter VIl - Chapter Xil deal with resting of public works and utilities with municipal authorities included are works, lighting, drainage, scavenging, streets, building regulations, wells, huts, nuisance, factories, burial provisions, disease control.

Part V - Subsidiary Legislation and Penalties

Chapter XIV - Chapter XV deals with the State Govemments rule making power and publication of rules, bye - laws and regulations.

Part VI - Procedure and Miscellaneous

Chapter XVI deal with licenses and permissions, summoning powers, notices, appeals, powers of inspection, legal proceedings and ancillary provisions.

Schedules - deal with Taxation and finance rules, purposes for which premises may not be used, list of dangerous diseases, penalties Appendix-5

SOCIAL IMPACT AND ENTITLEMENT FRAMEWORK FOR WORLD BANK FINANCED PROJECTS

TNUIFSL will ensure that for all proiects financed by it, the due processand procedureslaid down by the Governmentof Tamil Nadu will be adopted. For projects accessing World Bank funds, entitlementsfor each impact is describedbelow:

1. Lossof Land:

This impact affects families' accessto space for housing(homestead), agricultural land or land for commercial,industrial or institutionalpurposes.

a. Loss of land for homesteadmay impact owners with valid titles, or customary and usufructrights. The beneficiaryunit is the family, and the entitlement options offered to PAPswill includethe provisionof an equivalentarea of land in an acceptablelocation or cashcompensation at replacementvalue of lost property

In the case of squatters,the family will also be consideredas a unit and they will be provideda altemativesite as per Governmentnorms with cash compensationfor the lost structure,or a basicdwelling unit as per Govemmentnorms

b. Lossof agriculturalproperty is envisagedto impact personswith valid titles or customary or usufructrights. The beneficiarywill be the titleholder who will be entitled to choose betweenan altemativeland of equivalentproductive potential or cash compensationat replacementvalue

In the case of tenants,sharecroppers, leaseholders or encroachersthe individualwill be the beneficiary. They will be entitled to choose between minimum economic land holdings based on local standardsor a cash compensationfor the minimum economic landholdingat its replacementvalue

c. Loss of commercialindustrial or institutionalland is envisagedto impact persons with valid titles, customaryor usufructrights. The beneficiarywill be the titleholder who will be entitled to choose between equivalent land in an acceptable location or cash compensationat replacementvalue

In the case of tenants and lease holders, the beneficiary will be the commercial, industrial or institutionalunit. The beneficiaryunit will be entitled to equivalent leased land, reimbursementfor unexpiredlease and a transitionalallowance equivalent to two year's income

In the case of squatters, the beneficiary will again be the commercial, industrial or institutional unit. The beneficiary will be entitled to equivalent leased land and a transitionalallowance equivalent to two months'income

2. Loss of Structure

This categoryof impact includesfamilies or units loosing their housesor other commercial, industrialor institutionalstructures

a. Loss of houses will impact families with valid title, customary or usufruct rights. The beneficiary unit is the family which will be entitled to choose between a structure of equivalent standard in an acceptable location or cash compensationat replacement value In the case of tenants and lease nolders the beneficiary unit will again be the family who will be entitled to a transitional allowance equivalent to six months' rent to re-establish residence.

In the case of squatters and pavement dwellers, the beneficiary will be the family. They will be entitied to choose between a basic dwelling unit as per Government norms or cash payment for a basic dwelling unit at replacement value

b. Loss of commercial, industrial or institutional structures will affect units with valid titles, customary or usufruct rights. The beneficiary will be the commercial, industrial or institutional unit. The beneficiary unit will be entitled to choose between a structure of equivalent standard in an acceptable location or cash compensation at replacement value

In the case of tenants and leaseholders, the beneficiary will be again the commercial, industrial or institutional unit entitled to a reasonable transitional allowance equivalent to one year's income

In the case of squatters and pavement dwellers, the commercial, industrial or institutional beneficiary units will be entitled to choose between a basic unit as per Govemment norms or cash payment for the basic unit at replacement value

3. Loss of Livelihood/Trade/Occupation

This impact affects individuals access to wage employment

a. Loss of agricultural, commercial, industrial or institutional wage employment impacts specific individuals. The beneficiary individuals will be entitled to employment in re- constructed enterprise or a package for re-employment or starting a business, and a transitional allowance equivalent to one year's wages

4. Loss of Access to Common Resources and Facilities

In this category of impacts, the beneficiaries are communities (in the case of rural projects) or households (in the case of urban projects), and the losses include loss of rural common property resources or urban civic communities

a. In the case of rural common property resources, the beneficiary units will be the households or the community entitled to replacement of common property resources/amenities at minimum Government standards

b. In the case of urban civic amenities, the beneficiary units will be the households or the community entitled to access to equivalent amenities or services

5. Loss of Standing Crops and Trees

This category of impacts includes standing crops or trees for those with valid titles, tenants or lessees and encroachers or squatters

In all cases, the family will be the entitlement beneficiary. In the case of valid title and tenants, the benef ciary family will be entitled to cash compensation equivalent to one year's income for crops and cash compensation equivalent to one year for trees. In case of encroachers/squatters cash compensation will be paid.

6. Losses during transition of displaced persons/establishments Losses in this category include those during shifting!transport, maintenance, and construction. In all categories,the family or respectivecommercial, industriai or institutional unit will be the beneficiary

a. For shifting and transport,the beneficiaryfamily or the unit will be entitledto provisionof transportor cash equivalentfor the transportationarrangement

b. In the case of maintenance,the beneficiaryfamily or the unit will be entitled to cash paymentfor three months

c. In the case of construction,the beneficiaryfamily or unit will be entitled to a lumpsum cash payment for materials and labour or provision of materials for constructionof structures

7. Lossesto Host Communities

In this categoryof impact, the host community,particularly in the resettledarea, its access to amenities and services has reduced. The beneficiary host community will be entitled to restoration of losses as a result of resettlementor amenities/servicesequivalent to those providedto the projectaffected persons. Appendix-6

TERMSOF REFERENCE FORCORPORATE ENVIRONMENTAL AND SOCIALCONSULTANTS

Background

The TamilNadu Urban Infrastructure Financial Services Limited (TNUIFSL) has been set up to financevarious urban infrastructure projects including water supply,roads, bridges, street lights, solid waste plants, storm water drains, bus stations,and marketsin the municipalitiesof Tamil Nadu. The scope of operationsfor TNUIFSL includesurban infrastructureprojects sponsoredby Urban Local Bodies (ULBs), StatutoryBoards and PotentialPrivate Inventors.

TNUIFSLbelieves that each of its projectswill improve living standardsand the environmentof urban populationsin and aroundit projectlocations. TNUIFSLwill promoteenvironmentally sound, socially acceptable and commerciallyviable urban infrastructureprojects. TNUIFSL has reflected its environmentaland social commitmentsthrough detailed operational procedures detailed in its Environmental and SocialReport (ESR). All projectsfinanced by TNUIFSLshould be in consonance with its ESR.

To facilitatethe processlaid down within its ESR, TNUIFSLintends to empanel corporate consultants to assist in developing, appraising and monitoring environmentallyand socially sensitive projects.

II. Role of CorporateEnvironmental and Social Consultants

The empanelledCorporate Consultant will essentiallyprovide services to TNUIFSL as required,for the followingtasks.

i. Advising TNUIFSLon project speciric environmentaland social screening

The corporateconsultants will be requiredto advise TNUIFSLwhile screening projectsfor the environmentaland social components.

iL. Appraising Environmental Assessment Reports (EAR), Social Assessment Reports (SAR)and other documentssubmitted by Borrowers

The corporateconsultants will appraisethe EAR andSAR of environmentallyand sociallysensitive projects. They will reviewthe identifiedenvironmental issues and assessthe managementmeasures and assess compliance of the measures suggestedwith ESR. iii. Monitoring and evaluating projects

The corporate consultants will assist in monitoring the progress of environmental and social aspects during construction, operation and maintenance of projects specified by TNUIFSL. They will evaluate Quarterly Progress Reports submitted by borrowers and will audit projects specified by TNUIFSL.

III. Eligibility for Empaneliment as Corporate Consultants

Empanelled Corporate Consultants can be either individuals or organisations. The consultants should have the experience and expertise to address environmental and social concems related to urban infrastructure projects.

IV. Details of Empanellment

Corporate Consultants will be empanelled for a period of one year, of during they can be called upon to take up specific assignments.

V. Expression of Interest

The interested individual consultants / organisations should submit an application stating their interest to be empanelled. Each application (in English) should include the following information:

i. Name, address and facsimile number of the organisation; ii. Names and short Curriculum Vitae of the principal officials to be deputed; iii. Ownership and organisation sfructure of the firm; iv. Financial statements for the previous three years; and v. List of major assignments undertaken during the previous five years with special emphasis on the assignment being sought now

The last date for receipt of applications for expression of interest is one month from the date of publication. Please note this is not a request for consultancy proposals but for empanellment. After a review of the applications of expression of interest, shortlist for empanelling consultants will be prepared based on:

i. the firm's general experience in the field of the assignment; and ii. qualifications and competence of the personnel proposed for the assignment

Upto five consultants will be empanelled and invited to submit proposals for specific assignments as and when necessary.

- Amendmentsmade in the final report as suggestedby the WorldBank Mission (Oct. 4 -23, 1998.)