The World Bank
Rooftop Solar Guarantee Facility for MSMEs in India (P172261)
Appraisal Environmental and Social Review Summary
Appraisal Stage
For Official Use Only
(ESRS Appraisal Stage)
Date Prepared: 14/12/2022| Report No: 178844-IN
December 14, 2022 Page 1 of 12
The World Bank
Rooftop Solar Guarantee Facility for MSMEs in India (P172261)
BASIC INFORMATION
A. Basic Project Data
Country Region Project ID Parent Project ID (if any)
India South Asia P172261
Project Name Rooftop Solar Guarantee Facility for MSMEs
Practice Area (Lead) Financing Instrument Estimated Appraisal Date Estimated Board Date
ISAE1 Investment Project January 19, 2023 April 11, 2023
Financing
Borrower(s) Implementing Agency(ies)
Credit Guarantee Fund Credit Guarantee Fund
Trust for Micro and Small Trust for Micro and Small
Enterprises Enterprises
For Official Use Only
Proposed Development Objective
The development objective is to increase the installed capacity of rooftop photovoltaic (PV) solar in the micro, small,
and medium enterprises (MSME) sector.
Financing (in USD) Amount
• Total Project Cost 628,000,000
- Project Cost 528,000,000
- IBRD Payment Guarantee 100,000,000
• Total Financing 628,000,000
• Financing Gap 0
• Total World Bank Group Financing 100,000,000
o IBRD Payment Guarantee 100,000,000
• Total Government/ KfW Contribution 25,000,000
• Total Non-World Bank Group Financing 503,000,000
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The World Bank
Rooftop Solar Guarantee Facility for MSMEs in India (P172261)
o Private Capital and Commercial Financing 503,000,000
o of which Private Capital 503,000,000
B. Is the project being prepared in a Situation of Urgent Need of Assistance or Capacity Constraints, as per Bank IPF
Policy, para. 12?
NO
C. Summary Description of Proposed Project [including an overview of Country, Sectoral & Institutional Contexts and
Relationship to CPF]
Growth rebound in FY22 has been quick, pulled up by investment, recovering consumer demand and, more importantly,
a low base. Real gross domestic product (GDP) growth moderated from an average of 7.4 percent during FY15/16–FY18/19
to an estimated 3.7 percent in FY19/20,1 mostly due to (a) shocks to the financial sector; and (b) a decline in private
consumption growth.2 Against this backdrop, the outbreak of COVID-19 had a significant impact, with real GDP contracting
by 6.6 percent in FY20/21.3 Although India has made remarkable progress in reducing absolute poverty in recent years,
the COVID-19 outbreak has delayed the course of poverty reduction. India has made considerable progress in scaling the
solar energy sector—it ranks fifth globally in terms of annual solar power generation. The government of India (GoI) has
played an instrumental role in supporting the grid-connected rooftop solar photovoltaic (GRPV) sector by providing an
For Official Use Only
enabling policy framework. It provided capital subsidies to improve financial viability, introduced various business models
to enable private sector participation, and simplified the GRPV approval process to facilitate consumer participation,
among other achievements.
The Micro, small, and medium enterprise (MSME) sector is a pillar of economic growth in many developed and developing
economies of the world. This segment is the engine of growth for India. Besides playing a key role in the development of
the country, the MSME sector also generates a huge scale of employment opportunities. Thus far, the creditworthy
commercial and industrial (C&I) consumers have mostly benefited from GRPV growth, while the micro, small, and medium
enterprises (MSME) have not benefitted.
India has made considerable progress in scaling up the solar energy sector, and it ranks fifth globally in terms of annual
solar power generation.4 The growth of ground-mounted solar systems, which account for roughly 855 per cent of the
total 59 GW of installed solar power capacity in the country, has led to this success.6 However, there are challenges with
significantly scaling-up utility-scale solar power plants, given constraints associated with land availability and its
acquisition. Therefore, it is evident that building roof space must be utilised to increase solar power generation
penetration. Accordingly, the GoI aims to maximize the uptake of grid-connected rooftop solar photovoltaic (GRPV).
1
National Accounts Data, National Statistical Office, Ministry of Statistics and Program Implementation (MOSPI).
2
National Accounts Data, National Statistical Office, MOSPI.
3
National Accounts Data, National Statistical Office, MOSPI.
4International
Renewable Energy Agency (IRENA), 2019. Country Rankings, https://www.irena.org/Statistics/View-Data-by-Topic/Capacity-and-
Generation/Country-Rankings.
5
Balance 15% is contributed by GRPV and off-grid solar installations.
6
GoI, MNRE, 2022. Physical Progress, https://bit.ly/3CXv77r.
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The World Bank
Rooftop Solar Guarantee Facility for MSMEs in India (P172261)
The micro, small, and medium enterprise (MSME) sector is a pillar of economic growth in many developed and developing
economies globally, including India. GRPV could significantly contribute to reducing the operating costs of MSMEs and
support them in becoming competitive Therefore, GRPV is not only commercially viable but also an environmentally
sustainable alternative for the MSME sector for addressing their expanding electricity costs. Until now, creditworthy C&I
consumers have reaped most of the benefits of GRPV growth, accounting for nearly 80 percent of total installed GRPV in
the country,7 while MSMEs with perceived credit risks account for less than 10 percent of the GRPV installed capacity.8
In contrast, the uptake of GRPV by MSMEs has been quite low. There are several factors at play for the low adoption of
rooftop solar by MSMEs. One of the main bottlenecks is the lack of access to affordable financing due to lenders'
perception of a weaker creditworthiness of MSMEs, requiring them to provide higher collateral to access finance. As
MSMEs have limited balance sheet capacity, their ability to provide collaterals is limited. Therefore, they find it difficult to
secure financing for non-core activities like installing rooftop solar systems.
CGM PROPOSED IMPLEMENTATION STRUCTURE
For Official Use Only
7
India Solar Rooftop Map, Bridge to India, December 2021.
8
Rooftop Solar for MSME, Bridge to India, August 2020.
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The World Bank
Rooftop Solar Guarantee Facility for MSMEs in India (P172261)
FLOW OF FINANCING
The development objective is to increase the installed capacity of grid-connected rooftop solar photovoltaic (GRPV) in the
micro, small, and medium enterprises (MSME) sector through mobilisation of affordable and sustainable commercial
financing
D. Environmental and Social Overview
D.1. Detailed project location(s) and salient physical characteristics relevant to the E&S assessment [geographic,
For Official Use Only
environmental, social]
This operation will be a Financial Intermediary (FI) operation comprising the Implementing Agency (IA) - Credit
Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) as the Facility Manager. Participating Financial
Institutions (PFIs) as the participating lenders in the program that would offer credit facilities to the RESCOs or directly
to MSMEs and purchase CGM cover from the Facility Manager, i.e., CGTMSME). RESCOs (Solar Power Developers) would
have PPA off-take arrangements with targeted MSMEs and raise commercial financing from PFIs; and finally, the
beneficiaries – MSMEs that will take loans for setting up rooftop solar installations. The IBRD project will only support
guarantees, but there will be no direct financing. These institutions, as well as the physical location of the proposed
rooftop and ground-mounted solar installations is likely to be spread across India.
D. 2. Borrower’s Institutional Capacity
GoI’s Ministry of Micro set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) for, Small &
Medium Enterprises (MSME) and the Small Industries Development Bank of India (SIDBI) to provide various credit
enhancement products. Its’ objective is to enable commercial lenders to look at small and micro businesses with
objectivity and give more importance to project viability and business model validation. Under this operation, CGTMSE
as the Facility Manager will be responsible for establishing detailed operational procedures, including E&S risk appraisal
of MSME proposals. These shall include for selection of PFI’s, entering guarantee agreements with them and providing
relevant trainings to them on risk appraisal, conducting due diligence on guarantees requested by such PFIs, assessing,
and ensuring E&S risks are appropriately managed, etc.
Based on the assessment undertaken as part of project preparation, CGTMSE’s current capacity on E&S aspects and WB
E&S requirements seem low even though one of CGTMSE’s shareholders, namely SIDBI, has had the experience of acting
as Implementing Entity for other World Bank projects previously, including the India Partial Risk Sharing Facility for
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The World Bank
Rooftop Solar Guarantee Facility for MSMEs in India (P172261)
Energy Efficiency Project (P128921). Currently, no procedures or a well-established Environmental, and Social
Management System (ESMS) exist for managing environmental, social, occupational and community health and safety,
labour, and security aspects. Also, no resources, as in designated or dedicated manpower is assigned to manage these
aspects. At the appraisal stage, to address the above E&S risks, CGTMSE has already enhanced its capacity by
designating a Nodal E&S officer amongst its staff and is contracting a consultant to develop ESMS.
II. SUMMARY OF ENVIRONMENTAL AND SOCIAL (ES) RISKS AND IMPACTS
A. Environmental and Social Risk Classification (ESRC): Moderate
Environmental Risk Rating
The environmental risk rating is assessed as Moderate. The project will have overall positive impacts as it would
reduce the MSME’s dependence on grid power9 which in India is still largely based on fossil fuels. Environmental
impacts of the grid-connected rooftop solar sector are potential safety risks to the workers/labourers and community
receptor nuisance, e.g. (noise, dust, solid waste) and domestic wastewater during installation.
The potential safety risks to O&M personnel during the cleaning of panel, disposal of e-waste and batteries, and stress
of water resources required for cleaning of panel and community receptor nuisance risks (e.g., aesthetics/reflection)
are the key environmental risks during O&M. The low E&S capacities of both CGTMSE and the PFI could lead to lack
of appropriate supervision and monitoring of EHS risk assessment. Even though the environmental risk is minimal in
scale, specific to the site due to the lack of EHS capacity of CGTMSE, the environmental risk is considered “moderate”.
For Official Use Only
Social Risk Rating
The social risk rating is assessed as Moderate. The Project will largely have positive effects and benefits such as a)
deploying rooftop solar resulting in a potential reduction in operational costs and increasing competitiveness of
MSMEs; b) job creation as the rooftop solar installation is quite labour-intensive with the potential of creating
employment for about 100,000 persons from about 16 GW development under CGM; c) the technical assistance
program aimed at building people's capacities to play an active role in creating and sustaining the rooftop solar
market. Given the nature of the project, the main risks relate to i) OHS during installation and maintenance, potential
labour issues related to the workforce as well as the allegation of forced labor associated with some of the solar panel
suppliers; ii) nuances and potential safety risks to communities / neighbours such as noise, dust, and aesthetics /
reflection during installation and operation. As cited above, low E&S capacities of both the Facility Manager and PFI
can undermine the risk assessment and appropriate implementation of mitigation measures.
The social risks are also minimal in scale, nature, and magnitude, but due to the low capacity of the Implementing
agency, the project E&S risk is considered “Moderate.”
Sexual Exploitation and Abuse/Sexual Harassment (SEA/SH) Risk Rating
Given the nature of rooftop solar installations and operations, SEA/SH risks mainly arise during installation activities
undertaken during the on-premises installation or clearing/maintenance of the same at the MSMEs. While the
9
India’s Grid emission factor i.e., tons of CO2 associated with each unit of electricity provided by an electricity system in 2021 was
0.91
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The World Bank
Rooftop Solar Guarantee Facility for MSMEs in India (P172261)
duration of the installation (a one-time exercise) could be between 1-3 days, in the case of maintenance, it is likely to
be less than 0.5 to 2 days undertaken once every month, depending on the area. Given that this exercise is undertaken
on rooftops or within premises with access restricted to only maintenance personnel and personnel of the facility
owner, the SEA/SH risk is assessed as low. Given the nature of the project, SEA/SH risks need to be addressed at
different levels. CGTMSE will ensure zero-tolerance of SEA/SH, sensitize staff on SEA/SH risks, be informed of GBV
service providers and ensure that GRM is responsive to SEA/SH incidents. As PFIs play a critical intermediary role,
CGTMSE will sensitise PFIs on SEA/SH risk and mitigation measures. For instance, PFIs can roll out Codes of Conduct
and raise awareness among staff on SEA/SH risks when working with MSMEs and on survivor-centered response
measures. The Operations Manual will capture SEA/SH mitigation measures.
B. Environment and Social Standards (ESSs) that Apply to the Activities Being Considered
B.1. General Assessment
ESS1 Assessment and Management of Environmental and Social Risks and Impacts
Overview of the relevance of the Standard for the Project: RELEVANT
Two types of institutions would be involved: i) the financial institutions – Facility Manager (CGTMSE) and PFIs and ii) the
beneficiary MSMEs (subprojects).
Firstly, as an integral component of the Operation Manual (OM), CGTMSE will develop an ESMS before project
effectiveness. The ESMS shall comprise (i) environmental and social policy, (ii) clearly defined procedures for the
For Official Use Only
exclusion, identification, assessment and management of the environmental and social risks and impacts of subprojects
(e.g. exclusion list and screening criteria); (iii) organizational capacity and competency; (iv) monitoring and review of
environmental and social risks of subprojects and the portfolio, including periodic ESMS audit; and (v) reporting and
external communications mechanism, besides a GRM including measures to respond to public enquiries, concerns and,
grievances including SEA/SH in a timely manner for MSME Solar Operations that FI and PFI need to adhere. The PFIs
will need to demonstrate their own ability to undertake E&S due diligence for MSMEs that are seeking financing. PFIs
will either confirm their existing E&S practices or develop E&S practices or adopt CGTMSE’s E&S practices; to assess and
manage the E&S risks to be eligible to participate in this program in accordance with the ESMS laid down by CGTMSE.
PFI’s ESMS will cover all relevant ESS (as described below under ESS 9) and would form the basis for the assessment,
appraisal and sanctioning of loans to any borrower MSME.
CGTMSE has already prepared an E&S Policy in conformance to the World Bank requirement, which the Board of
Trustees has approved. Besides a brief introduction of the Organisation and the scheme, the policy includes i) E&S Policy
Commitment, ii) Scope, Coverage and Review, iii) Approach to Environment and Social Risk Management, iv) Excluded
category of sub-projects. CGTMSE has also initiated the process of the preparation of the ESMS and is in the process of
hiring a consultant to assist it.
As described above, the typical E&S risks in the sector would arise out of installation and can be mitigated by applying
good international practices (as described under the ESS9 section below).
ESS2 Labor and Working Conditions: Relevant
CGTMSE will need to apply ESS2 to its own organizational workforce. The potential risks related to direct workers of the
Facility Manager or IA (i.e., CGTMSE) are: i) occupational health and safety risks and impacts are limited to: essentially
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The World Bank
Rooftop Solar Guarantee Facility for MSMEs in India (P172261)
ergonomics, working conditions, etc.; ii), clarity on terms and conditions in the contractual arrangement, non-
discrimination policies and practices; and iii) Grievance Mechanism. (See details under Section on ESS 2 and ESS 9 below).
ESS10 Stakeholder Engagement and Information Disclosure
CGTMSE’s E&S Policy mentions the requirements for Stakeholder Engagement. Further, the ESCP provides
commitments on preparing an ESMS (prior to any onward financing to the PFIs) by CGTMSE, which will cover aspects
relating to the disclosure of information to as well as external communication, with stakeholders. The ESMS itself will
further guide CGTMSE and all PFIs on the identification of Stakeholders and engaging them in an effective and
culturally appropriate fashion, including a GRM and an external communication strategy.
B.2. Specific Risks and Impacts
A brief description of the potential environmental and social risks and impacts relevant to the Project.
ESS2 Labor and Working Conditions RELEVANT
As described under ESS9 below, the Facility’s ESMS, developed by the Project, will require all participating FI and
subprojects to be in conformity with all relevant national and state labour laws, and labour and working conditions
provisions covered under ESS2. Appropriate provisions in respect of labour and working conditions (including SEA/SH)
and their reporting will need to be included in the master agreement between CGTMSE and PFIs and sub-financing
agreements between PFI and MSMEs and/or RESCOs. The sub-financing agreement will also ensure the requirement
For Official Use Only
of incident and accident reporting in the sub-financing agreements. The notification from the PFI to reach CGTMSE
such that it can report to the Bank within 48 hours.
There are allegations of forced labor risks associated with the polysilicon suppliers, and the following enhanced
mitigations measures would be adopted for the project: (1) CGTMSE will provide contractual assurances that it has
not used or engaged forced labor and will not use or engage forced labor in its operations; and (2) CGTMSE will
require the same contractual assurances from the PFIs, who will, in turn, require the same from their borrowers, who
may, if appropriate, require the same from their primary supplier of solar panels. These shall also be included in the
Operational Manual.
ESS3 Resource Efficiency and Pollution Prevention and Management Relevant
This ESS is relevant. See the ESS9 section for further details.
ESS4 Community Health and Safety Relevant
This ESS is relevant. See the ESS9 section for further details.
ESS5 Land Acquisition, Restrictions on Land Use and Involuntary Resettlement Not relevant
See text under ESS9 for details. The ESMS developed by CGTMSE shall comprise an Exclusion List / criteria prohibiting
PFIs from supporting any subproject involving land acquisition or resettlement.
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Rooftop Solar Guarantee Facility for MSMEs in India (P172261)
ESS6 Biodiversity Conservation and Sustainable Management of Living Natural Resources Not relevant
See text under ESS9 for details. The ESMS that CGTMSE will develop shall comprise an Exclusion List / criteria
prohibiting PFIs supporting any subproject involving any impacts on natural or critical habitats, biodiversity values or
key environmental services.
ESS7 Indigenous Peoples/Sub-Saharan African Historically Underserved Traditional Local Communities Not relevant
See text under ESS9 for details. The ESMS developed by CGTMSE shall comprise an Exclusion List / criteria prohibiting
PFIs supporting any subproject involving any impacts on Indigenous Peoples.
ESS8 Cultural Heritage Not relevant
See text under ESS9 for details. The ESMS developed by CGTMSE shall comprise an Exclusion List / criteria prohibiting
PFIs from supporting any subproject involving any impacts on Cultural Heritage.
ESS9 Financial Intermediaries
The CGTMSE will be responsible for establishing detailed operational procedures in the Operations Manual (including
eligibility criteria for the PFIs) as well as for selecting and entering sub-guaranteed agreements with the PFIs, providing
relevant training to selected PFIs on risk appraisal, conducting due diligence on guarantees requested by such PFIs,
assessing, and managing the risks, etc. Prior to the effectiveness of the operation, CGTMSE shall prepare within the
For Official Use Only
Operation Manual an Environment and Social Management System (ESMS) outlining the policies, requirements and
procedures as required under this ESS. CGTMSE has already developed detailed Terms of Reference for hiring this
consultant to develop the ESMS.
The ESMS shall include the following elements: (i) environmental and social policy, (ii) clearly defined procedures for
the exclusion, identification, assessment and management of the environmental and social risks and impacts of
subprojects (e.g. exclusion list and screening criteria); (iii) organisational capacity and competency; (iv) monitoring and
review of environmental and social risks of subprojects and the portfolio, including periodic ESMS audit; and (v)
reporting and external communications mechanism, (i besides a GRM to respond to public enquiries, concerns and
grievances including SEA/SH issues, in a timely manner.
An outline of the ESMS that CGTMSE shall develop and require PFIs/RESCOs to follow are given below:
1. Policy: CGTMSE’s E&S policy for this operation, including the governing standards and frameworks such as the
WBG ESF and identification of applicable national laws and other good international industry practices. These
requirements will also be adopted by the PFIs/RESCOs as relevant.
2. Procedures for assessment of PFI’s (based on the E&S risk management process of the respective PFI. Each PFI
will adopt, develop, or improve existing systems to include the following ESS-specific requirements:
Exclusions
• involuntary land taking, any physical displacement or permanent disruption of sources of income,
• adverse impact on Indigenous People or their territories without their consent,
• located in protected areas, critical habitats, culturally or socially sensitive areas or leading to
conversion of natural habitat
• risks to labour rights, health and safety of employees, and harmful child or forced labour.
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Rooftop Solar Guarantee Facility for MSMEs in India (P172261)
ESS2:
• conformity with all relevant national and state labor laws, and labor and working conditions
• provisions in respect of labor and working conditions (including SEA/SH) and their reporting will need
to be included in the in the master agreement between CGTMSE and PFIs and sub-financing
agreements between PFI and MSMEs and/or RESCOs. The sub-financing agreement will also ensure
the requirement of incident and accident reporting in the sub-financing agreements.
• measures to mitigate forced labour associated with the solar panel supply chain.
• Measures to mitigate SEA/SH at the workplace
• OHS procedures with Workers’ Code of Conduct for task-hazard assessments, provision of PPE and
appropriate training, incident / accident recording per work hours and zero-tolerance for fatalities
• Procedures for managing the rules of employment /protection of workers’ rights, non-discrimination,
GRM.
ESS3:
Key risks include improper management and disposal of rejected/end-of-life equipment/materials like PV
cells, batteries, etc. These risks can be managed through the insertion of relevant provisions in the contract
documents and ESMS and Operations Manual for management and disposal as per the requirement of
National laws.
ESS4:
• identification of potential nuisances / risks /issues to third parties, avoidance as feasible and
consultation
• Procedures to ensure that the installation and O&M-related impacts are mitigated and do not cause a
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nuisance to the neighboring community.
• Development of a mechanism for managing grievances
• Development of a mechanism to manage SEA/SH risks and approach to disseminating information with
MSMEs.
3. Institutional capacity
• Implementation arrangement, including the establishment of an E&S cell at CGTMSE and detailed roles
and responsibilities
• Development of organizational capacity, including training on E&S aspects
4. Monitoring: Oversight on the ESMS implementation by the top management, i.e., monitoring of environmental
and social risks of subprojects and the portfolio, including periodic ESMS audits
5. Reporting and external communications mechanism, besides a GRM: It shall guide disclosure of information,
as well as external communication, with stakeholders; maintain and operate an accessible grievance
mechanism to receive and facilitate the resolution of concerns and grievances about the Project as well as
cause the PFIs to setup/maintain a GRM
B.3 Other Relevant Project Risks
NONE
Should "Other Relevant Project Risks" be disclosable?
YES
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Rooftop Solar Guarantee Facility for MSMEs in India (P172261)
C. Legal Operational Policies that Apply
OP 7.50 Projects on International Waterways
NO. The impact of groundwater, if any, would be from the washing of panels. All these projects are less than 1 MW
and spread throughout the country, and no major abstraction is envisaged.
OP 7.60 Projects in Disputed Areas
NO
B.3. Reliance on Borrower’s policy, legal and institutional framework, relevant to the Project risks and impacts
Is this project being prepared for the use of Borrower Framework?
NO
Areas where “Use of Borrower Framework” is being considered:
NO
III. WORLD BANK ENVIRONMENTAL AND SOCIAL DUE DILIGENCE
A. Is a common approach being considered?
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Financing Partners
NO
IV. CONTACT POINTS
World Bank
Contact: Amit Jain Title: Senior Energy Specialist
Telephone: 5785+47626 Email: amitjain@worldbank.org
Contact: Mani Khurana Title: Senior Energy Specialist
Telephone: 5785+47759 Email: mkhurana@worldbank.org
Contact: Satheesh Kumar Sundararajan Title: Lead Infrastructure Finance Specialist
Telephone: 5220+82863 Email: ssundararajan@worldbank.org
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Rooftop Solar Guarantee Facility for MSMEs in India (P172261)
Borrower/Client/Recipient
Credit Guarantee Fund Trust for Micro and Small Enterprises
Implementing Agency(ies)
Credit Guarantee Fund Trust for Micro and Small Enterprises
V. FOR MORE INFORMATION CONTACT
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 473-1000
Web: http://www.worldbank.org/projects
VI. APPROVAL
Task Team Leader(s): Amit Jain, Mani Khurana, Satheesh Kumar Sundararajan
Practice Manager (ENR/Social): Christophe Crepin clearance December 15, 2022; Kevin A Tomlinson clearnace
December 15, 2022
Safeguards Advisor (ESSA): Pablo Cardinale
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