GSPC Gas

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public 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 decision. Board dates are estimates only.

Project number	26994
Company name	GSPC Gas Company Limited
Country	India
Sector	Utilities
Environmental category	B
Department	Sub-National Finance
Status	Pend FAP

Date SPI disclosed	August 12, 2008
Projected board date	September 15, 2008

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The project is being implemented by GSPC Gas Company Ltd. (GGL or the company), a city gas distribution company active in the State of Gujarat. Since its inception two years ago GGL has successfully established operational gas distribution networks in a number of towns and cities across Gujarat to meet demand from industrial, domestic, commercial and transport sectors. GGL lays a steel pipeline network to be supplied via city gate stations from GSPL gas transmission network and to supply anchor industrial clusters and CNG stations. Larger PE networks are then added to supply residential and commercial consumers. As of March 2008, the company had laid 119 km steel pipeline and 1177 km PE pipeline, and had also constructed 16 CNG stations which are operational.

Anticipated development impact of the project

The project supports development of critical gas supply infrastructure for smaller consumers such as small and medium enterprises, residential and commercial consumers, and automotive users. It is fully aligned with the Government of India and Bank group objective of supporting cleaner fuels for local and global environmental benefits. The substitution of petroleum fuels and coal by natural gas in industry will have important environmental benefits that include large reductions of nitrous oxide, carbon monoxide, sulfur dioxide, and total organic compounds when compared on a calorific-equivalent basis for alternative fuels. Gas networks also have an added safety benefit since the need for storage facilities is eliminated. In addition to the above, industry and other consumers are expected to get financial benefits due to cheaper and reliable supply of fuel.

IFC's expected development contribution

IFC financing for GGL is expected to initiate the process of diluting the SOE nature of the company to support their objective of moving to professional management and commercial operations. In addition, IFC will support the company’s environment management practices.

Environmental and social issues - Category B

This is a category B project according to IFC’s environmental and social review procedure because a limited number of specific social and environmental impacts may result, which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The key social and environmental aspects that are/may be associated with IFC’s proposed investment relate to procedures in place for environment and social assessment of GGL’s projects; corporation wide applicable systems for management of social, environmental, health and safety (SEHS) aspects associated with the company’s projects and operations; and effectiveness of the implementation of SEHS management system. In view of the fact that GGL engages contractors for project construction and also for operation and maintenance (O&M), both under GGL team’s supervision, provisions in place to ensure that social and environmental aspects/impacts during construction and O&M are effectively mitigated is also important. In the context of GGL’s operations, the most important social and environmental issues of relevance include:

- changed risk profile of the areas in the vicinity of the CGD pipeline alignment;
- community environment, health, safety and security personnel related impact during construction and operation;
- in some instances, impacts on account of right of use (ROU) acquisition for laying pipeline from city gate station (offtake point on the high pressure transmission pipeline) to the nearest city distribution grid;
- community consultation and engagement;
- labor working conditions; and
- impacts due to emissions to soil, air and water during construction and operation.

A summary discussion on the social and environmental aspects of relevance to the project including the company’s plans to address these impacts has been provided in the Environmental and Social Review Summary (ESRS) prepared by IFC and publicly disclosed on IFC’s website.

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