E561TAJIKISTAN

PAMIR PRIVATE POWER PROJECTEnvironment and Social Impact Assessment

Executive Summary

1. PROJECT BACKGROUND

1.1 Project SettingTajikistan's Gorno Badakshan Autonomous Oblast (GBAO) is one of the poorest and mostremote areas of the world. Situated in the heart of the Pamir Mountains, GBAO is a region sparsein population and natural resources. The majority of its 250,000 people is rural combiningsubsistence agriculture with animal husbandry. A socio-economic survey conducted as part ofthe environment and social assessment of the project estimated an average annual income for thetypical project area family of six at US$216. Winter temperatures in the region average minus5°C. As a result, the average family spends between 8 to 17 percent of its disposable income onenergy (fuelwood, kerosene and electricity) notwithstanding the opportunity cost of labor used togather fuelwood and other forms of biomass. With forest cover largely depleted, the majority ofrural households rely on cattle dung, agricultural residues and root stock as heating and cookingfuel. Affordable electricity provides one of the only alternatives to continued natural resourcedepletion in the region.

Current power capacity in the GBAO region is composed of thirteen recently-constructed micro-hydroelectric plants and several small hydro-electric plants, two of which account for 70 percentof installed capacity - Pamir with 14 MW and Khorog with 7 MW. No functioning diesel powergenerating capacity remains. The transmission system of GBAO is in poor condition having beenlargely destroyed in the civil war of the 1990s. Of the 435 km of 35 kV lines, only about 15percent is still in service. There are about 990 km of 10 kV lines, and only a similar percentage isbelieved operational. All villages outside the capital Khorog receive no electricity from earlyNovember to late March or April. Load shedding only applies to Khorog.

The Government has adopted a strategy for the energy sector to expand and diversify Tajikistan'senergy system to supply reliable, efficient, and affordable energy to more people, support povertyreduction, improve the standards of living, and bring economic development to rural areas. Tothat end, the Government has initiated a package of policy and institutional reforms, andrehabilitation and adequate maintenance of the existing power systems.

1.2. Project Objectives

The objective of the project is through private sector involvement, to improve the reliability andenhance quantity of supply of electricity in the Gorno Badakshan Autonomous Oblast (GBAO) ina financially, environmentally and socially sustainable way.

1.3. Project Description

The proposed Project involves: (a) taking over and operation, by a private concessionaire PamirEnergy Company (the Beneficiary), of all existing power facilities in GBAO under a 25-year

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Concession Agreement; (b) completion of the Pamir I hydropower plant to its original designcapacity of 28 MW from the current 14 MW along with a regulating structure at Lake Yashilkul;and (c) rehabilitation of other assets including other small hydroelectric stations, substations,transmission and distribution lines.

1.4 Project ProponentPamir Energy Corporation (PamirEnergy), a special purpose company for the project, will beformed as a concessionaire, under the laws of the Republic of Tajikistan as a joint stock companyor another form of limited liability organization. PamirEnergy will be 70% percent owned andcontrolled by Aga Khan Fund for Economic Development (AKFED) and the balance by IFC.AKFED is part of the Aga Khan Development Network, a group of private development agenciescreated by His Highness the Aga Khan. AKFED has been active in GBAO since 1991. Amongits initiatives, AKFED mobilized donor funding, including World Bank's Tajikistan SocialInvestment Fund, to construct several mini-hydro stations in outlying villages. AKFED was alsoinvolved in the construction of the Pamir I hydro plant (Units 1 and 2) supported by USAIDfunding. In this context, AKFED identified the need for enhancing the long term power supplycapacities in the region, and particularly during winter, and approached IFC in 1998 for projectpreparation and financing assistance. IFC had previously financed thermal power projectsdeveloped by AKFED in Africa.

AKFED will be the main equity provider with US$ 7.5 million towards financing the total projectcost of about US$ 25 million. IFC would provide US$3.2 million in equity and another US$4.3million in debt for a total of US$7.5 million. IDA will lend US$ 10 million to the Government ofTajikistan (GOT), thus completing the financing.

IDA's involvement has also been crucial to the mobilization of financing from the SwissGovernment to enable the Tajik Government to meet its Social Protection obligations towards theProject, since a considerable share of the residential consumers would need to be protected frompaying even the 2.1 US cents/kWh tariffs'. With the support from the Swiss Government,complemented by IDA, the resource- constrained Government will be able to implement a set oflifeline tariff measures for poorer residential customers, phasing out over a ten year period, whilemeeting the project financial requirements. At the end of this period, a basic lifeline tariff for thepoorest households will be retained, with Government support.

The Project will halt the current disintegration of electricity generation and distribution facilitiesin GBAO and will provide additional generation capacity to meet peak demand in winter months.The project will also provide the energy base for long term economic growth while at the sametime reduce pressure on natural resources, reduce indoor pollution; and stimulate economicactivity over the medium term via construction.

1.5 Summary of ESIA FindingsThe Project is a rehabilitation, upgrading and expansion of an existing power generation,transmission and distribution system. All power generation facilities are run-of-river hydropowerplants and the rehabilitation of transmission and distribution lines will occur in existing sites sothat no new land acquisition and/or right-of-way is required. As a result, and as theEnvironmental Assessment has shown, the project will have only a limited number of specificenvironmental and social impacts, and these can be avoided or mitigated by adhering to generallyrecognized performance standards, guidelines or design criteria. On behalf of the projectproponents, IFC and the technical consultant Electrowatt-Ekono (EWE) have been collaborating

'The tariff required on a levelized basis for the 25-year concession period to achieve commercial viability.

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since 1999 on the project design as well as the environmental and social impact mitigationmeasures to ensure that those impacts are minimized.

The cornerstone of the project is the completion of the Pamir I run-of-river hydroelectric plantnear Khorog, the administrative capital of GBAO, by: i) installing two additional turbines to bringthe installed capacity of the plant to a total of 28 MW; and ii) completing a regulating structure atLake Yashilkul - the source of the Gunt River that powers the Pamir I plant - to allow release ofadditional water during the winter to ensure sufficient water flows for energy production at thetime of highest demand. The diversion of water to the expanded power plant will have nosignificant impact on the Gunt River inasmuch as a minimum ecological flow will be maintainedin the river between the intake and tailrace structures. To the extent that all diverted water isreturned to the Gunt from the power plant after use, the project will have no impact on the river'sdownstream use, although there will be some changes in the annual pattern of flows and therewill be no detectable impact on international waterways.

The most significant potential impacts identified will occur during the construction phase of theproject. During the construction phase, the level of Lake Yashilkul will be reduced by amaximum of two meters and the operations of the Pamir powerhouse will be interrupted for theinspection and rehabilitation of the tunnel. The following impacts may result:

* Temporary reduction of fish population in the lake as the area of spawning grounds andbenthic vegetation is diminished.

* Temporary depletion of flood plain vegetation that provides grazing and fodder forlivestock on the margins of the lake.

* Temporary interruption of an already unreliable power supply.

Accordingly, the Proponent, with the assistance of IFC and EWE, have developed a detailedEnvironmental Monitoring and Management Plan (EMMP) that includes measures,containing also compensation arrangements, to mitigate any adverse impacts to the physicalenvironment and social environment, most of which will result from the completion of theregulating structure at Lake Yashilkul. The EMMP describes the monitoring program andcontingency plans to address anticipated temporary impacts and ensure unanticipated medium-long term impacts.

2. ENVIRONMENT IMPACT ASSESSMENT PROCESS

The Project has evolved and expanded since AKFED originally approached IFC for financing in1998. IFC commissioned EWE to assess the technical feasibility of the project in 1999, whichincluded a critical assessment of the original Soviet-era Environmental Impact Assessment(prepared for the Pamir I hydropower project) and the capacity of the population to afford theincreased power tariffs that would be necessary to make the project financially feasible. Theinitial assessment of EWE's environmental specialist, supported by IFC's environmentalspecialist following a site visit in May 2000, was that the original design of the project wouldresult in adverse and unacceptable environmental and social impacts, including major permanentlowering of the Lake level. As a result, JIFC requested EWE to revise the design of theproject to reduce or eliminate these impacts. The project design was revised following anEWE technical mission to GBAO later in the same year. During that mission, the EWEenvironmental specialist and AKFED representatives carried out extensive public consultation inthe project area to assess public reaction to the project, its environmental impacts and theprospects of dramatic increases in electricity tariffs.

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In the spring of 2001, both EWE and IFC environmental specialists returned to the project area toassist AKFED in developing an environmental mitigation and management plan for both theconstruction and operation phases of the project. The main results of this mission were: i) thecreation of monitoring frameworks for the anticipated environmental impacts of the project; ii)formulation of a compensation framework for addressing any adverse impacts from the project onthe livelihood or the population; and iii) preparation of a draft Health, Safety and Environment(HSE) Plan for the project. EWE's environmental specialist returned to the project area inAugust 2001 to initiate the environmental monitoring programs planned in the previous mission.During negotiations of the concession agreement with the GOT during 2000 and 2001, the scopeof the project expanded to include not only the Pamir project but all power generation,transmission and distribution facilities in GBAO. As a result, the preliminary HSE Plan will beexpanded to encompass all project facilities and operations as the concession is undertaken.

2.1 Tajikistan Administrative, Legal and Policy FrameworkThere is no comprehensive overall environmental legislation in place in Tajikistan. The basic lawfor environmental protection is the Law on Nature Protection of 1993. It determines theorganisational framework for the protection of the environment, and also covers the followingsectoral aspects:

* Conservation of soils.* Protection of air quality.* Protection of water quality, provision of the required quality and quantity to meet

requirements of the population and the economy.* Protection of biodiversity.* Protection of environmental equilibrium and the development of its monitoring.

In addition to that, the country has a series of laws from other domains which also deal withaspects of environmental protection, and a number of environmental resolutions. Legally, theresolutions do not have the same weight as laws, but they are easier to pass. The most importantof these environmentally relevant texts are the following:

* Law on Mining (1994): regulates rational use of mineral natural resources.* Law on Wildlife Utilisation (1994): protection and management of wildlife

populations.* Law on Air Protection (1996): Control and protection of air quality especially in cities

and at industrial sites.* Law on Foreign Investment (1992): Regulates the need of foreign investments for

compliance with the protection of natural resources according to the legislation invigour.

* Law on Land Charges (1992): authorises charges for various forms of land use.* Resolution on the Unauthorised Collection of Substances (1990): Regulates use of

medically active substances, including plants useful for medicinal purposes.* Resolution on the Ministry of Environment (1992): Identifies the rights and the

responsibilities of the Ministry.* Resolution on State Control of Environmental Protection and Use of Resources (1994):

Defines the responsibilities of the State, represented by the MoE, in inspectingactivities for compliance with environmental legislation.

* Resolution on State Ecological Review (1994): Establishes the rights and obligationsof the MoE for reviewing all government-proposed development projects; this is theexisting approach to an EIA procedure. Attempts have been made by the MoE to havethis Resolution passed as a law in order to give it higher importance.

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* Resolution on State Ecological Program (1997): Definition of fundamental goals andtasks for the ecological and economic development of the Republic.

2.2 Institutional StructureThe responsibility for all environmental protection activities lies with the Ministry ofEnvironment (MoE) in Dushanbe and its provincial offices. A construction permit can only begranted when the MoE has approved the project, i.e. when it is satisfied that no environmentalharm will arise from the project and/or all mitigation measures required have been taken. An"ecological expertise" is made for such projects, either by specialists from the Ministry itself orby external experts. This follows the EIA practice which was in place during the Soviet Unionperiod; under this regulation, an EIA had been made in 1986 for the Pamir 1 HEP. Under thatprocedure, the initial project was in conformity with national regulations, although it did notsatisfy all the requirements of IFC/IDA.

However, a stringent and coherent regulation on EIA (defining project types requiring an EIA,general procedures and responsibilities, especially responsibilities of the project proponent,general structure and contents of EIAs, necessity and procedure for public involvement etc.) isnot in place. UNDP is preparing a program for EIA institutional strengthening and capacitybuilding within the MoE. Other responsibilities of the MoE include: carrying out environmentalmonitoring programs, when and if such programs have been designed; water quality and wateruse surveys; and air quality monitoring.

2.3 Applicable World Bank Group Safeguard Policies and Guidelines

As a condition of financing the Pamir Energy project, IFC and IDA require that the projectproponent comply with applicable World Bank Group (WBG) social and environmentalsafeguard policies and guidelines in the construction and operation of the project's facilities. Thiscompliance includes the mitigation of any potentially adverse social and environmental impactsof the project. General guidance on compliance is provided in both World Bank's and IFC'sOperational Policy 4.01 on Environmental Assessment . The environmental assessment hasidentified the applicability of the following WBG policies and guidelines:

* Natural Habitats (OD 4.04) - The construction and operation of the Pamir powerplant will require the seasonal draw-down of Lake Yashilkul, a natural reservoir thatfeeds the Gunt River, which is the water source for the Pamir power plant. Thisdraw-down may have an adverse impact on the lake's fisheries and on the floodplainvegetation surrounding the lake.

* Involuntary Resettlement (OD 4.30) - The floodplain vegetation of Lake Yashilkulprovides grazing and hay for livestock maintained by farmers living in and aroundthe Gunt River Valley. A depletion of water resources may have an adverse impacton floodplain vegetation, reducing the amount of grazing and hay available forlivestock and forcing the reduction of herds. Such reduction could cause economichardship to the farmers dependent on the floodplain resource.

* Safety of Dams (OP/BP 4.37) - Lake Yashilkul was formed by a landslide thatdammed two tributaries to the Gunt River many hundreds of years ago. During theirtechnical assessment of the project, the consultants determined that the rubble andboulder dam is stable. Nevertheless, at the recommendation of the World BankSafeguards Committee, expert opinion has confirmed the safety of the lake's naturaldam. Monitoring of the dam will be included in the overall operation andmaintenance of the project.

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* Cultural Property (OPN 11.03) - With the exception of two Kirgiz graves,successive environment and social assessments have identified no cultural propertyof any significance in or near areas that may be temporarily affected by projectconstruction activities. Nevertheless, at the recommendation of the World BankSafeguard Committee, expert opinion is being sought to confirm these findings. Thatopinion will be available after the winter allows a further site visit and appropriatemeasures to protect cultural property will be incorporated into the HSE plan asrequired.

* Projects on International Waterways (OP/BP/GP 7.50) -The review of the potentialenvironmental impact of the completion of Pamir 1 by Electrowatt in 1999 has shownthat the effect on Pianj River, of which the Gunt is a tributary and which forms theborder with Afghanistan, is marginal and well within natural fluctuations (minorreduction in summer and small increase in winter flows). To the extent that alldiverted water is returned to the Gunt from the power plant after use, the project willhave no impact on the river's downstream use and no detectable impact oninternational waterways. Formal confirmation has been issued by IDA managementthat notification of riparians is not required. Such confirmation would be a conditionof IDA Board presentation.

* Policy on Child and Forced Labor (IFC) - Harmful child labor consists of theemployment of children that is economically exploitative, or is likely to be hazardousto, or interfere with, the child's education, or to be harmful to the child's health, orphysical, mental, spiritual, moral, or social development. Forced labor consists of allwork or service, not voluntarily performed, that is exacted from an individual underthreat of force or penalty. IFC will require PamirEnergy and all PamirEnergycontractors to incorporate the necessary provisions in their contractual documents toimplement this policy.

* Environmental, Health and Safety Guidelines for Electric Power Transmission andDistribution (IFC) - Construction activities associated with the project - particularlythe completion of a regulating structure on Lake Yashilkul - will require adherenceto standard environmental management practices governing construction projectsincluding the management, clean up and restoration to original conditions ofconstruction sites and access to those sites. Operation of the Pamir power plant andthe other 11 smaller power generation facilities managed by PamirEnergy will alsorequire adherence to standard health, safety and environmental management practicesgoverning the operation of power generation and transmission facilities includingworkplace safety, handling and storage of hazardous materials and employeetraining.

In addition, IFC's Guideline for the Elimination of PCBs, which recommends that that PCBequipment, particularly equipment located in commercial/residential buildings should be replacedwith PCB-free equipment as routine maintenance and replacement allows may also be applicableto the project. A study undertaken by EWE, assessing the general situation of the power sector inTajikistan in 2000, did not reveal any use of PCBs in Barki Tajik installations anywhere in thecountry.

In conclusion, all applicable World Bank Group safeguard policies and guidelines have beenconsidered and addressed during the environment and social assessment of the project. Theinitial project design was adjusted so as to be in compliance with WBG safeguard policies andguidelines and appropriate environmental and social impact mitigation measures have beenincluded.

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2.4 Approach to Project AssessmentThe involvement of EWE in the project began in 1999, when it carried out a comprehensivereview of the project on behalf of IFC. In addition to technical and economic aspects, this reviewalso covered environmental and socio-economic aspects.

The environmental review of the project had to focus on three points, namely:* the overall environmental effects of the Pamir power plant project* the effects of the plant's operation on Gunt and Pianj rivers, and* the quality of the previous environmental assessment of the project.

The socio-economic review aimed at assessing the impact of the expected increase in electricitytariffs due to privatization on family budgets, and at estimating the ability of the population topay this price. The review was made based mainly on the following sources of information:

* Relevant documents: EIA report; technical project documents, mainly hydrologicalreport.

* Maps of the area; the most detailed map were of 1:200,000.* Discussions with representatives of the power company and of the relevant

Environmental Protection Agency.* Site visits to all the relevant points: Lake Yashilkul; Gunt River downstream of the

natural dam, at the water intake and at the water outlet of the power plant; confluencewith Pianj River; Pianj River downstream of Gunt confluence.

* Discussions with key informants in Khorog and in Dushanbe.* Rapid socio-economic survey by means of interviews in the project area.

This work, which was accounted for in an initial project report prepared for IFC, was thenexpanded during the following visits to the project area. These visits focused on the followingmain points:

* Socio-economic survey: the data obtained form a small sample of households had to beextended for a better assessment of the socio-economic situation in the project area andthe positive and negative impacts of the project.

* Initiation of a process of public information and participation, mainly by means of aseries of public hearings on the project.

* Development of the Environmental Management and Monitoring Plan for the project.

2.5 Stakeholder Consultation and Public DisclosureBetween July 1999 and October 2000, the Consultant undertook a comprehensive technical,economic, social and environmental assessment of the Project leading to a detailed project designand impact mitigation strategy. This project preparation had already involved a high number ofmeetings and discussions at various levels throughout the project area, with special emphasis onthe small village located near lake Yashilkul. Following this assessment, a series of 17 publichearings was conducted by representatives of the Sponsor and the Consultant in October 2000.These hearings engaged a wide range of the GBAO population including townspeople, ruralvillagers, school teachers and hospital workers. Minutes of these hearings indicated widespreadpublic agreement that improvements in the electricity supply are needed to improve general livingconditions and to support economic growth in GBAO, and that improvements are needed in themanagement of the utility.

During these public hearings, the details of the project were explained (improvement andexpansion of the Pamir plant, completion of regulating structure in Lake Yashilkul, improvement,especially rehabilitation of the transmission and distribution network). The problems to be dealt

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with were also explained (construction time of two years, shutting down the plant during the firstsummer of construction). No doubt was left about the fact that the price for electricity wouldincrease very substantially, and that a strict policy of cutting off consumers who do not pay theirbill would have to be introduced, particularly for industrial consumers.

In accordance with IFC Environmental and Social Review Procedures, a written summary of theproject detailing its potential environmental and social impacts and the planned mitigationmeasures will be translated into Russian, Tajik and Shugni - the predominant language of theGunt River Valley - and posted in publicly accessible places throughout the project area inadvance of project approval by the IFC Board of Directors. In preparation for presentation to theIDA Board, this EA is also being made publicly available in the project area and in Washington,in English and Russian. AKFED will facilitate a number of public hearings to consult withstakeholders on the final details of the project prior to IFC and IDA Board consideration of theproject.

3. PROJECT DETAILS AND ENVIRONMENTAL ANALYSIS

3.1 Project Components

The cornerstone of the project is the completion of the 28 MW Pamir 1 run-of-river hydroelectricplant near Khorog. This component of the project consists of:

* upgrading and completing the Pamir I power plant by installing the two additionalturbines and bringing the installed capacity of the plant to a total of 28 MW;

* completing the originally planned regulating structure at Lake Yashilkul, which willallow to release water to the river during winter to ensure a sufficient discharge forenergy production.

In addition, the project comprises the following additional components, which are not directlyrelated to the completion of the Pamir I plant:

* Rehabilitation and upgrading of the 9 MW Khorog Hydropower Plant, the 1.2 MW VanjHydropower Plant and the 2.0 MW Namangut Hydropower Plant.

* Erection of a new 35 kV line between the Pamir I power station and the substation inKhorog on an existing transmission line alignment.

* Rehabilitation of the 35 kV line between Khorog and Andarbak.

* General rehabilitation of critical sections of other 35 kV and 10 kV lines within theKhorog area.

* Rehabilitation of the distribution network within the Khorog area as required.

3.2 Project Location and Geophysical FeaturesGorno-Badakhshan is a very mountainous area, consisting of two main parts: (i) the Pamirmountains and high plateau, and (ii) the valleys at the western fringe of this high plateau, draininginto Pianj valley. The highest elevation of the Pamir is Peak Somoni (formerly PeakKommunism) with 7495 m; the high plateau has an elevation of generally between 3700 and4200 m asl. The Pianj River forms the border between Tajikistan and Afghanistan. After itsconfluence with Vaksh River, about 550 km downstream of Khorog, the Pianj becomes the AmuDarya, which is one of the two main tributaries of the Aral Sea.

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The project region is the valley of Gunt, one of the rivers originating on the high plateau anddraining into Pianj River. Khorog lies at the confluence of Gunt with Pianj, at an elevation ofabout 2075 m asl. Lake Yashilkul, from where Gunt River originates, is situated at the edge ofthe high plateau, at an elevation of 3720 m asl. There are three floodplains in the Lake Yashilkularea totaling 477 hectares (ha) and two of them, totaling 207 ha, could be affected by the project.

The climate of the project region is of the extremely continental mountain climate type.Temperatures are characterised by very marked seasonal and daily fluctuations. In Khorog,average temperature is 23.70 C in August and -6.3° C in January; in Bulunkul, a small villagenear Lake Yashilkul, average monthly temperature varies between 11.20 C in July and -25.5° C inJanuary. The whole region is rather dry (annual precipitation in Khorog 235 mm, in Bulunkulonly 86 mm), with the major part of the precipitation falling as snow in the period betweenNovember and April.

This climate also determines the discharge pattern of the rivers. Winter discharge is very low,summer discharge is high, augmented by water from melting snow.

With the exception of river alluvial plains in the generally narrow valleys, the vegetation is verysparse. The flanks of the mountains are covered with a low, very patchy steppe vegetation. Treesand bushes grow up to an altitude of about 3000 m asl, but only along the rivers or on irrigatedland. Forests are almost non-existent in the project area.

3.2.1 Environment and resource useIn spite of its sparseness, vegetation is a very important natural resource and an important part ofthe livelihood basis of the local population. In the valleys, agriculture (mainly subsistenceagriculture) is an important economic activity, at higher elevations this is restricted to animalhusbandry. During the summer, cattle (mainly yaks, but also cows) and sheep use the highvalleys (mostly above 4000 m asl) and mountain slopes as pasture. In winter, the herds comedown into the valleys, where they depend on the pasture provided by the alluvial plains of therivers, and on hay gained form these sites during summer. Overgrazing is a problem.Additionally, the vegetation has come under increasing pressure, especially during the last 10years, where due to the lack of altematives biomass (wood from the trees and bushes growingalong the rivers, but also step'pe plants) had increasingly to be used as fuel. Since the steppeplants used in this way are not cut, but uprooted, this practice is extremely harmful for thevegetation as well as for the soils. At higher elevations, where not trees and bushes grow, animaldung is the most important fuel.

3.2.2 Socio-economic contextTajikistan is the poorest of the former Soviet Republics, and GBAO is probably the poorestregion of Tajikistan. This is due to the high altitudes, the mountainous and very unproductiveland, the harsh climatic conditions, and also to the remoteness of the area, which makes importsas well as exports to and from GBAO difficult and expensive. Employment opportunities arevery few, and salaries are very low. An estimated 77 percent of the population lives below thepoverty line.

During the Soviet period, much of the energy requirement was covered by coal, and mainlydiesel, which had to be imported. Diesel was also used for operating generators for theproduction of electricity. Even remote villages where equipped accordingly and had a sufficientsupply of electricity throughout the year. Most schools and hospitals were equipped with centralheating systems, mostly burning coal.

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After independence in 1991, import of coal and diesel (as import of other products) stoppedimmediately and completely. The only form of energy still available is hydropower, which is notsufficient to meet energy demand. One direct consequence of this situation is that most schoolsand hospitals are closed during January and February, the two coldest months. Households had toshift largely to biomass (including dung) as the main energy source for cooking and heating. To alesser extent, candles and kerosene are used, mainly for lighting.

The project will increase the use of local hydro-power resources to offset this loss of importedfuels and will increase electricity supply and improve distribution in GBAO. It will provideadditional capacity to meet peak demands in the winter months and will reduce some of thepressure on local tree cover, that is being harvested for fuelwood.

4. ASSESSMENT OF ENVIRONMENTAL IMPACTS

4.1 Identification of Relevant ImpactsThe original EIA for the project was prepared in 1986. All the relevant aspects (landscape,climate, hydrology, soils, vegetation, fauna, water quality, hydrobiology) were addressed in thisreport. The main conclusion of the report was that with the exception of effects on LakeYashilkul, environmental impacts are either non-existent or of very minor importance, and that nospecific mitigation measures are required. This view was confirmed during the project evaluationin 1999.

As far as Lake Yashilkul is concerned, the EIA focused exclusively on the impact on fisheriesand on specific impact mitigation measures. These included measures for increasing fishproductivity in the lake, with a view to commercializing this resource. However, while the fishstock should certainly be maintained, such measures, at least at the present time, are not justified.

The potential impact of the project on the floodplains at Lake Yashilkul was not addressed at allin the original EIA. Nonetheless, this impact is now considered the most important negativeeffect of the project and requires mitigation measures.

4.2 Project Construction Phase

The following paragraphs describe potential environmental and social impacts and mitigationmeasures focusing on Lake Yashilkul. However, where the most important potentially affectedreceptors, namely, the fisheries and floodplain vegetation, are concerned, biophysical data is notsufficient to accurately forecast the impacts. Therefore, monitoring of these impacts has beeninitiated and will continue into the operations phase of the project as described in Section 6.

4.2.1 Hydrology

In order to minimise the construction risk and to reduce costs for draining the construction pitrequired for completing the regulation structure at the outlet of Lake Yashilkul, it is planned todraw the lake down by about two meters during the two summers required for the construction.This drawdown will increase river flow during the period of its implementation. Once theconstruction period over, a similar amount of water will have to be retained in the lake, thusreducing the flow in the rivers during the first post-construction spring and summer. Thisreduction, however, will be less than the one which will in the future be required for

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compensating for the operation of Pamir 1, which will entail a yearly lake drawdown in winter ofup to 6 m. This issue is dealt with in the section on impacts during operation (see below).

Other than this, the project will not change the river regime. The intake structure for Pamir 1, aweir across Gunt, is already in place and operating, and neither the structure nor its operationpattern will be changed by the present project.

4.2.2 Dam safetyLake Yashilkul has been formed by a natural dam as a result of a massive landslide, whichoccurred in prehistory. Unlike Lake Sarez, located in the next valley to the north of Yashilkul,which was formed by an extremely large landslide fewer than a hundred years ago, the naturaldam of Yashilkul is stable and can be considered safe. A separate Dam Safety Study has beencarried out to confirm this assessment.

4.2.3 Floodplain vegetationLowering of the lake level during summer may have an effect on the groundwater level in the twofloodplains adjacent to the lake, which will also be lowered. This in turn could negatively affectthe vegetation in the floodplains, which depends entirely on ground water. A reduction infloodplain productivity would negatively affect the people who depend on these floodplains forfeeding their livestock. The areas of possible impacts, the number of people that could be affectedand measures to mitigate any economic hardship are discussed below:

* There are three floodplains in the Lake Yashilkul area totaling 477 hectares (ha)comprising: Somon with an area of 157 hectares (ha), Marijinoy which covers 50hectares, and Bulunkul floodplain which covers 270 ha. Of these, only the Somon andMarjinoy floodplains could be affected, i.e., totaling 207 ha (43%) of the availablefloodplains.

* In terms of population, about 190 people from the Bulunkul Goskhoz (state farm), andabout 300 people from Pamir Goskhoz could be affected.2

* In terms of hay production/availability, about 79 tons in Somon floodplain and another 25tons in Marjinoy floodplain could be lost due to the project's construction.

* In the event that indeed the floodplains are affected as mentioned above, the PamirEnergywould compensate the people affected, with cash and/or hay actually supplied. (Seesection 6.2.4 for more details on compensation).

* In addition, the Pamir Goskhoz farmers would receive improved electricity supply fromthe Project, since they are connected to the main grid of GBAO. In other words, they getcompensated for loss of grazing and also benefit from the project. However, the farmersof Bulunkul Goskhoz are not connected to the main grid and therefore would only getcompensated for loss of grazing, but would not benefit from the Project as currentlyenvisaged.

2 190 people whose livelihood depends on the Bulunkul Goskhoz include 50 employees in this farm andtheir 140 dependents.300 people whose livelihood depends on Pamir Goskhoz include 95 employees and their 205 dependents

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* To address this concern, the finalized Concession Agreement includes the provision toroute any savings in the project costs as presently defined, to enhancing power supplies inremote areas to people of GBAO that now do not enjoy electricity supply. Efforts will bemade to ensure, that in the event of any cost savings, the people in the Lake Yashilkularea not connected to the main GBAO grid at present, would be the first ones to benefitfrom any savings in project costs, perhaps by building the integrated small hydro plantinto the regulating structure. In addition, efforts are underway to raise additionalfinancing for such remote area electrification.

* Furthermore, the sponsors will be encouraged to initiate programs in the Lake Yashilkularea to initiate a pilot assistance cum enterprise development program that seeks to:improve livestock holdings of individual herders (via improved grazing and fodderinputs, improved breeding techniques, etc.); and find improved markets for their stock.

While there is a risk of the above-mentioned negative impacts, it is not possible to calculate itsmagnitude given the available data. For this reason, the project's main mitigation measuresconsist of setting up a monitoring program that will detect an influence of the project onfloodplain productivity, and to budget compensation payments to the users if this should berequired.

Once construction is complete, the summer lake level will be restored to its natural level, and anypotential negative effects on the vegetation should not persist. Here again, the monitoringprogram will help to verify this assessment (see below).

4.2.4 Lake fisheriesDrawing down the lake can affect the fish population in two ways: (i) by reducing the amount ofbenthic organisms which form the main food basis for the fish, and (ii) interfering withreproduction by means of destroying spawning grounds. The latter could mainly happen if thelake level was to be lowered during June, which is the spawning period of the fish species whichis the highest in numbers in the lake.

For this reason, the fish population in the lake has to be monitored, although it is presently notexploited by the local population. This monitoring will have to be carried on beyond theconstruction phase of the project in order to detect potential impacts on fisheries of the operatingregime (see below).

4.2.5 Impact of construction activitiesThe completion of the regulating structure at lake Yashilkul can have adverse environmentalimpacts. Although these are limited in duration and area of impact, efforts need to be made tominimise them, as follows:

* Water contamination: Construction work in a river invariably leads to an increase in turbidityand in the sediment load of the river. This, however, is not of a major concern since baselinequantities of suspended solids are usually high, especially at times of high flows.Furthermore, the existing weir at Pamir 1 also serves as a sediment trap. However, there is arisk of water contamination with fuels and lubricants used at the construction site. Measuresfor reducing this risk are taken normally at a construction site and include proper storage ofthese substances, at a safe distance form the water, and a general prohibition to refuel,maintain and wash cars, lorries and construction machines in or near the water. These

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measures will have to be a condition for the contractors, and it will have to be controlled andenforced as a part of the environmental monitoring during the construction activities. Withthese measures in place, the risk of water contamination is very low.

* Site access: Presently, access to the construction site is a track or road leading from the mainroad Khorog - Murgab to Bulunkul and then onwards to the future construction site at theoutlet of Lake Yashilkul. Vehicle drivers typically drive outside the track as soon as itdeteriorates. This practice damages the vegetation in this semi-desert environment, whereregeneration is very slow. In order to prevent such damage, the road/track will have to bemaintained, and where required improved, in order to make it suitable for any kind of trafficto and from the construction site. Off-track driving will have to be prohibited. Between thevillage of Bulunkul and the future construction site, the road crosses three small lateralstreams. Here, appropriate structures - small bridges or culverts - will have to be put in placefor allowing an easy crossing of theses streams. Preparing and maintaining access will be theresponsibility of the contractor, and will also have to be controlled during the entireconstruction phase.

* Construction sites: Temporary land use (e.g. for storage of material, for excavatingconstruction material, or for dumping of unused excavation material) will have to berestricted to the absolute minimum required. A rehabilitation of such sites at the end of theconstruction periodis required. This concerns mainly the cleanup of installation and storagesites and the removal of all material no longer used.

* Worker health and safety: At all construction sites, worker health and safety rules will have tobe observed by the contractors.

* Local economic benefits: The construction activities for Pamir I will generate a considerableamount of income through the labour required for its implementation. Most, if not all,construction work will be carried out by local contractors. However, efforts will have to bemade to ensure employment of inhabitants of villages near the construction site. Thisemployment will contribute to an improvement of the local economic situation.

4.2.6 Impact of power disruptionThe completion of the regulating structure will not affect the functioning of existing power plants,since it will interfere only marginally with river discharge, increasing it at least during a part ofthe summers required for construction. No change in the natural regime will take place in winter.However, rehabilitating and upgrading of the power plant itself will require to shut it down duringone summer, thus reducing the available amount of electricity during this period. Since energydemand is especially high in winter, and this has to be seen in the light of a permanentconsiderable improvement of the supply situation, this temporary inconvenience is consideredacceptable.

4.2.7 Rehabilitation works

The rehabilitation of the existing hydro plants at Khorog, Vanj and Namagut and of the powerdistribution system comprises limited scale works on existing sites or transmission linealignments. The details of the rehabilitation works will be defined in the audits of existingfacilities which will be carried out by PamirEnergy under the project. All of these works will becarried out in conformity with WBG environmental and social guidelines.

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4.3 Project Operations Phase

4.3.1 HydrologySince the natural river regime does not guarantee a sufficient amount of water in Gunt River foran optimal operation of Pamir 1 HPP in winter, the regulating structure on Lake Yashilkul willrelease an additional 10 m3/s during this period. This release will result in a drawdown of thelake during the winter months. To compensate, and to have the required amount of water in thelake for the following winter, the same total amount of water will have to be retained in the lakeduring the summer months.

The effects of this planned regime on the lake level are illustrated in Figure 4-1. While theproject, as conceived originally, planned to draw down the lake by about 2 m and to operate itfrom there. Rather, the revised project design maintains the lake level during summer close to itshistoric levels and within its natural range of fluctuation, mainly for preventing permanentdamage to the vegetation of the floodplains.

The operation of the regulating structure on Gunt River will allow the purpose of the project - anincrease in winter flow - to be achieved. These augmented winter flows have to be compensatedby retaining a similar total amount of water in the lake during the summer months, thus reducingthe river discharge in this period. Analyses carried out for design show that the resultingreduction in summer flow is rather small in relative terms (less than 10%), and even in GuntRiver it is within the natural fluctuations. Most importantly, the project does not change theseasonal flow pattem, of high discharges in summer and low ones in winter.

Lake Yashikul Water Level Fluctuation

3,722.0 -------------- -------------- --

-- 1945-19843 3,714.0 - -- ----------------- =-Orig. project

--- Rev. project

3,708.0.

3,706.0 l l l

J F M A M J J A S 0 N D

Figure 4-1: Lake level fluctuations with and without the regulating structure in place. Theproject as planned now prevents the permanent drawdown of the lake by about 2 m.

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At Khorog, Gunt flows into Pianj River, which forms the border between Tajikistan andAfghanistan. The changes caused by the project in Gunt discharge values will also affect Pianj.However, Pianj is far bigger than Gunt (average annual discharge in Gunt at Khorog: 104 m3/s;Pianj at Shizd: 435 m3/s). Its annual discharge pattern is also very seasonal, with summer flowsof over 1000 m3/s. Here, the change brought about by Pamir 1 is a reduction on flow of around1%. This is far less than any natural, even short time fluctuation, and can be determined onlymathematically. Therefore, it can be said that the impact of Pamir 1 on Pianj is negligible.

Pianj River Discharge at Shidz

1400

1200 --- -

800 - ---------- - - ....... -@ ------- +------------------ 67 w ithoutC -u--~~~~~~~~~~~~~~~~~~~~~~70 w thout

- x- 70 w ithE4 .0 0 - -- --- - -- --- .......... . ... ... ... . -- - -- - -- -

200 - ----- *----------~--v-............------------*~

Jan. Feb. Mar. Apr. Mby June Jul. Aug. Sept. Oct. Nov. Dec.

Figure 4-3: Effects of the project on Pianj river, at about 100 river km downstream of itsconfluence with Gunt. For this river, no long term flow data are available. However, the twoyears on record (1967 and 1970) show that variation form year to year can be rather marked, andthat the changes caused by Pamir I (increase in winter, reduction in summer) are marginal.

The "with project" curves in the figures above are calculations based on the assumptions thatthere will be: (i) a continuous release in water from the lake of 10 m3/s from November to April;(ii) no change in May and October; (iii) a retention of 10 m3/s in June and September; and (iv) aretention of 20 m3/s in July and August. The optimal regime will have to be found in the firstyears of operation. It is therefore recommended to start retention earlier and/or with highervalues, e.g., starting in May and retaining more in June, in order to reach the high water level inthe lake at an earlier date. The monitoring program (see below) will provide important input forthis decision.

4.3.2 Floodplain vegetation

Productivity of floodplain vegetation depends entirely on the availability of water, i.e., on theground water level in these alluvial floodplains. This in turn is influenced very directly by the

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lake level. A lowering of the lake level would lead to a lowering of the ground water table in thefloodplains and in this way to a reduction of the productivity. Therefore, the two mitigationmeasures for preventing this effect are: (i) the modification of the project in a way that allows tokeep the summer water level within the range of its natural fluctuations; and (ii) to find anoperating regime which allows to bring the lake level up as quickly as possible. If this isachieved, the project should not cause any long term adverse impact on the vegetation and on theproductivity of the two floodplains. Here again, the results of the monitoring will be important.

4.3.3 Lake fisheries

The fisheries of lake Yashilkul are not exploited presently, but they constitute a potentiallyvaluable resource for future use. Drawing down the lake, and changing the pattern of its levelfluctuations can interfere with fish populations, namely with its food base and the reproductionpattern.

For maintaining the fish population in the lake, mainly liseosman (Schizopygopsis stolizkae), themost numerous species, it will be important to find the optimum operating regime for the outletstructure. The best regime would probably be to opt for a quick rise in lake level as early as,possible, in order to prevent too strong a change during the spawning period of this species. Thisstrategy would proceed in parallel with the recommendations made for maintaining the floodplainvegetation. The results of the monitoring program will be essential for defining the best operationpattern.

4.3.4 Worker health and safety

PamirEnergy will establish a Health, Safety and Environment (HSE) unit at project headquartersin Khorog to implement the project's Environmental Monitoring and Management Plan (seebelow) The HSE Unit Engineer will monitor the compliance of all PamirEnergy generation andtransmission facilities to the relevant WBG environmental, health and safety guidelines on aregular basis. PamirEnergy will appoint and train an HSE manager to each facility who will beresponsible for enforcing workplace safety and good housekeeping in compliance with theguidelines on site. PamirEnergy will provide the Unit Engineer and other relevant personnel withparticipant training in prevailing international standards for occupational health and safety asrequired. The Engineer, in turn, will provide preliminary and refresher training to all facility HSEmanagers annually.

The Unit Engineer will inspect all generation facilities on a quarterly basis and meet with theHSE manager at each facility to discuss his findings. Violations of guidelines will be noted andpersistent violations will be reported to the PamirEnergy General Manager, who may takedisciplinary action against the management of the facility.

The Unit Engineer will also regularly inspect all transmission facilities, including transmissionlines, sub-stations and transformers to ensure that they are safe and maintained in accordancewith WBG guidelines. As part of its public education efforts, the HSE Unit will raise publicawareness about electricity safety and encourage consumers to report problems to the Unit.

5. ANALYSIS OF ALTERNATIVES

As a part of the project evaluation in 1999, a short assessment of energy alternatives was made.This study confirmed that the proposed expansion of the Pamir hydroelectric plant is the mosteconomic and the most environmentally acceptable. The following options have been addressed:

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* Fossil fuels: Coal and diesel oil were used before, for heating and for operatinggenerators. All fossil fuels have to be imported; Tajikistan does not have any oil, and thecoal found so far, although said to be of good quality, is located in regions with difficultaccess. Transport costs for importation from Osh, in the Kyrgyz Republic, areprohibitive, with about 100 US$/t. Kerosene is used mainly for lighting, but is not analternative for other uses.

* Biomass: Wood is scarce, and the existing resources are heavily exploited. Availability ofother plant biomass (steppe plants) is also limited, and is also overexploited. Cottonstalks are an important fuel in other parts of Tajikistan, but this, like other agriculturalwaste, is not available here. The general scarcity of biomass also excludes biogas as anoption.

* Animal dung: This is a very important fuel, but it is fully utilised, without potential forexpansion. Furthermore, burning animal dung deprives the farmers form their mostimportant fertiliser.

* Hydropower: There is a considerable additional potential for further hydropowerdevelopment, especially for small and micro hydro plants for supply to isolated villages.The problem here is that these small installations tend to freeze in winter, when energydemand is highest.

* Other renewables: Wind speed is limited, especially in winter; this excludes wind as analternative. Solar power might be an option; irradiation is high, even during winter,mainly thanks to the dry climate. However, available solar systems for electricitygeneration are still too expensive to be a viable alternative to hydropower under the givencircumstances. Geothermy could be an option in a few places. In the project area, as inother parts of GBAO, there are a few hot springs, some of which are being used (thermalbaths, heating of greenhouses). However, this can be used only very locally.

In addition, the regional agency of the national utility, Barki Tajik, has allowed the generationand the grid system to fall into an advanced state of decay. It did not, therefore offer a good basisas a power purchaser on which to base a project financing for the increased generation. IFC andAKFED therefore proposed a 25 year concession, under which responsibility for running theelectricity service of the region will be taken over by the project company which in addition to itscommitments to certain new investments, will also commit to meet certain performancestandards.

6. IMPACT MITIGATION MONITORING AND MANAGEMENT

6.1 Health Safety and Environment Unit

PamirEnregy will establish a Health, Safety and Environment (HSE) Unit at project headquartersin Khorog to implement the project's Environmental Monitoring and Management Plan (EMMIP).The HSE Unit will be a permanent office within PamirEnergy. The Unit will be established assoon as PamirEnergy is established and its personnel will gain additional experience by workingtogether with the Project Consultant (Electrowatt-Ekono) in monitoring PamirEnergy'sconstruction and operation activities. The HSE Unit will have three principal functions:

* To undertake an environmental audit of all project facilities and recommend toPamirEnergy remediation of those facilities to achieve compliance with WBG social andenvironmental safeguard policies and guidelines as necessary.

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* To administer research activities undertaken by contractors on behalf of the project (e.g.,Lake Yashilkul fisheries and floodplain monitoring) and coordinate the results of thoseactivities with the impact mitigation activities to which the project is committed (e.g.,compensation payments to herders for possible diminished floodplain pasture - seebelow); and contribute to defining the operating regime for the lake, and

* To monitor the compliance of PamirEnergy and all contractors employed byPamirEnergy with WBG social and environmental safeguard policies and guidelines.

6.2 Environmental Monitoring and Management Plan

The EMMP for the Pamir Energy Project will have six interrelated components: 1) Health, Safetyand Environmental Monitoring; 2) Yashilkul Lake Level Monitoring; 3) Floodplain Monitoring;4) Compensation Distribution and Monitoring; 5) Yashilkul Fisheries Monitoring; and 6)Community Outreach. A description of each of these components follows.

6.2.1 Health, Safety and Environmental Monitoring

The principal task of the HSE Unit will be the regular monitoring of the project's compliancewith IFC's social and environmental safeguard policies and guidelines. PamirEnergy will beresponsible for incorporating these policies and guidelines into all contracts related to theengineering and construction of project facilities as well as in its standard operating proceduresfor those facilities.

6.2.2 Lake Level Monitoring

Lake level monitoring is currently being carried out by the government MeteorologicalObservatory in Khorog. According to the information obtained on the occasion of the expert'svisit to Khorog in early April 2001, this monitoring has been resumed recently, after a number ofyears of interruption of the program. However, at that time no recent data were available.

The plant itself will require a reliable lake level monitoring, and for this purpose the necessarydevice will be installed at the outlet control structure. It is suggested that such a monitoringprogram is started as soon as possible by PamirEnergy.

6.2.3 Floodplain Monitoring

The potential impact of the project on the two floodplains at lake Yashilkul (Somon andMarjinoy) could negatively affect the livelihood of the local population. If so, PamirEnergy willhave to provide compensation to the farmers dependent on the floodplain resources. In order todetermine if, and the extent to which, such compensation is required, a floodplain monitoringprogram has been initiated, which includes floodplain productivity and groundwater monitoring,to be carried out until the impacts have stabilized. If a reduction in productivity has been detected,it is important that compensation payments be made before the onset of winter, since hay willhave to be bought in time. The floodplain monitoring will continue until the impacts havestabilized.

6.2.4 Compensation

The HSE Unit will coordinate the research and monitoring activities of the Flood PlainMonitoring component and assess the need to purchase hay stocks to compensate herders fordiminished production of the Yashilkul floodplains. This assessment will take place after the hayharvesting season in August during the project construction period and for at least two years afterconstruction is complete. The HSE Unit will provide cash compensation directly to the

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cooperative farms that utilize the floodplains for grazing and hay production. The compensationpayments will be calculated on the basis of the number of head of livestock maintained by themembers of each cooperative farm (including animals that they own independent of the farms)and any short-fall in hay production estimated by the Floodplains Monitoring component.

The HSE Unit will audit each cooperative farm receiving compensation to ensure that therequisite hay stocks are purchased, and the Unit will monitor the distribution of hay stocksthroughout the winter to ensure that needs of the cooperative members are met.At present, it is not possible to estimate the impact of the project on the productivity of thefloodplains until the drawdown of the lake is undertaken. For this reason, a compensationcontingency fund of $50,000 to cover a five year period has been proposed as part of the HSEUnit budget. This amount is based on a "worst-case" scenario calculated according to currentlivestock holdings and an average current price of hay per ton as reported by the managers ofcooperative farms surveyed in March/April 2001.

While the impact of the project is expected to stabilize within five years from the commencementof construction, the company will ensure that any enduring or unforeseen adverse impacts on thelivelihoods of the project area population will be addressed through direct compensation targeteddevelopmental initiatives.

6.2.5 Fisheries Monitoring

A survey of Lake Yashilkul fisheries is currently underway by a team from the University ofKhorog. As with the proposed floodplain monitoring, it is important that the fisheries monitoringstarts ahead of the construction works to establish reliable baseline data against which projectimpacts can be assessed. Since the population living in the project area does not fish in LakeYashilkul, there will be no compensation associated with any decline in the lake's fisheries.However, the data produced can be used later on in order to decide whether there is actually apotential for developing the fisheries as an economic resource.

6.2.6 Community Outreach

The principal activity of the HSE Unit Community Outreach component is to promote safe andresponsible energy use (including electricity, kerosene, wood fuel and other biomass) andpayment of electricity tariffs through public education efforts including mass media and publicmeetings.

In addition to public education, the HSE Unit may take on a more developmental role inpromoting electricity use and creating linkages with ongoing community and enterprisedevelopment initiatives in GBAO through the Community Outreach component.

As part of its regular interaction with consumers and its liaison with developmental organizations,the HSE Unit staff will explore opportunities for promoting improvements over the currentpatterns of energy use in GBAO to help make electricity more affordable to consumers. Throughcollaboration with AKFED, for example, PamirEnergy could support the development ofenterprises that manufacture more efficient cooking and home heating devices or the marketing ofcompact fluorescent light bulbs. The HSE Unit would, in turn, promote the use of thesetechnologies among electricity consumers. Such promotion efforts could be linked with ongoingrural development programmes that provide credit for domestic improvements such as sanitationand water supply.

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6.3 Monitoring, Reporting and Evaluation

In collaboration with the consultant and other collaborating organizations (including IFC), theHSE Unit will develop monitoring and reporting formats for each component. The Unit willidentify a set of simple performance indicators for each component and will monitor and reportagainst those indicators on a regular basis to PamirEnergy management, AKFED and IFC. IFCwill share its evaluation of EMMP implementation with IDA.

IFC will require an annual consolidated monitoring report for all components for the duration ofits financing of the project. The format of these reports will be determined prior to financialclosing. In addition, IFC will require an evaluation of EMMP implementation within one year ofthe completion of the construction phase of the project. PamirEnergy will be required toimplement relevant recommendations related to EMMP implementation.

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