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Environmental & Social Review Summary
This Environmental and Social Review Summary is prepared and distributed in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board of Director’s decision. Board dates are estimates only.
Any documentation which is attached to this Environmental and Social Review Summary has been prepared by the project sponsor and authorization has been given for public release. IFC has reviewed this documentation and considers that it is of adequate quality to be released to the public but does not endorse the content.
Pharmaceuticals and Medicine
VIVIMED LABS LIMITED
Date ESRS disclosed
April 15, 2011
Invested: August 3, 2011
Signed: June 17, 2011
Approved: June 7, 2011
View Summary of Proposed Investment (SPI),
Category & Applicable Standards
Key Issues& Mitigation
Overview of IFC's scope of review
IFC’s review of this project consisted of site visits to the specialty chemicals plant in Bonthapally, the pharmaceutical plant in Jeedimetla and the R&D Centre at Mallapur all of them located in the Hyderabad area. A site visit was conducted to the already acquired land in Srikakulam, Andhra Pradesh, where the Special Economic Zone (SEZ) including the green-field plant will be built.
Documents reviewed include permits; licenses; monitoring records for air emissions, liquid effluents, ambient air, and workplace exposure; as well as E&S procedures, manuals, handbooks and programs for the existing operations. Documents regarding land acquisition and the prefeasibility report for the construction of the new manufacturing plant in Srikakulam were reviewed. At the time of this appraisal the Environmental Impact Assessment (EIA) reports for Srikakulam and Choutuppal have not been prepared as the Terms of Reference from the national and state governments (SEAC: State Environment Appraisal Committee) have not been issued.
Meetings were held with the corporate management team including Chief Executive Officer; Vice President for Quality Assurance, Health Safety and Environment and Regulatory Affairs; Operations Director; Production Manager; and Human Resources Manager.
Vivimed Labs Limited (Vivimed or the “Company”), based in Andhra Pradesh, India is a leading manufacturer and exporter of specialty chemicals (for personal care and industrial segments) and pharmaceutical products. Vivimed is listed on both National and Bombay Stock Exchanges. The Company plans to invest about $42 million for the following projects:
Setting up a specialty chemical and pharmaceutical facility in a Special Economic Zone in Srikakulam, Andhra Pradesh, India
Setting up a facility for pharmaceutical formulations in Choutuppal
Modernization and enhancement of its existing facility in Jeedimetla to meet US FDA and MHRA standards
Maintenance capital expenditure at its plants in Bidar and Bonthapally
The proposed IFC investment is to part finance this capital expenditure plan with a mixture of long term debt and foreign currency convertible bonds.
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):
- PS1: Social and Environmental Assessment and Management Systems;
- PS2: Labor and Working Conditions;
- PS3: Pollution Prevention and Abatement;
- PS4: Community Health, Safety and Security; and
- PS5: Land Acquisition and Involuntary Resettlement.
Vivimed’s manufacturing plants are located in semi-urban or industrial areas and negative impacts are not expected on the biodiversity or natural resources; no Indigenous People and cultural heritage sites are known to be in the areas affected by the project; therefore, PS6, PS7 and PS8 issues are not expected to arise in this project.
Vivimed shall consider all relevant social and environmental risks and impacts according to IFC performance standard requirements while assessing new expansion projects to ensure operation in full compliance with IFC requirements.
Environmental and social categorization and rationale
This is a Category B project under IFC’s Policy on Social and Environmental Sustainability because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized good international industry practices, guidelines or design criteria
Specific key environment, social, health and safety issues reviewed include:
Corporate capacity, staffing and management system in place to undertake the projects and operations in a manner consistent with IFC Performance Standards;
Assessment of health, safety and environmental impacts of new projects;
Land acquisition process;
Working conditions for employees and contract workers during both construction and operation of the plants;
Occupational health and safety;
Energy efficiency and water use;
Wastewater reduction, treatment and disposal, in particular discharge to marine environment at Srikakulam;
Air emission control and monitoring;
Management of hazardous materials and hazardous wastes; and
Management of community health, safety and security risks and impacts during construction and during operations.
Key environmental and social issues and mitigation
Vivimed has presented information on its current practices and policies that address the potential impacts and are expected to ensure that the proposed project will comply with Indian laws and regulations, IFC’s Performance Standards, and the applicable World Bank Group Environmental, Health and Safety (EHS) guidelines. Additional actions are summarized in the attached Environmental and Social Action Plan (ESAP).
Social and Environmental Assessment and Management System
-Social and Environmental Assessment: Vivimed has identified the key occupational risks and environmental impacts of its current operations through its EHS management systems and has defined policies and procedures to address the significant risks and impacts. The company has considered controls for aspects such as liquid effluents, air emissions, waste management, life and fire safety, and occupational health and safety. In addition; Vivimed has been active ensuring compliance with local and international requirements for the commercialization of the products; it has included (i) pre-registration of its products for REACH (Registration, Evaluation, Authorization and restriction of Chemicals) applicable to European Union countries; (ii) United States Environmental Protection Agency (EPA) certification for Triclosan (VIV-20); and (iii) Certification for Bio-Terrorism preparedness from the United States Food and Drug Administration -USFDA (a prerequisite for exports to certain countries). Vivimed is in the process of seeking USFDA approval for the existing sites in Bidar and Bonthapally.
The existing manufacturing plants have obtained the required environmental and social licenses including the factory license, standing order, Pollution Control Board (PCB) approval, and generator and boiler installation certificates among others. In addition; the company reports periodically to the local authorities on its environmental performance and on its safety and training records.
Vivimed has submitted to the Andhra Pradesh Pollution Control Board and the Ministry of Environment and Forests the pre-feasibility report and the application form (Form-1), as first step to obtain the Environmental Clearance and the Consent to Establish the SEZ (Special Economic Zone) in Srikakulam. An Environmental Impact Assessment (EIA) will be commissioned once the Terms of Reference are provided by the authorities and agreed with IFC. The EIA in form and content acceptable to IFC will be submitted to IFC before construction starts, together with the specific studies requested such as Coastal Regulatory Zone studies and the Rapid Marine Environmental Impact Assessment. Vivimed will ensure adequate disclosure of the information previous to the public hearing meeting required by the local authorities.
The project in Choutuppal will be developed in 26.3 acres, which have been authorized to be used as an industrial area. The pre-feasibility report has been concluded and the company will initiate the licensing and construction during 2011. Vivimed will submit to IFC the Consent for Establishment documents in form and content acceptable to IFC before construction starts and relevant permits as the project develops.
-Social and Environmental Management Program: Vivimed has corporate policies for quality, safety and environmental management. The Bonthapally and Bidar plants have recently been audited by TUV India and have been certified under ISO 9001 (Quality), ISO 14001 (Environmental) and OHSAS 18001 (Occupational Health and Safety) management systems. In addition the company has obtained the SA 8000 (Social Accountability) certification for headquarters and the Bonthapally and Bidar plants. The other manufacturing plants are not certified, but have in place Standard Operating Procedures and basic Good Manufacturing Practices (GMP) manuals. Vivimed is committed to develop and implement Environmental and Social Management System (ESMS) at the new manufacturing plants in Srikakulam and Choutuppal. Vivimed manufacturing plants are audited by many of its customers, including reputed multi-national corporations (MNCs). Internal Safety and Environmental Audits are undertaken every six months by an interdisciplinary team, corrective measures are implemented.
-Organizational Capacity: Vivimed has Environment, Health and Safety (EHS) staff at each plant and a corporate level Vice-president for EHS issues, who also has oversight of quality assurance and regulatory affairs. In addition, the production manager at each manufacturing plant and the operations director are involved in EHS management and assessment of legal compliance for all the plants. Human Resources (HR) policies are defined and implemented at corporate level by the HR manager with support of a small HR team at each manufacturing plant.
-Monitoring and Reporting: Monitoring is conducted for key EHS aspects such as ambient air quality, air emissions at stack level, ambient noise, liquid effluents parameters, lost time injuries and occupational exposure. Reports are submitted by each plant to local authorities such as the state Pollution Control Board (PCB). Central reporting is undertaken through the managerial report as required by ISO 14001 and OHSAS 18001.
Labor and working conditions
-Human Resource Policy and Management: Vivimed has Human Resources policies covering aspects such as equal opportunity, prohibition of child labor, grievance procedures, disciplinary processes and ending employment. Vivimed has an employee handbook in which procedures, rules and policies are defined; it includes work practices as well as salaries, benefits and safety aspects of the operations. All the employees have received a copy of the handbook and its content is shared during induction and annual training. The company manages its labor relations in accordance with relevant Indian regulations and recently Vivimed’s headquarters and the Bonthapally and Bidar plants have undertaken an SA 8000 external audit and have been certified. Vivimed shall apply existing HR policies to the new sites and will ensure compliance with the requirements of IFC’s Performance Standard 2 (PS2).
-Workers Organizations: There are active unions at the Bonthapally and Bidar manufacturing plants; participation is around 10% of the total number of employees. The company confirmed that they would not prevent employees’ participation in workers’ organizations. In addition the company has recently implemented workers’ committees at each plant and is planning to promote more active workers’ participation.
-Retrenchment: Vivimed currently has over 560 direct employees and around 340 sub-contract workers via contractors who provide security, gardening, housekeeping and catering services, among others. Approximately 27% of the workforce is women, mostly employed in the packaging areas, laboratories and head offices. The project is expected to create near 2000 direct jobs, in addition to indirect employment during the construction. Retrenchment is not expected from this project.
-Non-Discrimination, equal opportunity and protection of the workforce: Vivimed doesn’t hire employees under 18 years, the company checks the age of employees and contractors prior to hiring, and evidence of age has been obtained for all the employees. Salaries paid in Vivimed are above the government mandated minimum wages. During 2010 the company performed a salary scale study to verify “basic need wage” as per SA 8000 requirement and to ensure fair payment and transparency on promotions and progressions. Vivimed verifies salary payment to the sub-contract employees and coverage of basic benefits in accordance to legal requirements. Benefits extended to the employees include medical insurance covering the employee and direct family, including parents; life insurance; accident policy; transportation; meals at manufacturing plants; and participation on the company’s stock ownership plan.
-Occupational Health and Safety: Vivimed has identified the occupational health and safety risks at the workplace, and manufacturing plants have in place Standard Operational Procedures and training plans to control the hazards. The company has implemented mechanisms to investigate occupational accidents; during 2010 zero accidents were reported. Most of the operations of the company are performed in enclosed systems, with limited employee exposure to process chemicals. Vivimed will include volatile organic compounds (VOCs) and relevant specific chemicals (e.g. toluene, perchloroethylene, etc) as workplace air quality monitoring parameters at Bonthapally, Bidar and in the new manufacturing plants. Employees have annual medical check-ups. Vivimed has Work Safety Committees at each manufacturing plant, the committees meet once every two months to review safety performance; the company is working to actively engage employees on safety matters.
During the site visits, IFC identified certain areas where OHS improvement is required in particular in storage areas where ventilation, housekeeping and use of proper PPE should be reinforce. Vivimed will review and upgrade as required the fire protection systems, emergency egress and lighting at the raw materials warehouses in all its manufacturing plants. With regard to the construction of the new manufacturing plants, Vivimed will guarantee that construction contractors manage labor and OHS (Occupational Health and Safety) elements in accordance to PS2.
Pollution Prevention and Abatement
-Resource Conservation and Energy Efficiency: Vivimed plants use power supplied by the grid with backup supply from diesel generators. Insulation is present in most of the steam lines and reactors, however there are areas where steam is not recovered and potential energy savings can be achieved. Vivimed, is planning to implement some energy recovery features in the new manufacturing plant at Srikakulam given the scale of the project.
-Air Emissions: Backup generators, boilers and thermal oil systems are fueled either by coal or diesel oil. Stack emissions are tested periodically by third parties. The combustion facilities at Jeedimetla are small, and below the size threshold at which IFC require emissions monitoring. Stack emissions reports from Bidar and Bonthapally indicate that boilers meet relevant local requirements and WBG limits for key parameters (NOx, SO2 and PM). Boilers at the new plants will use coal given its availability in the proposed locations. Vivimed will consider WBG limits for the design of the emissions controls for the new manufacturing plants at Srikakulam and Choutuppal and will monitor and report to IFC the air emission levels once they are operational to ensure compliance with WBG limits.
Vivimed has solvent recovery units in Bidar and Bonthapally and is planning to install and operate solvent recovery units in the new manufacturing plants at Srikakulam and Choutuppal. Vivimed will undertake a risk-based review of the air filtration provided at all process and manufacturing room air discharge points, in the pharmaceutical facilities and identify the need if any to upgrade to HEPA filtration at each discharge point. Ventilation systems at the new pharmaceutical plant in Choutuppal will ensure controlled emissions of potentially hazardous active ingredients.
-Liquid Effluents: The Bidar and Bonthapally manufacturing plants have industrial wastewater treatment plants (WWTP). Wastewater at Jeedimetla is collected weekly and disposed through the local wastewater authority. Effluents at Bonthapally are treated through sedimentation, filtration and distillation. Treated water is used in the cooling system and the excess is delivered to the local wastewater authority for further treatment in a government-owned Common Effluent Treatment Plant (CETP). The liquid effluents discharges are currently in compliance with local and IFC requirements for COD, BOD and TSS; however testing for biotoxicicty and specific parameters such as AOX, hexane, toluene and active ingredients has not been performed. Vivimed will perform a full monitoring assessment of the effluents to ensure compliance with WB EHS guidelines requirements. Vivimed will consider WBG limits for the design of the emissions controls for the new manufacturing plants at Srikakulam and Choutuppal and will monitor and report to IFC liquid effluents parameters once they are operational to ensure compliance with WBG limits.
-Hazardous materials: The manufacturing plants for Specialty Chemicals (e.g. Bidar, Bonthapally and the proposed project) handle and store solvents such as methanol, hexane, toluene, isopropyl alcohol and perchloroethylene. There are solvent recovery units and the solvents are re-used. Vivimed has set goals to improve the efficiency in the use of solvents and is implementing measures such as controlling fugitive emissions and improving distillation capabilities. The company will assess the technical and economic feasibility to optimize solvent use in the formulations. The solvents are stored in external tanks with secondary containment and fire safety controls, including foam and hydrant systems. The company has Material Safety Data Sheets (MSDS) for the raw materials and final products, basic segregation by risk is observed in the warehouses. Vivimed will review and upgrade the warehouses where chemical products are stored and the existing procedures to ensure proper hazardous material handling, in particular aspects such as ventilation, proper segregation, emergency response, use of proper PPE and communication of hazards will be reviewed.
-Solid Waste Management: Vivimed separates and disposes the waste according to risk in compliance with Indian laws and WBG guidelines. Non-hazardous wastes are collected at each site and disposed through an authorized Common Treatment, Storage and Disposal Facility (TSDF) and secured landfill. Hazardous wastes are sent to cement factories for incineration as approved by local authorities. Vivimed maintains records of waste volumes generated and methods of disposal. The new manufacturing plants in Srikakulam and Choutuppal will follow similar procedures to handle solid waste residuals.
-Greenhouse Gas Emissions: Greenhouse emissions of the operations are associated with electricity consumption and the use of coal and diesel for the heating processes. The annual Greenhouse emissions of the current operations have been estimated as 34,500 tons of CO2 equivalent, 30% of which is derived from the electricity use and 45% from coal use. The expansion project is expected to be implemented in phases and the estimated GHG footprint of expanded facilities is 80,000 tons of CO2equivalent. Process design is not yet finalized so there is some uncertainty over this figure, which the company will confirm when necessary data are available.
Community health, safety and security
-Hazardous Material Safety and Emergency Preparedness and Response: The Company has detailed emergency plans at each manufacturing plant; the plans cover fires and accidental releases of hazardous substances. The company conducts periodic drills in collaboration with the local fire brigades. Vivimed has the relevant material safety data sheets (MSDS) for both raw materials and final products. The Jeedimetla and Bidar manufacturing plants use significant amount of organic solvents for the production processes. Storage of those solvents is protected by fire hydrants and foam systems, in addition to secondary containment. Vivimed, will ensure that the design of the new plants at Srikakulam and Choutuppal considers the potential exposure to hazardous materials for the community and controls are in place to avoid or minimize the exposure. Emergency plans for the new manufacturing plants at Srikakulam and Choutuppal will be developed and training provided to employees and as needed to nearby communities.
-Community Health, Safety and Security: Existing manufacturing plants are located in industrial areas and local communities are not in the immediate vicinity of the plants. At the time of the appraisal visit, road access to the area where the Srikakulam plant will be located required access through a nearby village. Local authorities have plans to build a road that might avoid passing through the village, but firm plans are not defined yet. During construction of the new plant Vivimed will develop a traffic management plan that will account for vehicle movement, dust, exhaust, road congestion and pedestrian safety to be followed by the construction contractors and by Vivimed. If needed the traffic management plan should be implemented as well during the operational phase of the plant.
-Security Personnel: Vivimed uses security personnel in all its facilities, however they are not armed and there has not been complaints regarding abusive behavior.
Land acquisition and involuntary resettlement
Vivimed has acquired near 311 acres of land at Chittivalasa, Boyapalem and Naruva villages, Ranasthalam Mandal, Srikakulam district Andra Pradesh; approximately 34 km from Srikakulam and 18 km from Garivide Railway station, where the company will establish a Special Economic Zone for synthetic Organic Chemicals (Cosmetics, dye intermediaries, bulk drugs and intermediaries). 170 acres of land belonged to a single owner, around 28 acres were acquired from individual farmers and 113 acres were acquired from the Andhra Pradesh Industrial Infrastructure Corporation (APIIC), who previously acquired the land from farmers. All transactions were undertaken on a willing seller-willing buyer basis, with a price agreed through negotiation and signed sale agreements and transaction documents were available for review at appraisal. There was no housing on the project site, nor economic activity except by the sellers of land; therefore, no involuntary physical or economic displacement occurred on account of the Project. The land is partially degraded farm land and that has not been used for growing crops in recent years, and a big portion is a coconut plantation, which the company intends to preserve as its 33% of greenbelt area as required by law. No disputes over land purchase were reported. The Company will ensure that all impacts resulting from land acquisition are managed in accordance with PS5 requirements.
The land for the project in Choutuppal (26.3 acres) was acquired more than 6 years ago on a willing buyer / willing seller basis. Vivimed has been undertaking negotiated purchase of private land at market rates and no involuntary resettlement (physical or economic) has occurred.
Client's community engagement
Vivimed undertakes community projects in the areas where its manufacturing plants are located. Vivimed supports initiatives from the Concern India Foundation Programs that aims to provide transit residential schools for children rescued from child labor, homes for the aged, health centers for the rural poor, schools for the hearing impaired and special schools for mentally challenged children. Vivimed also supports the Tanmai Socio Cultural Foundation, dedicated to improving the quality of women’s health in Andhra Pradesh, Vivimed sponsors medical camps for underprivileged women, and assists the development of children in specially identified government schools by providing teaching aids, books and other educational material. Vivimed is also working on the introduction of an e-learning platform to facilitate education as well as medical counseling in the rural areas. Employee participation on some initiatives is also promoted and has included special programs at schools for the blind, interactions with senior citizens and blood donation camps.
Vivimed will ensure that both appropriate and timely disclosure of social and environmental information relating to the proposed projects at Srikakulam and Choutuppal will occur. The disclosure will include public disclosure in local media (with options for interested parties to view documents describing the project anticipated E&S impact, and measures proposed in the management plan for mitigation of these impacts), and other disclosure requirements as defined by law, such as public hearings. Vivimed will formalize their external grievance mechanism to allow external stakeholders to address complaints or concerns regarding the projects. Vivimed will submit to IFC the Minutes of Public Hearing of the project at Srikakulam and if needed an action plan to address community concerns will be agreed. Vivimed will follow local requirements regarding public disclosure and consultation for all the projects under this transaction.
Local access of project documentation
This ESRS and accompanying Environmental Action Plan constitute the first formal public disclosure of information related to the environmental performance of Vivimed. It will be available for review and comment at:
Vivimed Labs LtdVeernag Towers, HabsigudaHyderabad, A.P. 500 006, IndiaT +91(0)40 2717 6005/6F +91(0)40 2715 0599E-mail: email@example.comWeb: www.vivimedlabs.com
78/A, Kolhar Industrial Area
Bidar - 585403
Tel: +91 (0) 8482 232045/320396
Fax: +91 (0) 8482 232436
Survey No. 202,207/A,207/E and 207/AA,
Bonthapally Village - Jinnaram Mandal
Andhra Pradesh, India
For comments, please contact
Mr. K. S. Sastry
Vivimed Labs LtdVeernag Towers, HabsigudaHyderabad, A.P. 500 006, IndiaT +91(0)40 2717 6005/6, M +91 80083 96565F +91(0)40 2715 0599E-mail: firstname.lastname@example.orgWeb: www.vivimedlabs.com
The Company will make adequate public disclosure of this transaction in the Indian business and trade press. Vivimed will disclose locally the intention to build a new plant previous to initiate the construction at Srikakulam and Choutuppal and will communicate to IFC the disclosure site.
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