If provided by the financial institution, the Early Warning System Team writes a short summary describing the purported development objective of the project and project components. Review the complete project documentation for a detailed description.
Parag, established in 1992, is one of India's largest private dairy companies. It has a milk processing capacity of up to 2,000,000 litres per day (LPD) - 1,200,000 LPD at its facility in Manchar, and another 800,000 LPD at Palamner.Parag procures milk from 22 districts in 4 states - Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu. The Company collects raw milk from over 4,300 village level collection centres, 77 chilling centres (including 37 owned by the Company), and 37 Bulk Cooling units across the Manchar / Palamner districts. The Company has a diversified product portfolio ranging from liquid milk to value added products like UHT milk, cheese, butter, ghee (clarified butter), paneer (cottage cheese), yoghurt, curd, lassi, flavoured milk, dairy whitener and milk powder sold under the brands 'GO', 'Gowardhan' and 'Top Up', with value added products being > 60% of sales. It owns one of the largest integrated cheese plants in Asia with capacity of 40 tons per day.The Company also established backward integrated operations into dairy farming in 2005 when it established Bhagyalakshmi Dairy Farms (a fully owned subsidiary), a modern farm with ~2500 cows (of which ~1100 are milking cows) that serves as an R&D unit for improving the yield and quality of milk.The project under consideration is Parag's further expansion into value added products, especially whey (de-mineralised whey powder) and UHT milk, strengthening its current operations through plant automation, refurbishing of old manufacturing areas and expanding its procurement and distribution networks. The expansion, automation and refurbishment activities will be carried out at Parag's existing facilities in Manchar and Palamner.
OVERVIEW OF IFC'S SCOPE OF REVIEW
IFC's review of this proposed investment consisted of appraising technical, environmental, health and safety (EHS) and social related information submitted by Parag Milk Foods Pvt. Ltd. ("Parag" or the "Company"), including business plans, corporate EHS policies, Human Resources related procedures and documents; organization charts; training records; relevant authorizations and permits, environmental monitoring reports, resource consumption data, etc.The appraisal included site visits to (i) Parag's milk processing facilities in Manchar, Maharashtra (60 km from Pune) and Palamner, Andhra Pradesh (130 km from Bangalore) (ii) Bhagyalakshmi Dairy farm in Manchar, as well as (iii) two chilling centers around Manchar; document review; and discussions with Parag's senior management and technical teams .
IDENTIFIED APPLICABLE PERFORMANCE STANDARDS**
While all Performance Standards are applicable to this investment, IFC's environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards.PS 1 - Assessment and Management of Environmental and Social Risks and ImpactsPS 2 - Labor and working conditionsPS 3 - Resource Efficiency and Pollution PreventionIf IFC's investment proceeds, IFC will periodically review the the project's ongoing compliance with the Performance Standards
ENVIRONMENTAL AND SOCIAL CATEGORIZATION AND RATIONALE
This is a Category B project according to IFC's Policy on Environmental and Social Sustainability, because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria.Key environmental and social (E&S) issues associated with this Project include: development and implementation of management systems covering environment, health and safety and food safety; assurance of fair, safe and healthy working conditions in compliance with local regulatory requirements and relevant Performance Standards; resource efficiency of the operations (water, energy, milk); monitoring and management of air emissions, wastewater treatment and discharge, solid and other waste disposal; the impacts of operations on local ambient air quality; life and fire and safety management including emergency preparedness and response; and the supply chain of milk.The project activities will be undertaken within the existing processing facilities. The project is not expected to present risks to communities around Parag's operations (PS4). No land acquisition is envisaged for any of the activities in the Project. Hence, impacts of the type envisaged in PS 5 (Land acquisition and involuntary resettlement), PS6 (Biodiversity Conservation and Sustainable Natural Resource Management), PS7 (Indigenous Peoples) and PS8 (Cultural Heritage) are not expected on account of the Project.
**Information on IFC's Policy and Performance Standards on Environmental and Social Sustainability can be found at www.ifc.org/sustainability
ENVIRONMENTAL AND SOCIAL MITIGATION MEASURES
IFC's appraisal considered the environmental and social management planning process and documentation for the project and gaps, if any, between these and IFC's requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through the implementation of these measures, the project is expected to be designed and operated in accordance with Performance Standards objectives.
PS 1: ASSESSMENT AND MANAGEMENT OF ENVIRONMENTAL AND SOCIAL RISKS AND IMPACTS
Environmental & Social Assessment: The Manchar facility has existed at the same location since 1992. The Palamner facility was commissioned in 2010. The proposed project involves installation of new low-impact equipment and machinery within the footprint of Parag's existing facilities, and minor construction activities, therefore, the environmental and social impacts of the Project will be minimal. Reflecting this, local regulations did not require a formal Environmental and Social Impact Assessment (ESIA) study of the project as part of permitting process. Parag has however obtained all necessary permits as per the regulatory requirements.Policy and Management Systems: Parag does have an environmental policy which adequately guides the management of sustainability issues. The Company has put in place an ISO 9001:2000 certified quality management system (QMS) for both the facilities, and is in the process of developing a formal energy management system which is designed to be certified, meeting the requirements of ISO 50001.At each processing site, the maintenance and utilities head is responsible for management of environmental aspects and energy efficiency in the factory, while the Human Resources (HR) manager is responsible for safety management. However, to further strengthen the system and to have increased focus on these issues, Parag will either appoint a qualified professional or provide a senior member of the company's management the responsibility for environmental, social and OHS management within the company.Also, Parag will develop formal integrated systems for EHS management, expanding upon its quality and energy management experience, with IFC's Performance Standards appropriately incorporated. The systems will be developed and implemented within a time frame agreed with IFC.Supply Chain: Milk is mainly procured from farmers through a network of over 4,300 village level collection centers, 77 chilling centers and 37 bulk coolers. Most of these centers (except Parag owned chilling centers) are run by village based cooperatives/self-help groups or small entrepreneurs. For the chilling centers in Manchar area, Parag provides the equipment; however, the centers are run by the cooperatives/self-help groups or small entrepreneurs. Parag owns and operates 37 chilling centers in the Palamner area. The workforce in these chilling centers is both permanent workers and casual workers. To secure compliance of these chilling centers (on labor and wastewater management), Parag will commission a compliance audit of a sample of chilling centers and take corrective actions, as required.
PS 2: LABOR AND WORKING CONDITIONS
Parag directly employs 983 workers in Manchar and 231 workers in Palamner. In addition, 579 workers in Manchar and 200 in Palamner are engaged through contractors. The Company employees are typically in managerial, supervisory, quality control and machine operator roles. The contract workers are engaged in material movement (loading and unloading), gardening, housekeeping, packaging and labeling, canteen and security operations.Human Resource Policies and Procedures: Parag has drafted a HR manual which describes all the HR policies and procedures. It will be presented to the Board of Directors for their approval before it comes into effect.Working Conditions and terms of employment: All the workers at Parag, including both permanent and contract workers, have written contracts through which they are informed about the terms of their employment. All the legal and social security benefits are provided to the workers, however, the current wage payment structure at Parag needs improvement to ensure compliance with IFC PS2 and legal requirements. Parag will, therefore, revise the wage structure for its permanent and contract workers.Grievance Mechanism: Parag has a works committee with equal representation of workers and management. The workers can discuss various workplace related issues in this forum (e.g. Canteen food, workplace cleanliness, hygiene, uniform, etc.). There is also an annual practice of "Raise your Concern" where workers can raise their concerns with the Managing Director directly.Workers' Organization The national law and local state laws support workers to become members of trade unions. Parag management does not restrict its workers to become member of trade unions. However, currently there is no workers' union at Parag.Non-discrimination and Equal Opportunity: No instances of discrimination were noted; however, currently there is no documented policy on non-discrimination at Parag. Parag will develop a policy on the same.Occupational Health and Safety (OHS): Parag has not undertaken a formal OHS risk assessment of its facilities, and manages safety matters on the basis of its managers' and supervisors' industrial experience. The plant visits did identify a number of areas in which safety should be improved, and Parag has undertaken to implement these improvements in the context of an OHS management system. Parag will commission a qualified industrial safety expert to carry out a comprehensive OHS risk assessment and develop a corrective action plan (CAP) to address the findings, in the context of the developing OHS management system. The CAP will be implemented within a time frame to be agreed with IFC. However, in the interim, and in parallel with this formal review process, several areas for improvement will be addressed on a priority basis including: guarding/covering of moving parts; slip and trip prevention; electrical safety; development, implementation and display of emergency response plan. Enhanced systems for investigation, and documentation of accidents/incidents/near-misses; and mapping/re-engineering of dangerous work practices will be undertaken within the management system context, and the OHS professional shall advise Parag on these matters.The fire safety system at both the facilities is based on portable fire extinguishers. As a priority matter, Parag will commission an appropriately qualified fire safety engineer to review fire protection at the processing sites, advise on their compliance with relevant local regulation and also develop a fire safety action plan, which will consider, inter alia fire prevention, egress, detection and alarm systems, compartmentalization, fire suppression and control, and fire emergency response planning. The fire safety action plan, including implementation timetable will be agreed with IFC and implemented by Parag according to the agreed timeline.
PS 3: RESOURCE EFFICIENCY AND POLLUTION PREVENTION
- Pollution Prevention: Air EmissionsThe main sources of air emissions are the coal based cogeneration plants (for steam and power) both in Manchar and Palamner. Both facilities have stand-by boilers, fired by coal at Manchar and oil at Palamner, and diesel generators for electrical standby power. Typically, these systems operate for around one week in a year when the cogeneration plant is shut down for maintenance.Parag regularly monitors quality of stack emissions as well as ambient air quality at Manchar. The boiler emissions do not currently meet the particulate matter limits. Based on these results and to control the air emissions from the cogeneration plant, the Company is already in the process of installing bag filters. At Palamner, the utility system is being expanded, and bag filters will be included. At Manchar, emissions of other combustion products meet WBG emissions parameters and local requirements. Data were not available at Palamner, but compliance is expected on the basis of experience at Manchar. Parag will monitor the stack emissions and ambient air quality to ensure compliance with local requirements, as well as relevant World Bank Group (WBG) EHS guidelines and take any corrective actions, as needed. The company will, in accordance with the regulatory requirements, provide acoustic treatment to DG sets or to the room where the DG sets are installed.- Pollution Prevention : Water and wastewaterThe company sources its water from a river at the Manchar facility. Water meters are installed on the main supply as well as various consumption points. At Palamner, the main sources of water are the two on-site borewells. Parag has its own water treatment unit (at Palamner and Manchar) with filtration, softener, demineralisation (DM) plant and reverse osmosis (RO), which produces water for drinking, milk processing, washing of process containers, gardening, domestic usage, cooling towers and boilers. The average daily water consumption is approx. 1,200 m3 at Manchar and 450 m3 at Palamner.This facility is equipped with an effluent treatment plant (ETP) with secondary treatment. ETP at Manchar has anaerobic treatment in an upflow anaerobic sludge blanket (UASB) as well as aerobic treatment in a conventional activated sludge process (ASP). The ETP at Palamner is based on ASP. The treated effluent is used for outside area cleaning and gardening. The Company will ensure that the ETP meets the legal discharge limits as well as WBG guidelines on a continual basis. This will be done through attention to milk loss (see below) and additional effluent treatment capacity should milk loss reduction not be adequate to meet the necessary effluent standards. Also, liquid effluent treatment equipment will be installed at Parag-owned collection/chilling centers (around the Palamner area) to meet WBG guideline values and local discharge standards.- Pollution Prevention : Waste ManagementThe waste management practices atboth Manchar and Palamner have scope for improvement with respect to segregation and storage of wastes and handling of ash on-site. Parag will upgrade waste management systems in accordance with good industry practices and the WBG EHS Guidelines on hazardous materials management. In particular: the Company will, as part of the environment management systems, implement a program to: (a) identify all hazardous and non-hazardous wastes generated as per host country rules on hazardous waste handling and management; (b) label, segregate and store all hazardous and non-hazardous wastes; (c) dispose of hazardous wastes through authorized entities only; and (d) maintain records of all wastes disposed from site.At the dairy farm, the cattle waste slurry is disposed of on open land for evaporation. The company has procured a liquid separator; however, it is yet to be installed. Parag will develop manure management systems at the farm, possibly based upon anaerobic digestion with some energy recovery.- Resource EfficiencyThe milk loss at Parag's facilities was noted to be higher than the industry good practices. Parag will establish a continuous improvements team to identify and close sources of lost milk. This will not only lead to better profitability but also reduce the load on ETP operations. Parag has devoted considerable engineering resources to reduce energy and water use. The Company was able to report specific energy and water consumption by product line, although in most cases consumption exceeded benchmarks. Some energy saving activities were also identified by the IFC team during the appraisal mainly related to refrigeration and steam systems, and these will be followed up by Parag. As described above, Parag is in the process of developing a formal, and ISO-certified energy management system and will use this system to control its energy and water use. Parag will commission energy audits at both processing sites as well as a sample of collection centers. The energy audits will especially consider manufacturing process equipment, refrigeration systems as well as steam systems. Based on a techno-commercial feasibility, the recommendations of the audits will be implemented.The Company's greenhouse gas emissions on account of its current operations are about 80,000 tCO2e per annum.