World Bank Document€¦ · Document of The World Bank ... UNDP United Nations Development Program ... Country: India Project Name: INDIA - CFC PRODUCTION

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Document of

The World Bank

Report No: ICR00002241

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(TF-23789)

ON A

GRANT

IN THE AMOUNT OF US$83.02 MILLION

TO THE

REPUBLIC OF INDIA

FOR A

CHLOROFLUOROCARBON PRODUCTION SECTOR

GRADUAL PHASEOUT PROJECT (ODS III)

June 22, 2012

Sustainable Development Department

South Asia Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective May 8, 2012)

Currency Unit = Indian Rupee (Rs.)

US$ 1.00 = Rs. 53.15

FISCAL YEAR

April 1 - March 31

ABBREVIATIONS AND ACRONYMS

ACPP Accelerated CFC Phase-out Program

CAS Country Assistance Strategy

CER Certified Emission Reduction

CFC Chlorofluorocarbons

CSL Chemplast Sanmar Limited

CTC Carbon tetrachloride

DEA Department of Economic Affairs, MOF, GoI

DGFT Directorate General of Foreign Trade India

EMP Environmental Management Plans

EUN Essential Use Nomination

ExCom Executive Committee of the MLF

FI Financial intermediary

FM Financial Management

GEF Global Environment Facility

GEO Global Environmental Objective

GFL Gujarat Fluorochemicals Limited

GHG Greenhouse gases

GIZ Gesellschaft für Internationale Zusammenarbeit (German Agency for

International Cooperation)

GoI Government of India

GWP Global Warming Potential

HCFC22 Hydro-chlorofluorocarbon 22

HFC23 Hydro-fluorocarbon 23

IDBI Industrial and Development Bank of India

ISR Implementation Status and Results Report

MDI Metered dose inhalers

MEA Multilateral Environmental Agreement

MIS Management Information System

MLF Multilateral Fund for the Implementation of the MP

MoEF Ministry of Environment and Forests

MOF Ministry of Finance

MP Montreal Protocol

3

MT Metric Ton (1000 kilograms)

MTR Mid Term Review

NACEN National Academy of Customs Excise and Narcotics

NCCoPP National CFC Consumption Phase-out Plan

NFI Navin Flourine Industries

NOU National Ozone Unit

ODP Ozone Depleting Potential

ODS Ozone Depleting Substance

ODS II Ozone Depleting Substance II Project(P031829)

ODS III CFC Production Sector Closure Project (P069376)

ODS IV CTC Sector Phase-out Project (P085345)

PDO Project Development Objective

PMU Project Management Unit

PRCL Polyolefins Rubber Chemicals Limited

TA Technical Assistance

UNDP United Nations Development Program

UNEP United Nations Environment Program

UNIDO United Nations Industrial Development Organization

Vice President: Isabel Guerrero

Country Director: N. Roberto Zagha

Sector Manager: Herbert Acquay

Project Team Leader: Ruma Tavorath

ICR Team Leader : Akiko Nakagawa

4

INDIA

CFC PRODUCTION SECTOR GRADUAL PHASEOUT PROJECT

CONTENTS

Data Sheet

A. Basic Information

B. Key Dates

C. Ratings Summary

D. Sector and Theme Codes

E. Bank Staff

F. Results Framework Analysis

G. Ratings of Project Performance in ISRs

H. Restructuring

I. Disbursement Graph

1. Project Context, Global Environment Objectives and Design ................................... 5

2. Key Factors Affecting Implementation and Outcomes ............................................ 15 3. Assessment of Outcomes .......................................................................................... 16

4. Assessment of Risk to Development Outcome ......................................................... 20 5. Assessment of Bank and Borrower Performance ..................................................... 20

6. Lessons Learned ....................................................................................................... 23 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 25 Annex 1. Project Costs and Financing .......................................................................... 26

Annex 2. Outputs by Component ................................................................................. 27 Annex 3. Economic and Financial Analysis ................................................................. 30

Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 31 Annex 5. Beneficiary Survey Results ........................................................................... 33 Annex 6. Stakeholder Workshop Report and Results ................................................... 34

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 35 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 36 Annex 9. List of Supporting Documents ...................................................................... 37

5

Project Data Sheet

A. Basic Information

Country: India Project Name:

INDIA - CFC

PRODUCTION

SECTOR CLOSURE

PROJECT (ODS III)

Project ID: P069376 L/C/TF Number(s): TF-23789

ICR Date: 06/21/2012 ICR Type: Core ICR

Lending Instrument: SIL Borrower: MULTILATERAL

GRANT TO INDIA

Original Total

Commitment: USD 83.02M Disbursed Amount: USD 87.48M

Revised Amount: USD 88.54M

Environmental Category: B Global Focal Area: O

Implementing Agencies:

United Nations Environment Program, Ministry of Environment and Forests

Cofinanciers and Other External Partners:

B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 02/18/1999 Effectiveness:

Appraisal: 12/06/1999 Restructuring(s):

Approval: 06/09/2000 Mid-term Review: 10/02/2006 10/02/2006

Closing: 06/30/2011 12/31/2011

C. Ratings Summary

C.1 Performance Rating by ICR

Outcomes: Satisfactory

Risk to Global Environment Outcome Low or Negligible

Bank Performance: Satisfactory

Borrower Performance: Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance

Bank Ratings Borrower Ratings

Quality at Entry: Highly Satisfactory Government: Satisfactory

Quality of Supervision: Satisfactory Implementing

Agency/Agencies: Satisfactory

Overall Bank

Performance: Satisfactory

Overall Borrower

Performance: Satisfactory

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C.3 Quality at Entry and Implementation Performance Indicators

Implementation

Performance Indicators

QAG Assessments

(if any) Rating

Potential Problem Project

at any time (Yes/No): No

Quality at Entry

(QEA): Satisfactory

Problem Project at any

time (Yes/No): No

Quality of

Supervision (QSA): Satisfactory

GEO rating before

Closing/Inactive status Highly Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Banking 1 1

Central government administration 2 2

Other industry 97 97

Theme Code (as % of total Bank financing)

Environmental policies and institutions 50 50

Pollution management and environmental health 50 50

E. Bank Staff

Positions At ICR At Approval

Vice President: Isabel M. Guerrero Mieko Nishimizu

Country Director: N. Roberto Zagha Edwin R. Lim

Sector Manager: Herbert Acquay Richard O. Ackermann

Project Team Leader: Ruma Tavorath Naimeh Hadjitarkhani

ICR Team Leader: Akiko Nakagawa

ICR Primary Author: Akiko Nakagawa

Vaideeswaran Sankaran

F. Results Framework Analysis Global Environment Objectives (GEO) and Key Indicators(as approved) The global objective of this project was to support India's CFC production phase-out as mandated

by the Montreal Protocol (MP). Developing countries under Article 5 of the MP, including India,

were required to stop CFC production by 2010, and as India was the second largest CFC producer

in the world after China, India's achievement was seen as a major milestone in achieving the

global environmental objective with regards to helping restore the stratospheric ozone layer.

7

Project outcomes were monitored through independent verification of CFC production against a

CFC production quota at individual plant levels and national aggregate levels.

Revised Global Environment Objectives (as approved by original approving authority)

and Key Indicators and reasons/justifications

(a) GEO Indicator(s)

Indicator Baseline Value

Original Target

Values (from

approval

documents)

Formally

Revised

Target

Values

Actual Value

Achieved at

Completion or

Target Years

Indicator 1 : Phasing out CFC production

Value

(quantitative or

Qualitative)

22589 MT 0 MT 0 MT

Date achieved 12/31/1999 01/01/2010 08/01/2008

Comments

(incl. %

achievement)

CFC production phase-out was completed 17 month ahead of the original

schedule except the production of pharmaceutical CFCs allowed under the

Essential Use Nomination (EUN) production.

Indicator 2 : Establishment of tradable quota system for CFC production

Value

(quantitative or

Qualitative)

System not yet

operational

System maintained

and kept

operational

Date achieved 06/07/2000 12/31/2010

Comments

(incl. %

achievement)

The quota system regulating the 4 producers was introduced under a Government

Order (March 2, 2000). Tradable quotas and quota reporting system are kept

operational under the EUN production.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target

Values (from

approval

documents)

Formally

Revised

Target Values

Actual Value

Achieved at

Completion or

Target Years

Indicator 1 : CFC manufacturers in compliance with production targets

Value

(quantitative or

Qualitative)

13,176 MT 0 MT

Date achieved 01/01/2004 12/31/2011

Comments

(incl. %

achievement)

CFC production stopped except the production of pharmaceutical CFCs allowed

under the Essential Use Nomination (EUN) production.

8

G. Ratings of Project Performance in ISRs

No. Date ISR

Archived GEO IP

Actual

Disbursements

(USD millions)

1 12/21/2000 Satisfactory Satisfactory 20.49















16 06/09/2008 Highly Satisfactory Satisfactory 72.91





21 12/06/2010 Highly Satisfactory Moderately Satisfactory 82.00


23 12/24/2011 Highly Satisfactory Moderately Satisfactory 85.34

January 2012 87.47

Note: The project closed on December 31, 2011, and the final ISR was received on December 23,

2011. However, among the additional compensation for the Accelerated CFC Phase-out Program

(ACPP), the first tranche mounting to US$2.134 million was disbursed in January 2012, which

was within the disbursement grace period until April 30, 2012.

H. Restructuring (if any) Not Applicable

9

I. Disbursement Profile

10

1. Project Context, Global Environment Objectives and Design

1.1 Context at Appraisal

1. Background. The Vienna Convention for the Protection of the Ozone Layer and the

Montreal Protocol (MP) on Substances that Deplete the Ozone Layer under the Convention are

international treaties which became effective in the 1980s. Their objectives are to eliminate

consumption and production of ozone depleting substances (ODS) to avoid ozone layer depletion

which adversely affects human health and the environment. Under Article 5 of the MP,

developing countries including India, were required to meet the following phase-out schedule for

ODS having high ozone-depleting potential (ODP):

Table 1: Phase-out Schedule for Article 5 Countries

Year

ODS Controlled under the MP

CFCs (Annex A Group1)

Halons (Annex A Group II)

HCFCs (Annex C Group I)

CY 1999 Freeze consumption


CY 2005 Reduce by 50%


CY 2010 Reduce by 100% Reduce by 100%




CY 2025 Reduce by 67.5%

CY 2030 Reduce by 97.5%


Source: MP. The table does not include ODS chemicals unrelated to this project. Regarding HCFC, at the

19th Meeting of the Parties to the MP in September 2007, the Parties agreed to accelerate the HCFC phase-

out schedule in the MP in both developing and developed countries, as shown in Table 1 above.

2. India’s CFC Phase-out Program. For CFCs in Annex A Group I of the MP, the

Government of India (GoI) successfully complied with the “1999 freeze” requirement and

prepared the CFC Production Sector Phase-out Plan with the Bank’s assistance. The Plan

proposed quantified phase-out targets of CFC production from 1999 until production cessation in

2010, and was submitted to the Executive Committee (ExCom) of the Multilateral Fund (MLF), a

fund responsible for supporting developing countries in meeting their MP commitments. At its

29th meeting in November 1999, ExCom approved the Plan, with an MLF grant of US$82 million

to GoI, and appointed the Bank as the implementing agency (ExCom Decision 29/69). The MLF

grant was approved on the basis of the annual phase-out target volume corresponding to the

annual grant tranches, as shown in Table 2 below.

3. Country Assistance Strategy (CAS). At the time of appraisal, India’s CAS (1998-2000)

did not have a specific reference to ODS, but it did identify global environment as one of the

three themes to focus on in the environmental assistance strategy. The CAS stated that

supporting India in complying with the agreements reached at the Kyoto Conference (1997) for

11

climate change should be the Bank strategy, which is in alignment with support to comply with

other Multilateral Environmental Agreements (MEA) such as MP.

Table 2: CFC Production Phase-out Targets and Approved MLF Grant Tranches

4. Building on the basis of the Bank’s predecessor projects (ODS I and ODS II), this

project (referred to as ODS III) supported the final stage of India’s CFC production

phase-out efforts.

1.2 Original Global Environment Objectives (GEO) and Key Indicators (as approved)

5. The original GEO of this project was to support GoI in the reduction and eventual

stoppage of CFC production (CFC11, CFC12, CFC113), and thus, to assist GoI to comply with

one of the ODS phase-out requirements under the MP. At the time of appraisal, India was the

second largest CFC producer in the world after China, and India’s final stoppage of CFC

production by 2010 was expected as a major milestone in achieving the GEO of helping to restore

the stratospheric ozone layer. Project outcomes were monitored through independent verification

of indicators such as CFC production volume against the CFC production quota at individual

plant levels and the national aggregate level.

6. GEO indicators include the phased-out CFC production volume with each CFC producer

in compliance with annual production targets and the establishment of a tradable quota system for

CFC production.

1.3 Revised GEO (as approved by original approving authority) and Key Indicators,

and reasons/justification

7. The original GEO and key indicators were not changed. As described in section 1.6, the

phase-out of halon, which is one of the non-CFC ODS, was added as a component during

implementation, but because the plant dismantling was followed by the one-time disbursement

and monitoring was unnecessary for this additional component, no indicators were added.

CY1999 22,588 12

CY2000 20,706 11

CY2001 18,824 11

CY2002 16,941 6

CY2003 15,058 6

CY2004 13,176 6

CY2005 11,294 6

CY2006 7,342 6

CY2007 3,389 6

CY2008 2,259 6

CY2009 1,130 4.8

CY2010 0 1.2

Total 82

Grant Tranche (US$million)Production Ceiling (Mt)

12

1.4 Main Beneficiaries (original /revised, briefly describe the “primary target group” identified in the PAD and as captured

in the GEO, as well as any other individuals/ organizations expected to benefit from the project)

8. Primary beneficiaries. The four CFC producers in India were the primary beneficiaries

of the enterprise compensation component: SRF Limited (Rajastan), Gujarat Fluorochemicals

Limited (GFL) (Gujarat), Navin Fluorine Industries (NFI) (Gujarat), and Chemplast Sanmar

Limited (CSL) (Tamil Nadu). Based on the CFC Phase-out Annual Program submitted and

approved at ExCom meetings and the verified production figures, these enterprises received

compensation tied to CFC production phased-out targets.

9. Secondary beneficiaries. The secondary beneficiaries were individuals and institutions

that benefited from the Technical Assistance (TA) component. The Ozone Cell at the Ministry of

Environment and Forests (MoEF) and the Project Management Unit (PMU) in the MoEF

benefited from institutional strengthening and the development of Management Information

System (MIS). MoEF received support in establishing a production and consumption quota

system. The Directorate General for Foreign Trade (DGFT), National Academy of Customs

Excise and Narcotics (NACEN), and custom authorities were given customs training and capacity

building to control illegal transactions.

10. Direct global benefits. As the second largest CFC producer in the world after China at

the time of appraisal, India’s cessation of CFC production and its accelerated cessation efforts

contributed significantly towards helping to restore the stratospheric ozone layer. However, the

complete reversal of the ozone layer damage will take decades. A secondary direct global benefit

is the reduction of greenhouse gases (GHG). CFCs have a high global warming potential (GWP)

compared to carbon dioxide, and CFC production phase-out itself is a significant contribution to

reduce GHG emission.

1.5 Original Components (as approved)

11. The project components are as follows:

12. Component 1: Enterprise compensation (US$80 million). This component provided

grant funds as compensation payments to the four CFC producers in return for meeting the CFC

annual phase-out target volumes, as outlined in Table 2 above.

13. Component 2: Technical assistance (TA) (US$2 million). The United Nations

Environmental Program (UNEP) was responsible for supervising this component. The

component activities consisted of: (a) staffing support for the PMU to be established by MoEF,

(b) development of an MIS for collecting and managing production data, (c) consultant services

for technical support to the PMU in fulfilling its responsibilities, (d) design and implementation

of public awareness programs, (e) support for research activities on substitute chemicals, (f)

support for training, seminars and workshops, (g) support for research on CFC recovery and

recycling, (h) technical support to the CFC producers with environmental analysis and

preparation of environmental management plans (EMPs), and (i) support for other governmental

departments and agencies collaborating in the CFC phase-out program.

13

Table 3: Estimated Project Cost

Category Appraisal Estimate (US$ millions)

CFC phase-out compensation 80.00

Financial Agency Fee (IDBI) 0.80

Technical Assistance (UNEP) 2.00

UNEP Agency Fee 0.22

Total 83.02

14. Estimated project cost for the TA component is as follows.

Table 4: Estimated Project Cost for the TA Component

Category Appraisal Estimate (US$)

Consultant’s service 1,150,000

Office Supplies and Operating Costs 650,000

Training Workshops 200,000

Service Fee 220,000

Total 2,220,000

1.6 Revised Components

(a) Halon Component 15. Responding to the ExCom decision at the 34

th meeting (July 2001) to finance the

dismantling, removal and destruction of halon production plants in India, the Grant Agreement

was amended in 2003 to include the Halon Producers Production Phaseout component (US$ 2.3

million) at two beneficiary enterprises under the ODS III project, i.e., SRF Ltd and Navin

Flourine Industries (NFI) Ltd., with the latter reconstituted as the Polyolefins Rubber Chemicals

Limited (PRCL) at the time of the amendment. The freeze compliance of halon production in the

two enterprises achieved a phase-out at a total of 288.8 ODP metric tons (MT), and the

compensation for plant dismantling was shared between NFI and PRCL in the ratio of 69.93

percent and 30.07 percent respectively, for which the one-time disbursement was made in

September 2003 under the verification audit and performance-based disbursement mechanism

established in the ODS III project.

16. This component was added as a result of the Consensus Agreement between the ExCom

and GoI (ExCom Decision 34/68), and Restructuring Documents were not prepared at the Bank.

Addition of this component was managed by a legal document to amend the original OTF Grant

Agreement (TF023789), which was issued by the Bank on March 10, 2003, and counter-signed

by Industrial Development Bank of India (IDBI) on April 17, 2003.

(b) Accelerated CFC Phase-out Program (ACPP)

17. During its 56th meeting (November 2008), the ExCom approved the revised agreement

between GoI and the ExCom on India’s ACPP to complete the production phase-out as of August

2008, or 17 months ahead of schedule. Restructuring documents were not prepared for such

revision and the Project Agreement between the Bank and GoI was amended and became

effective on December 21, 2011. Such an accelerated phase-out made the four enterprises

eligible for a total of US$3.17 million additional compensation. Among the additional

14

compensation for ACPP, the first tranche amounting to US$2.134 million was disbursed in

January 2012.

1.7 Other significant changes (in design, scope/scale, implementation arrangements/schedule, and funding allocations)

18. The closing date of the project was extended from June 30, 2011 to December 31, 2011

due to the delayed procedures related to the ACPP. The extension was intended to allow for the

remaining final tranche disbursement (US$1.057 million) after the decision of the ExCom 66th

meeting (April 16-20, 2012) during the standard four-month grace period through April 30, 2012,

or an additional two months of extension until June 30, 2012 based on a possible request from

GoI.

19. The request for the second and final tranche amounting to US$1.057 million was

considered at the 66th ExCom meeting, but ExCom members raised questions regarding

“documentation on CFC stockpile destruction (ExCom Decision 60/47, 2010), and on production

closure and dismantling” (ExCom Decision 54/37(d), 2008). As a result, the ExCom agreed to

defer the disbursement request until its 67th meeting in July 2012. Hence, the disbursement grace

period expired without carrying out the final disbursement of US$1.057 million.

Table 5: Estimated, Revised and Final Project Cost (in US$ millions)

80.000 80.000 83.170 82.113 102.64%

-- 2.300 2.300 2.300 --

0.800 0.823 0.855 0.845 105.64%

2.000 2.000 2.000 2.000 100.00%

0.220 0.220 0.220 0.220 100.00%

83.020 85.343 88.545 87.478 105.37%

0.000 0.000 0.000 0.000 --

0.000 0.000 0.000 0.000 --

83.020 85.343 88.545 87.478 105.37%

Percentage

of

Appraisal

Total Project Costs

Project Preparation Facility (PPF)

Front-end fee IBRD

Total Financing Required

Total Baseline Cost

CFC phase-out compensation

Halon phase-out compensation

IDBI Financial Agency Fee

Technical Assistance (UNEP)

UNEP Agency Fee

Components

Appraisal

Estimate

Revised

Estimate

after adding

Halon

Component

Revised

Estimate

after

ACPP

Final

Disburse-

ment

Note: Figures are rounded.

20. Other than the changes as mentioned above, the design, scope, implementation

arrangements and funding allocations were not modified.

15

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry (including whether lessons of earlier operations were taken into account, risks and their

mitigations identified, and adequacy of participatory processes, as applicable) 21. Quality at entry was highly satisfactory. The ODS III project inherited the design

established in India’s ODS II project which captured the lessons learned from ODS I. The first

lesson was to have a financial intermediary (FI) between the Bank and the beneficiaries to

minimize transaction costs. IDBI, which was the FI under ODS II, assumed the same role in

ODS III, and ensured continuity. The number of beneficiaries in the ODS III project was four

producers as opposed to 83 subprojects in ODS II, thereby assuring greater efficiency at entry.

The second lesson was performance-based disbursement tied to CFC production reduction,

subject to third-party audits. A simple project design involving only four producers contributed

to timely disbursements, accelerated phase-out, and effective implementation.

2.2 Implementation (including any project changes/restructuring, mid-term review, Project at Risk status, actions taken)

22. Implementation of the CFC Production Sector Phase-Out component proceeded

satisfactorily throughout the project period. CFC Production phase-out agreements and targets

were set; producers met these targets; monitoring was done through audits; disbursements of

grants were made in line with the agreements. IDBI had some minor delays in fund transfers,

which was mainly due to the grant being held in foreign currency in the United States, and thus

delayed as the bank where the account was established had to abide with the prevailing laws in

the United States, e.g. sanctions against Iran. In this regard, the introduction of the Real Time

Gross Settlement system in November 2005 was useful because disbursements flowed directly to

the beneficiaries on the same or the following day.

23. Implementation of the TA component was delayed during the initial phase because the

fund flow arrangements among the Bank, UNEP and Ozone Cell had not been streamlined.

However, once these were established, the constraints were removed.

24. During implementation, the Project Coordinator within the PMU played an important role,

and when the Project Coordinator position was vacant, the implementation became slow, as

described in Sections 5.1(a) and 5.2 (a). However, as described in those sections, the vacancy did

not have much impact on the implementation or the PDO as most of the critical tasks were

initiated / completed when the Project Coordinator was in place.

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

25. In the CFC Production Sector Phase-Out Component, the regular audits served as the

M&E tool, and the process was followed in a streamlined manner throughout the project period.

These audits were done by two agencies, i.e., the Ozone Cell and the Bank. The Ozone Cell’s

half-yearly audit was useful in providing guidance on mid-year corrections if any, and also

formed the basis for releasing the second installment (60 per cent) to the CFC producers. The

third-party audits under the project served the mandatory purpose of reporting to the ExCom and

also provided recommendations for the ensuing year.

16

2.4 Safeguard and Fiduciary Compliance (focusing on issues and their resolution)

26. Safeguards. The project was classified as category B, consistent with that of other ODS

projects assisted by the Bank. Under the project, CFC producers were required to prepare

Environmental Management Plans (EMPs) for plant modification or dismantling in case both

CFC and HCFC22 production was terminated. However, all the CFC production facilities were

swing plants capable of producing HCFC22 too and thus there was no need to undergo any partial

or total modification as they phased out CFC production and transformed to HCFC production.

Under the MP, India is entitled to produce HCFC until 2040, and since no swing plants were

dismantled during the life of the project, MoEF has the responsibility that whenever the cessation

of HCFC production takes place, the production lines of swing plants would be dismantled

according to environmentally sound practice in compliance with GoI requirements.

27. As for the halon phase-out component, EMPs were made by the two manufacturers (SRF

Ltd and PRCL, formerly NFI). Based on site visits conducted by the third-party auditor (Deloitte

Touche Tohmatsu India Private Limited), it was confirmed that the EMPs included an appropriate

monitoring system and a mitigation mechanism in order to minimize environmental impact

caused by dismantling the plants.

28. Fiduciary compliance. There were no financial management (FM) issues or

procurement issues during implementation. This was due to (a) the simple project FM

design which involved IDBI as FI responsible for annual financial audits, and (b) there

were not many procurement transactions, as most of the financial resources were

disbursed to CFC manufacturers as compensation for phased-out production.

2.5 Post-completion Operation/Next Phase (including transition arrangement to post-completion operation of investments financed by present operation, O&M, sustaining reforms and institutional capacity, and next phase/follow-up operation)

29. The Bank is currently assisting GoI in meeting MP requirements to reduce the production

and consumption of carbon tetrachloride (CTC), which is another group of ODS. The CTC

project (ODS IV, P085345) is being implemented under an institutional arrangement similar to

that of ODS III, and TA and supervision missions for ODS III and ODS IV have been conducted

jointly.

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation (to current country and global priorities, and Bank assistance strategy) 30. The PDOs were relevant at the appraisal stage and were still relevant at closure. They

were directly relevant to GoI’s obligation under the MP to phase out CFC production. As shown

in Table 6 below, the project supported GoI in completing the final decade of CFC production

phase-out, which was an agreed obligation of GoI.

31. The objectives of the project were also highly relevant to the global priorities of phasing-

out ODS. As stated above, India was the second largest CFC manufacturing country at the time

of the appraisal, and CFC production phase-out of such a country was one of the most important

17

building blocks of the phase-out schedule under MP, as outlined in Section 1.1. Furthermore,

accelerated phase-out generated additional global benefits.

32. In the latest CAS (2010-2014), MLF under the MP is acknowledged as playing an

important role in ODS phase-out efforts in India, having two on-going projects (ODS III and

ODS IV).

Table 6: Agreed and actual CFC production by year and producer

Source: ExCom meeting documents. CFC production ceased as of August 1, 2008, and production in

CY2010 was for MDIs, as allowed under MPs Decision IV/25 for essential uses.

3.2 Achievement of Global Environmental Objectives (GEO) (including brief discussion of causal linkages between outputs/outcomes, with details in Annex 2)

33. The ODS-III project is deemed Satisfactory. First, the ultimate objective of the project

was to ensure that GoI could meet its CFC production phase-out target under the MP by 2010.

As shown in Table 6 above, GoI successfully achieved the phase-out target and all milestones.

Moreover, GoI responded to the incentives in promoting accelerated phase-out under the MP and

completed the 100% production phase-out as of August 1, 2008, or 17 months ahead of schedule.

CFC production beyond 2008 is for metered dose inhalers (MDI) only, which is authorized under

essential use nomination (EUN). It should be noted that, although CFC production was

successfully phased-out and the GEO was achieved, GoI did not meet the requirement on

documenting the CFC stockpile destruction and equipment dismantling described in Section 1.7

above and hence, the 66th ExCom meeting (April, 2012) deferred the request for final

disbursement of US$ 1.057 million until the 67th meeting in July 2012.

34. The second objective was to ensure that annual production targets by each CFC

manufacturer are in compliance with production targets, in accordance with the Quota Order. In

Required

reduction

under MP

Agreed

volume

under MLF CSL GFL NFI SRF

CY1999 22,588 22,411 0% 1,485 7,415 7,244 6,267

CY2000 20,706 20,407 8% 1,823 7,352 5,179 6,053

CY2001 18,824 18,691 17% 1,601 6,614 4,958 5,518

CY2002 16,941 16,890 25% 1,440 6,037 4,440 4,973

CY2003 15,058 15,014 33% 1,279 5,370 3,943 4,422

CY2004 13,176 13,069 42% 324 4,623 4,250 3,872

CY2005 11,294 11,161 50% 50% 954 3,988 2,929 3,289

CY2006 7,342 6,964 67% 626 2,278 1,924 2,136

CY2007 3,389 2,347 85% 85% 286 195 881 985

CY2008 2,259 674 90% 0 246 228 200

CY2009 1,130 0 95% 0 0 0 0

CY2010 0 319 100% 100% 0 0 111 208

51%

Actual

volume

CFC production in India

Agreed

volume

under

MLF

(MT)

Actual

volume

(MT)

Actual CFC production

per producer

(MT)

90%

100%

(N/A)

Production reduction percentage

compared to baseline (%)

18

this regard, as shown in Table 6 above, the total production volume of the four manufacturers in

any given year was always within the annual production target. As the third key indicator, a

tradable quota system for CFC production was established. For example, in CY2010 when a

limited amount of CFCs were produced for MDI use under MoEF license, two producers (CSL

and GFL) traded their entire quota to the other two producers (NFI and SRF) under this tradable

quota system.

3.3 Efficiency (NPV/EIRR, cost effectiveness, e.g., unit rate norms, least cost, and comparisons; and FIRR) 35. For ODS consumption projects, ExCom evaluates proposals using cost-effectiveness

thresholds to prioritize funding in case necessary resources exceed the resources available (ExCom Decision16/20). ODS III is a production phase-out project for which compensation is

based on profit losses, but the average cost-effectiveness of US$3.54/Kg ODP achieved in ODS

III CFC production phase-out component still demonstrates high efficiency. The average cost-

effectiveness of the Halon production phase-out component was US$7.98/Kg ODP, and the

component benefited from economies of scale gained through implementation under the ongoing

project framework.

Table 7: ExCom Cost Effectiveness Thresholds for ODS Consumption

Sector Sub-sector US$/Kg ODP

Aerosol Hydrocarbon 4.40

Foam General

Flexible polyurethane

Integral skin

Polystyrene/polyethylene

Rigid polyurethane

9.53

6.23

16.86

8.22

7.83

Halon General 1.48

Refrigeration Commercial

Domestic

15.21

13.76

Solvent CFC-113

TCA (trichloroethane)

19.73

38.50

3.4 Justification of Overall Outcome Rating (combining relevance, achievement of GEOs, and efficiency)

Rating: Satisfactory

36. The intended development outcome of CFC production closure was achieved in an

accelerated manner even ahead of what was envisaged at the Mid-term Review (MTR) in

December 2006. The prevailing market scenario – both within India and internationally – also

abetted the accelerated phase-out. ODS III is certainly one of the most successful projects

implemented by the Ozone Cell / MoEF. Targets were set and met. Accelerated phase-out was

agreed; additional compensation was given; the phase-out was completed 17 months ahead of

schedule. Several TA initiatives were taken, e.g. training of the Custom Officers and data

triangulation, in order to ensure that no CFCs are continued to be used in the country. The TA

was also found to be effective as the number of confiscation increased between 2004 and 2008. It

should be noted that, although CFC production was successfully phased-out and the GEO was

19

achieved, GoI did not meet the requirement on documenting the CFC stockpile destruction and

equipment dismantling described in Section 1.7. Therefore, the overall outcome was Satisfactory.

3.5 Overarching Themes, Other Outcomes and Impacts (if any, where not previously covered or to amplify discussion above)

(a) Poverty Impacts, Gender Aspects, and Social Development 37. ODS-III project has no direct relevance to poverty or gender.

(b) Institutional Change/Strengthening

(particularly with reference to impacts on longer-term capacity and institutional development)

38. Under the ODS III project, MoEF /Ozone Cell established an independent organization -

-PMU - - as a registered society. This was a special vehicle created for the ODS phase-out. The

objectives of the PMU were not restricted to CFC production sector phase-out, and as a legal

entity, it was intended to continue beyond the project period as well. At that time, the creation of

the PMU was a big step for ensuring institutional strengthening of MoEF. The PMU was

responsible for facilitating the phase-out in a project mode whereas the Ozone Cell was assigned

to manage the phase-out in terms of international and national policy. The PMU was dealing

with various multilateral and bilateral agencies pertaining to the phase-out, including the World

Bank, UNEP, United Nations Development Program (UNDP), United Nations Industrial

Development Organization (UNIDO) and Gesellschaft für Internationale Zusammenarbeit (GIZ,

German Agency for International Cooperation). While there were many constraints, the PMU

functioned smoothly once its procedures were streamlined. The PMU’s operation was guided by

the Project Implementation Manual and Operational Manual. In addition, the PMU prepared a

ODS phase-out strategy for every three years that was approved by the Ozone Cell and MoEF.

(c ) Other Unintended Outcomes and Impacts (positive or negative, if any)

39. During the last two years of project implementation, there was a difference of opinion

between the Ozone Cell and the Bank regarding the project. From the Bank’s perspective, the

PDO had been met by December 31, 2011 and no activities were scheduled beyond that time, and

thus the project was closed, with disbursement of the final tranche expected by the end of the

disbursement grace period, April 30, 2012 in accordance with the 66th ExCom approval.

However, the Ozone Cell felt that the project could not be closed before the ExCom had approved

the final disbursement, and this was not expected to happen until the April 2012 meeting. In

addition, the Ozone Cell also felt that, although the Bank was the implementing agency under the

MLF, the Bank’s decision to close the project was unacceptable. Such a difference of opinion

was unfortunate, although it should be noted that it had no bearing on the project outcome.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) 40. Not applicable.

20

4. Assessment of Risk to Development Outcome Rating: Low or negligible

41. Given that compensation has been paid to the CFC manufacturers and the national policy

prohibits the manufacture and use of CFCs, the risk to the PDO is low. The consumption quota

system and transaction-wise import/export data reporting system were established to avoid any

illegal CFC transaction, and thus ensure sustainability and continuity.

42. The 66th ExCom meeting (April 16-20, 2012) pointed out that the CFC production

closure and dismantling (ExCom Decision 54/37(d), 2008) had not been properly documented

and presented as one of the reasons for not allowing the final disbursement. However, the Bank

was notified that equipment at the swing plants of the four producers related solely to the

production of CFCs such as piping and day tanks were dismantled, and this makes resuming CFC

production economically unattractive. It should be noted however that such notification to the

Bank was informal, because as indicated in Section 7 below, the Ozone Cell unfortunately does

not acknowledge the closure of this project on December 31, 2011, and did not allow

communication between the Bank and the four manufacturers.

43. As for the halon production phase-out component, there should be no risks to PDO since

the dismantling of production plants at two enterprises was verified in 2003, which makes

resuming halon production economically unviable.

5. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues)

5.1 Bank (a) Bank Performance in Ensuring Quality at Entry (i.e., performance through lending phase)


44. In preparing this project, the Bank team took note of the lessons learned during the

implementation of previous ODS II project approved in March 1995 and closed in September

2004. In the project design, the main component of disbursing grant to the beneficiaries through

an FI for CFC production closure was supported with a TA component that would build the

capacity to ensure full and complete phase-out across the country. Such a project design fully

captured the lessons learned during the implementation of the ODS II project, of which the details

are described in Section 2.1.

(b) Quality of Supervision (including of fiduciary and safeguards policies)


45. Supervision in General. The Bank’s performance in supervising the project is rated

Satisfactory. The Bank approach of regular supervision/ implementation support missions to

identify key issues during implementation and to raise the same at the appropriate level within the

Government was useful. The Bank team was systematic, structured and organized. They

21

produced structured Aide Memoires that were useful for follow-up and pointing out gaps /lacunas

for the PMU / Ozone Cell to take appropriate actions, and produced Implementation Status and

Results Reports (ISR) in compliance with Bank rules. In addition, the Bank provided constant,

close follow-up and support to the PMU, particularly when they had challenges with decisions to

be taken by MoEF / GoI with the Ozone Cell. Also, coordination with the Bank was effective

due to the TTL’s presence in New Delhi, and the overall method of management was good.

46. During the early period of implementation, there were some issues between the Bank and

UNEP on the TA component. Such issues were procedural and not technical in nature, and were

subsequently resolved. UNEP played an important and useful role in terms of providing TA, i.e.,

pointing out that India could be a defaulter in terms of meeting the consumption targets, sharing

of expertise in conducting workshop and data triangulation. Although UNEP missions were

independent of the Bank’s, they were well-coordinated and worked in conjunction with each

other.

47. An important aspect where the Bank provided substantive support related to the

accelerated phase-out that the CFC producers agreed about a year after the MTR. In ExCom’s

51st meeting (March 2007), there was a suggestion for the Bank to work with GoI on an

accelerated phase-out, and in ExCom 56th meeting (November 2008), ExCom approved revision

of the agreement between ExCom and GoI to include accelerated CFC production phase-out and

the award of an additional compensation of US$3.17 million (ExCom Decision 56/63). The

period between March 2007 and November 2008 was challenging in terms of developing a

detailed proposal and reaching an agreement between ExCom and GoI on the ACPP. Through

this project, the Bank assisted the Ozone Cell in a substantive way to support the establishment of

the ACPP.

48. Supervision in the Last Two Years. Since the Project Coordinator at PMU resigned in

December 2009 for personal reasons, the Ozone Cell’s capacity weakened, and its effectiveness

in addressing pressing issues was significantly diminished. This Project Coordinator who served

the longest in that position (September 2004 to December 2009) was highly competent, and

identifying an equally competent successor was difficult. While the Project Coordinator position

was vacant, as a result of ExCom approving the ACPP in November 2008, the Performance

Agreement between GoI and the four CFC producers required amendment, but this could not be

completed until December 2011. In addition, the Ozone Cell spent an inordinate amount of time

on questioning the Bank’s fiduciary and reporting procedures and the rationale for following the

protocol set out by the Department of Economic Affairs (DEA) at the Ministry of Finance (MOF)

and the Bank’s overall engagement in India. From the Bank’s perspective, all trust-funded

programs including those dealing with the global commons are subject to the protocol set out by

the respective focal points in each country. The Bank also reserves the right to assign sector

specialists in field offices, as they are viewed to be better placed in understanding conditions on

the ground and coordinating the efforts of various players within a given country.

49. While a number of meetings were held with the Ozone Cell, officials at MoEF and DEA,

these often tended to focus on the issues at hand, for instance regarding the pending amendment

to the Performance Agreement, and did not fully resolve the underlying questions regarding the

legitimacy of the Bank’s process and procedures to supervise the program. Such difficulties of

engaging in a productive dialogue were shared among all relevant units in the Bank, and after the

last supervision mission in May 2010, ISRs were prepared based on information included in

annual technical audit reports, and without conducting official supervision missions. Three ISRs

were prepared and given clearance without supervision until the close of the project in December

2011.

22

50. Official supervision missions not implemented in the final 18 months did not influence

the project quality because of the following factors: (i) the project was subject to third- party

audits which is sufficient for Bank procedures, and (ii) as shown in Table 6 above, CFC

production (except for medical purposes) was terminated in August 2008 and the project

activities were drawing to a close. In the last 18 months, the focus of project activity was for

ExCom to confirm whether India satisfied the requirements to release the additional disbursement

for ACPP, and documentation to finalize the payment to producers who had stopped the

generation of CFCs in advance of stated targets. Even after MoEF asked for an extension, the

remaining activity was for payments to producers to stop production of CFCs and meet with

compliance requirements.

(c ) Justification of Rating for Overall Bank Performance


51. The outcome of the project has been successful in assisting India to meet the production

phase-out as per the agreed phase-out schedules under the MP.

5.2 Borrower (a) Government Performance


52. The role of GoI / MoEF / Ozone Cell was to oversee the functioning of the PMU, which

had the responsibility for implementing the project. Though the PMU was an independent unit

established to implement phase-out projects, it operated under the day-to-day guidance and

supervision of the Ozone Cell. The PMU arranged for audits to be conducted on a regular basis,

and had no conflict in outcomes. The PMU constantly advised and deliberated with the Ozone

Cell on policy issues based on their project implementation experience, created substantive

awareness and engaged stakeholders through a number of workshops that were held, particularly

between 2003 and 2006.

53. The PMU played an important organizational role in the successful implementation of

this project. It was staffed with about 5-6 officers and included the following positions: Project

Coordinator, Audit Coordinator, MIS Coordinator, Technical Officer, a Data Entry Operator and

one support staff. The Project Coordinator played a significant role in project management, and

although the position was sometimes vacant, it was staffed during the critical phases of the

project such as target setting, agreements of accelerated phase-out and conducting awareness

workshops. Therefore, although inconvenient, the occasional absence of a full time Project

Coordinator did not have impact greatly on project implementation.

54. The delay in implementation of the ACPP appears to be due to the several legal

procedures that needed to be carried out by the CFC manufacturers in preparing the Project

Completion Reports that were pending for a long time. Some producers did not furnish the

reports in agreement with the Ozone Cell. An affidavit on CFC equipment dismantling was

required, and this was not completed. The reasons for this delay are not known as the interviews

with the Ozone Cell and the CFC manufacturers could not be carried out as explained in Sections

4 and 7 of this report.

23

(b) Implementing Agency or Agencies Performance


55. IDBI was the Bank’s FI for disbursing grant proceeds to beneficiaries. Throughout the

project period, the IDBI carried out its role as FI in conformity with appropriate financial and

administrative practices, and under the monitoring of the Ozone Cell / MoEF. As required, IDBI

maintained a financial management system, including records and accounts. IDBI was

responsible for due diligence in the execution of sub-project agreements, management of the

Special Account for the grant fund, submission of withdrawal application to the Bank for

processing timely disbursements of grant funds to the CFC manufacturers, timely replenishment

of funds, arranging annual financial audits by Statutory Auditors, and submission of final audit

reports to the Bank. During the course of implementation, the beneficiaries have never faced any

problem with disbursement of funds. All the activities were carried out in a satisfactory manner,

and full compliance of financial covenants was also maintained. Effective and productive

cooperation among the Ozone Cell / MoEF, the Bank, beneficiaries and IDBI were one of the key

factors for this satisfactory performance.

(c ) Justification of Rating for Overall Borrower Performance


56. Throughout the project period, the PMU / Ozone Cell progressed with the

implementation in a systematic manner and accomplished the PDO effectively. Towards the end

of the project period, there were some delays in settling the additional compensation for the

ACPP, as described in Section 5.2 (a) above. The delays led to strained relationships between the

PMU / Ozone Cell and the Bank, although this was relatively insignificant considering the overall

success of project implementation and PDO achievement.

6. Lessons Learned (both project-specific and of wide general application)

57. Staff continuity contributed to smooth implementation. The project was implemented

from 2000 until 2011, and although the implementation period was long, the project benefited

from staff continuity such as the TTL at project closing date already becoming a task team

member in the second supervision mission in 2001, and assigned as the TTL in 2004. Such staff

continuity was crucial to ensuring continued relationship with clients, and helped greatly to

manage the project efficiently.

58. Lean staffing at implementing entity may cause delay. The Ozone Cell at MoEF has

limited human resources, and after the Project Coordinator resigned and the position became

vacant in 2009, decision-making and clearance process at the Ozone Cell became significantly

delayed towards project closure.

59. Coordination within the Bank. ExCom is a decision-making body which governs the

MLF under the MP and approves country annual programs to phase out ODS, and since the

Environment Anchor in the Sustaninable Development Network represents the Bank and

participates in the ExCom meetings, adequate information sharing between the Anchor and the

regional unit proved to be crucial for the overall success of the project. Such precautions were

24

not necessary in the case of other agencies such as UNEP where project implementation staff

participate in ExCom meetings. Such precaution might have been unnecessary if ODS were not

managed by a vertical fund such as MLF in which a limited number of participants discuss and

approve annual programs, as opposed to the case of a multi-subsector fund such as the Global

Environment Facility (GEF) where a large number of council members and constituencies jointly

review a wide range of proposals.

60. More structured coordination between various multilateral and bilateral agencies

enhances effectiveness. CFC production phase-out assisted by the Bank was one part of the

overall national ODS phase-out program, and there were other projects implemented with UNDP,

UNIDO and GIZ support. While some level of coordination was achieved through the integration

of activities at the Ozone Cell, greater effectiveness could have been possible if coordination was

built into the design of these various projects. The necessity of coordination between multilateral

agencies was especially felt during the last few years of the project when the CFC production in

India was for MDI producers only, who were the beneficiaries of an Italy/UNDP/UNEP project

under the MLF, but who did not have any engagement in or contact with ODS III.

61. PMU needed to have greater and full autonomy. The PMU was created as an

independent institution registered with full autonomy. At the time of its establishment, it was felt

that such an autonomous organization was required to efficiently and effectively implement the

phase-out projects. However, in practice, the PMU was not given financial autonomy and this

resulted in the PMU’s reporting to the Ozone Cell, which was responsible for its day-to-day

functioning. This made the role of the PMU very difficult. On the one hand, the PMU had to

report to the Ozone Cell. On the other hand, it also had to report to various multilateral and

bilateral agencies. In certain cases, the differing views between the Ozone Cell and the

multilateral agencies put the PMU in a difficult situation operationally. If the PMU had been

given full autonomy, it would have been as efficient and effective as the other units within the

Ozone Cell such as those managing the UNDP, UNIDO or GIZ programs.

62. Bank’s systems and procedures are constraining when compared to those of other

multilateral and bilateral agencies involved in ODS phase-out. Other ODS phase-out projects

are implemented by national governments with significant handholding by the development

agencies such as UNDP and GIZ. However, the Bank’s systems and procedures are designed for

national governments to execute projects on their own, and project management without constant

and close support from the Bank. The other agencies (e.g. UNDP or UNIDO) had their own units,

which were reporting directly to them (e.g. UNDP itself) and not to the Ozone Cell. These units

functioned more efficiently and effectively compared to the PMU as it had to directly report to

the Ozone Cell. Also, the system of the PMU reporting directly to the World Bank is not in line

with the World Bank’s own systems & procedures.

63. Long-term partnership between the Bank and IDBI continues to be an important

aspect of the Montreal Protocol program. The Bank’s investment in the relationship with

IDBI has been an important aspect of the successful MP program in India. The smooth and

effective functioning of IDBI in the ODS III project is a testimony to the benefits of such a well-

developed relationship.

25

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies

64. As of the date of this report, the Ozone Cell has unfortunately refused to acknowledge

that the project closed on December 31, 2011. Subsequently, this ICR is prepared without the

benefit of an ICR mission or inputs from the Ozone Cell.

(b) Cofinanciers

65. Not applicable.

(c ) Other partners and stakeholders (e.g. NGOs/private sector/civil society)

66. UNEP. As described in Section 2.2 above, implementation of the TA was delayed

during the initial years, but since the issues were subsequently resolved, UNEP sees this TA

component being completed in a highly satisfactory manner. UNEP points out that their

engagement in the project generated synergies, they effectively coordinated between government

agencies, and enhanced awareness among stakeholders.

67. IDBI. IDBI is of the view that from their perspective, the project design, institutional

arrangement, IDBI fee level and project implementation were appropriate, and they do not see

any room to improve the institutional arrangement.

68. Beneficiary enterprises. As indicated in Section 4 above, the Ozone Cell has not

allowed any form of communication between the Bank and the four manufacturers, and

comments from four enterprises were unavailable at the time of the report preparation.

26

Annex 1. Project Costs and Financing

(a) Project Cost by Component (in US$ Million equivalent)

80.000 80.000 83.170 82.113 102.64%

-- 2.300 2.300 2.300 --

0.800 0.823 0.855 0.845 105.64%

2.000 2.000 2.000 2.000 100.00%

0.220 0.220 0.220 0.220 100.00%

83.020 85.343 88.545 87.478 105.37%

0.000 0.000 0.000 0.000 --

0.000 0.000 0.000 0.000 --

83.020 85.343 88.545 87.478 105.37%

Percentage

of

Appraisal

Total Project Costs

Project Preparation Facility (PPF)

Front-end fee IBRD

Total Financing Required

Total Baseline Cost

CFC phase-out compensation

Halon phase-out compensation

IDBI Financial Agency Fee

Technical Assistance (UNEP)

UNEP Agency Fee

Components

Appraisal

Estimate

Revised

Estimate

after adding

Halon

Component

Revised

Estimate

after

ACPP

Final

Disburse-

ment

Note: Figures are rounded.

The 66

th ExCom meeting (April 16-20, 2012) did not allow the final disbursement of US$1.057

million out of the additional compensation of US$3.17 million for the accelerated phase-out, and

ExCom agreed to defer the disbursement request until its 67th meeting in July 2012. Details are

described in Section 1.7.

(b) Financing(in US$ Million equivalent)

Source of Funds Type of

Co-

financing

Appraisal

Estimate

Latest

Estimate

Actual

Disburse-

ment

Percenta

ge of

Appraisa

l

Borrower Self 0.00 0.00 0.00 0.00

Montreal Protocol Investment Fund Grant 83.020 88.545 87.478 106.6%

27

Annex 2. Outputs by Component

1. Global Environmental Objectives (GEO)

1. The GEO of this project was aimed at supporting India's CFC production phase-out as

mandated by MP. Developing countries under Article 5 of the MP, including India, were

required to stop CFC production by 2010. Since India was the second largest CFC producer in

the world after China, India's achievement was expected as a major milestone in achieving the

GEO with regards to helping restore the stratospheric ozone layer.

2. GEO Indicators

Indicator

Baseline Value

Original

Target Values

Formally

Revised

Target Values

Actual Value

Achieved at

Completion or

Target Years

Indicator 1 Phasing out CFC production

Value

(quantitative or

qualitative)

22589 MT 0 MT 0 MT

Date achieved 12/31/1999 01/01/2010 8/1/2008

Comments

(incl. %

achievement)

CFC production phase-out was completed 17 months ahead of the original

schedule with the exception of the production of pharmaceutical CFCs allowed

under the Essential Use Nomination (EUN) production.

Indicator 2 Establishment of tradable quota system for CFC production

Value

(quantitative or

qualitative)

System not yet

operational

System

operational and

maintained

System operational

and maintained

Date achieved 06/07/2000 01/01/2010 12/31/2010

Comments

(incl. %

achievement)

The quota system regulating the four producers was introduced under a

Government Order (March 2, 2000). Tradable quotas and quota reporting

system are kept operational under the EUN production.

Indicator 3 CFC manufacturers in compliance with production targets

Value

(quantitative or

qualitative)

13,176 MT 0 MT 0 MT

Date achieved 1/1/2004 01/01/2010 12/31/2010

Comments

(incl. %

achievement)

CFC manufacturers in compliance with production targets, and CFC

production phase-out was completed 17 months ahead of the original schedule

with the exception of the production of pharmaceutical CFCs allowed under

the EUN production.

3. Major Outputs of the TA component

2. This section is a summary of the completion report prepared by UNEP.

3.1 Institutional Strengthening. 3. PMU was established and operating with one project coordinator, one audit coordinator

and one MIS coordinator and other secretarial staff. A Long term TA strategy (2001 – 2004) and

28

(2005-2007) focusing on production and consumption was developed and finalized. The training

and capacity building of the PMU staff has enabled them to mainstream many activities in their

work plan. The project also supported the Ozone Cell in linking up with the consumption sector

activities under National CFC Consumption Phaseout Plan (NCCoPP), particularly in the

following aspects:

(a) Supporting NCCoPP in demonstration and training on good service practices and retrofitting

of open type compressors using CFC12 with HCFC 22.

(b) Training of state government agencies (industry, environment, police, shipping, legal etc) for

prevention of illegal trade.

4. The linkages between the production sector and consumption sector strategies through

NCCoPP project of GIZ enabled linkages between CFC producers and consumers. Monitoring

and verification of production and sale of CFCs for exports and domestic markets was made

possible by synergies between ODS III and NCCoPP.

3.2 Data Management System. 5. Data Triangulation work between producers, Directorate General for Foreign Trade

(DGFT) and customs data, which is an ongoing exercise, has enabled development of a database

as well as a reporting framework. This has been found useful by relevant stakeholders and will

continue to be relevant during the HCFC phase-out as well.

3.3 Service Sector Training. 6. The training sub-component in ODS III project was implemented in close coordination

with the NCCoPP activities, and has been very successful. A study instituted by Ozone Cell

indicates significant achievements in servicing sector as indicated below:

Use of CFC in the service sector stopped from 2008 onwards.

India phased out the use of CFC in MDI sector which enabled it to withdraw its EUN for

2010.

3.4 Customs Training. 7. UNEP supported National Academy of Customs Excise and Narcotics (NACEN) to

mainstream ODS issues in the training curricula for customs officers. The ODS training modules

for Customs officers were strengthened to curb illegal imports of ODS so as to avoid potential

non-compliance. The training strategy targeted two specific categories of personnel, the first

comprising of Customs officials is purely related to the control of cross-border trade in CFCs and

combating of illegal trade of all ODS. The second category was a conglomeration of various

enforcement authorities and stakeholders at the state and central levels performing different

functions relating to ODS. The strengthening of the capacity of NACEN will be leveraged to

promote the objectives of CFC phase-out. Given that there are sufficient resources within

NACEN and that ODS issues have been well mainstreamed in the training curricula, the

sustainability of the activity is not in question.

3.5 Awareness and Outreach.

8. The main activities under this sub-component included publication of newsletters for

refrigeration and air conditioning technicians, dissemination of an awareness video/ information

kit, support to Ozone Cell to organize Ozone Day, use of mass media to communicate with

29

general public, outreach / awareness workshops for major stakeholders, and maintenance/

updating of the website.

30

Annex 3. Economic and Financial Analysis (including assumptions in the analysis)

1. Economic and financial analysis was not carried out for this project. However, as stated

in Section 3.3, this project achieved significant economies of scale, considering the investment

and its achievements.

Cost effectiveness by component Project cost

(US$ million)

Phased-out ODP

(Kg)

Average cost effectiveness

(US$/Kg ODP)

CFC production phase-out 80.0 22,589,000 3.54

Halon production phase-out 2.3 288,000 7.98

2. For ODS consumption projects, ExCom evaluates proposals using cost-effectiveness

thresholds to prioritize funding in case necessary resources exceed the resources available

(ExCom Decision 16/20). ODS III is a production phase-out project for which compensation is

based on profit losses but the average cost-effectiveness of US$3.54/Kg ODP achieved under the

ODS III CFC production phase-out component still demonstrates high efficiency. The average

cost-effectiveness of the Halon production phase-out component was US$7.98/Kg ODP and the

component benefited from economies of scale gained through implementation under the ongoing

project framework.

ExCom Cost Effectiveness Thresholds for ODS Consumption

Sector Sub-sector US$/Kg ODP

Aerosol Hydrocarbon 4.40

Foam General

Flexible polyurethane

Integral skin

Polystyrene/polyethylene

Rigid polyurethane

9.53

6.23

16.86

8.22

7.83

Halon General 1.48

Refrigeration Commercial

Domestic

15.21

13.76

Solvent CFC-113

TCA (trichloroethane)

19.73

38.50

31

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Names Title Unit Responsibility/

Specialty

Lending

Naimeh Hadjitarkhani Sr Operations Officer SASEN Team Leader (-2000)

William Marke Principal FM Sp. SARFM FMS

Sanjay Vani Sr Financial Management Sp. SARFM FMS

Robert Saum Financial Management Sp. SARFM FMS

Rajat Narula Financial Management Sp. SARFM FMS

Santhanam Krishnan Procurement Specialist SARPS Procurement

Kumi Kitamori Environmental Specialist SASEN Environment Management

Steve Gorman MP Team Leader ENVMP Environment Policy

Muthoni Kaniaru Counsel SARIM Legal

Roy Pepper Principal Industrial Economist PSDEN Industrial Analysis

Bela Varma Program Assistant SASEN Program Support

Supervision/ICR

Ruma Tavorath Sr Environmental Specialist SASDI Team Leader (2004-11)

Bilal H. Rahill Senior Manager CESI2 Team Leader (2000-04)

Akiko Nakagawa Sr Environmental Specialist SASDI ICR Team Leader

Shellka Arora Legal Associate SARIM Legal

Philip Beauregard Sr Policy Officer HRSEP Legal

Papia Bhatachaarji Sr Financial Management Sp. SARFM FMS

Arun Manuja Sr Financial Management Sp. SARFM FMS

Arvind Mantha FM Analyst SARFM FMS

Kumaraswamy

Sankaravadivelu Procurement Specialist SARPS Procurement

Viraj Vithoontien Sr Environmental Specialist EASER ODS Technologies

Vaideeswaran Sankaran Consultant SASDI ODS Technologies

Erik Pedersen Consultant EASER ODS Technologies

Srinivas Ravindra Consultant SASDI ODS Technologies

Kumudni Choudhary Program Assistant SASDO Program Support

Genevieve Maria Dutta Program Assistant SASDO Program Support

Madhu Philips E T Temporary SASDO Program Support

Bela Varma Program Assistant SASDO Program Support

(b) Staff Time and Cost

Stage of Project Cycle

Staff Time and Cost (Bank Budget Only)

No. of staff weeks US$ Thousands (including

travel and consultant costs)

Lending

FY00 65.62

32

FY01 1.96

FY02 0.00

FY03 20.70

FY04 2.04

FY05 0.00

FY06 4.41

FY07 -0.01

FY08 0.00

Total: 94.72

Supervision/ICR

FY00 7.00

FY01 104.45

FY02 56.19

FY03 78.47

FY04 58.57

FY05 47.40

FY06 74.02

FY07 89.35

FY08 62.49

Total: 577.94

33

Annex 5. Beneficiary Survey Results (if any)

Unfortunately, the Ozone Cell does not acknowledge that the project closed on December 31,

2011, and did not allow any form of communication between the Bank and the four

manufacturers during preparation of this report.

34

Annex 6. Stakeholder Workshop Report and Results (if any)

Not applicable.

35

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR As of the date of this report, the Ozone Cell has unfortunately refused to acknowledge that this

project closed on December 31, 2011. Subsequently, this ICR was prepared without the benefit

an ICR mission or inputs from the Ozone Cell.

36

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders

This section is a summary of the completion reports prepared by UNEP and IDBI.

1. UNEP

UNEP's views on this project were conveyed through a memo and a teleconference. The UNEP

memo summarizes the project background, UNEP’s roles, execution of the TA component, and

lessons learned. The implementation of TA was delayed during the initial years, but since the

issues were resolved subsequently, UNEP sees the TA component of this project as satisfactory.

UNEP identifies the following as lessons learned:

Strategic project planning through a joint consultation process with the leading technical

experts, industry and other stakeholders is necessary. Field testing of the methodologies for

implementation should be done prior to putting into practice on a large scale.

Intelligent use of limited funds is crucial to reach-out to a maximum number of stakeholders,

enterprises and technicians. Use of effective awareness tools targeting different stakeholders

is a cost effective measure.

A network should be developed which effectively provides all the necessary support to the

project during its entire implementation cycle and optimal utilization of project resources.

Lean management structure with effective coordination and empowered as a decision

making body has made PMU an effective institution for project implementation. However,

during the project implementation, frequent changes in the PMU have, at times, led to slow

down activities. It is necessary therefore to have continuity at the PMU management level.

Continuous development and review of an accurate and relevant database for evidence based

decision-making is necessary for effective implementation.

2. IDBI

IDBI’s views on this project were conveyed through a memo and a teleconference. The IDBI

memo summarizes the project background, IDBI’s roles, disbursement details to four

manufacturers, compliance to financial covenants, and lessons learned. IDBI is in the view that

from their perspective, project design, institutional arrangement, IDBI fee level and project

implementation were appropriate, and they do not see any room to improve the institutional

arrangement of the project. According to IDBI, the four manufacturers have never faced any

problems with fund disbursement from IDBI, and have expressed their appreciation for IDBI’s

prompt services. Such a high quality of performance was also observed by the financial

management specialists at the Bank.

37

Annex 9. List of Supporting Documents (archived in WB Docs/IRIS/Operations Portal)

1. MLF for the Implementation of the MP: Memorandum and Recommendation of the Country

Director for India of the IBRD to the RVP, SAR on a Proposed Ozone Projects Trust Fund

Grant (Report No. 20613) June 7, 2000

2. Accelerated CFC production phase-out (agreement) (ExCom 56), October 2008

3. ODS III Project Mid-term Review (Strategic Review), December 23, 2006

4. UNEP Implementation Completion and Results Report, April 2012

5. IDBI Implementation Completion and Results Report, March 2012

6. Halon closure report

7. All 23 ISRs

8. Aide-Memoires/ Management Letters

9. Ozone Projects Trust Fund (OTF) Grant Agreement (TF023789) June 30, 2000

10. Amendment to the OTF Grant Agreement (TF023789) March 10, 2003/April 17, 2003

11. Consensus Agreement for the Indian Halon Production and Consumption Sector (*Agreement

between the ExCom and GoI, decided at the 34th ExCom meeting.

UNEP/OzL.Pro/ExCom/34/58, Annex XV)