I worked for Infrastructure Leasing & Financial Services (IL&FS) in various capacities since 1996. I was their Corporate Consultant on Environment, later the Chief Sustainability Officer and in addition Head of the Knowledge Management Unit. I was also the first Dean of IL&FS Academy for Applied Development (IAAD) that was set up with a mission to put sustainability in practice.
I left IL&FS on November 30, last week relinquishing all the above positions.
I was never a full time staff or an employee of IL&FS. I continued running my own consulting and not for profit activities, teach at IIT Bombay as Professor (Adjunct) and work as an independent international consultant with UN and Multilateral/Bilateral Development Agencies. I must credit IL&FS for letting me to be a “free radical”.
This blog post is an account of my experience working with a leading Corporate with a multifarious business canvas of diverse sectors such as water, wastewater, energy, transportation, education etc.– and the value it added to my career and life.
I am also using this post to make my observations on the Environment, Social and Governance (ESG) at Financing Institutions.
P Illangovan, my buddy at the Asian Institute of Technology (AIT) in Bangkok, sent me an email in 1995 to contact one Mr. Hari Sankaran at Infrastructure Leasing & Financial Services (IL&FS). “These guys need some help to set up an Environmental & Social Management System. You could help” he said.
Illango was working as an Environmental Specialist at the Washington office of the World Bank. The World Bank was appraising a loan of around 180 million USD for private sector financing in infrastructure in India through IL&FS. As per the requirements of the Operational Policy (OP) of the World Bank, IL&FS was required to set up an Environmental & Social Management System (ESMS), prepare the required documentation, recruit staff and train them through piloting of the system on some of the infrastructure projects.
The idea was to identify environmental and social risks at various stages of the project cycle on a proactive basis, prioritize and minimize these risks by influencing the project concept and design and thereafter mitigate the residual risks through an environmental and social management plan. The residual risks were to be addressed by allocating them across the stakeholders through concession, contract obligations and covenants. The system was to be customized for Public Private Partnership (PPP) projects – that IL&FS was to develop and finance
Somehow, I did not like the company name “IL&FS”. Having just left teaching and research at the Indian Institute of Technology (IIT), Bombay, terms such as “Leasing” & “Financing” were alien and allergic to me. I did not contact Mr. Hari Sankaran
A month passed and I got a reminder email from Illango and then a frantic phone call. “Prasad, what’s happening? I had suggested your name to Hari and promised that you will reach him and help in the establishment of ESMS. George Varghese of Development Alternatives has already prepared a draft and you need to fix it and operationalize the ESMS at IL&FS. Unless this is done to Bank’s satisfaction, the loan will not be sanctioned. Everything else is ready except the ESMS part”
I told Illango that I did not quite like the company name.
“Come on Prasad, be serious. IL&FS is run by some great guys who understand PPP in the infrastructure business. With ESMS integration IL&FS will be able to show case how to mainstream E&S issues and influence the PPP business in the country. They will be the first movers in the E&S space and you will be part of it. At least go and see Hari for my sake, say “no” if you like but for courtesy, show up your face please” Illango said this in a rather irritated tone.
In those days, IL&FS had office at the Mahindra Towers in Worli. I called Hari’s office and fixed an appointment to see him around 11 am. “Well, let me do this meeting formality for Illango’s sake” I said to myself.
Hari Sankaran was then Senior Vice President (SVP) at IL&FS. He did not sit in a cabin. I saw him sitting on a desk with a large table lamp, with hardly any papers pending on the desk, a coffee mug and few soiled paper napkins.
“Dr Modak, we have been looking for you” He beamed. “When do we start working on the ESMS?” I was dazed with this man’s style of approaching a stranger, with utter confidence and not wasting time in the preliminaries and coming straight to the point. I thought he should be spelling his name as “Hurry Sankaran” and not “Hari”.
Hari briefed me in the next 20 minutes on ESMS, shared the base document, proposed an agenda (essentially time lines for delivery). I gave my ideas too and we had a great conversation. I sensed that I was speaking to someone already up on the curve, excited and serious about implementation of ESMS.
“Now some coffee?” Hari ended the conversation. I realized that we had gelled extremely well. Meeting Hari was an important part of my destiny! Not only as a professional and but later a close friend.
Just by then, Hari received a call from Chennai. IL&FS was developing Tirupur Water Supply Project in a PPP format – one of the first PPPs in the water sector in Asian. Government of Tamil Nadu (GoTN) was the partner with support of the World Bank. Tirupur was the top textile export center of India (more than a billion US$ export then) with a cluster of 700 industries. Tirupur was “thirsty” for 185 million liters of water every day. Ground water situation was no good and water was to be pumped over a long distance from river Cauvery.
“Prasad (Hari had stopped by then calling me Dr Modak), are you free to travel with me to Chennai tomorrow? Some bureaucrats at the GoTN want to know the implication of following ESMS. You will be the best person to explain what’s in India’s environmental governance and what is the World Bank expectation. We will be back in the evening. Let us meet for the 7 am Air India flight at the airport”
I nodded yes (it was so hard to refuse)
My association with IL&FS thus started in a spurt and continued like a breeze for the next 20 years.
We implemented the ESMS and met expectations of the World Bank. While working with IL&FS, it was exciting for me to see how E&S perspectives could influence the project – its scope, alternatives, identification of preferred option including different forms of execution i.e. financing and institutional arrangements. All the interventions led to the projects advantage.
I recall projects like Ahmedabad-Mehsana Toll Road, Vadodara-Halol Toll road and Delhi-Noida Toll Bridge. E & S integration in these projects became success stories, got well documented and publicized. In case of Vadodara-Halol the route was optimized to reduce the displacement of people from 1000+ to less than 40; cattle underpasses were provided and tree transplantation was carried out for Ahmedabad-Mehsana Toll Road and high-powered citizen committees were created (one with Maneka Gandhi and other with Professor Yash Pal as chairmen), holding meeting at the construction site of Delhi-Noida Toll Bridge every month (on each side). These committees served as a watchdog on Marubeni, the contractor and over a period established cordial relationships from the confrontations in the beginning. I used to attend every citizen meeting at the site and at the both ends of the bridge.
In all these projects, those whose lands were affected were compensated at market rates and Income Generation Schemes (IGS) were designed that provided skill building and ensured sustainability in their incomes. In the RIDOR project (Roads in Rajasthan) that impacted nearly 1100 families due to land acquisition were handled sensitively and were provided with customized IGS (in addition to the compensation for the land acquired) with a follow up of a 3-year monitoring & evaluation program to adapt and ensure that the affected community received the intended benefits. The later helped IL&FS to borrow from KfW a debt at a very concessional rate and over long duration.
Many of the E&S measures implemented at these projects increased the cost of the project, albeit marginally (estimated between 1 to 2%) but gave rich dividends in terms of projects acceptability (something critical in the PPP format), reduced risks (to the lenders and investors) and led to a “brand” building. For example, a Public Interest Litigation (PIL) filed by one a “competitor” on Ahmedabad-Mehsana road was squashed by the Judge looking at the exemplary environmental & social management plan of IL&FS which would have otherwise led to 6 months of delay (costing to at least 8% increase in the project cost and loss of income from tolling).
The World Bank considered all such projects as show cases of good practices. The staff of the World Bank was taken to these sites for learning. So the agency who imposed ESMS, used the practice experience of IL&FS to build their own capacities! That was something interesting and to be proud of.
The ESMS at IL&FS expanded in 2007 to Environmental and Social Policy Framework (ESPF). This was necessary as IL&FS restructured its business into independent verticals such as IL&FS Toll Network Ltd, IL&FS Energy, IL&FS Water, IL&FS Environment etc and this required a hybrid of non-compromising core principles enshrined by Corporate Policy and adaptation of the principles into procedures with practice guidance as appropriate to each business vertical. I really enjoyed this phase of establishing and operating ESPF across the IL&FS Group. This was lots of excitement and learning
By then Hari rose to become Vice Chairman and MD of IL&FS. But he still found time to discuss E&S perspectives (now in Sustainability parlance). He was always involved and supported me. Looking back however, I realized that he was perhaps the only one in the entire organization who understood the true spirit and the benefits of E & S integration in the business. Many who were “downstream” were simply the followers, some were biased that E & S management only adds to the costs while some remained indifferent and many stayed or chose to be ignorant. We conducted several sessions on awareness at the level of CEOs and training of middle level on ESPF and appointed ESPF coordinators in each IL&FS vertical – but couldn’t get the traction that we wanted to see. The initial “golden era” of projects such as Vadodara-Halol or Delhi-Noida toll bridge was perhaps eroded. The business models had changed with less control to “influence”
I started getting questions from the Chief Executive Officers (CEOs) and Chief Financial Officers (CFO)s “Show me the Money”. That became my big frustration. I felt that I was wasting my time. I decided to give more time to my consulting company Environmental Management Centre and the non-profit outfit Ekonnect Knowledge Foundation. I also realized that I needed to balance work and health and spend more time to write, teach and get more connected with students and the academia.
Many financing institutions today are adopting ESMS like systems like IL&FS. I had opportunities to establish ESMS at other financial institutions such as National Bank of Egypt, IDCOL in Bangaldesh, CIMB in Malaysia etc as a Consultant. In most instances, the reason for ESMS was due to pressure or a push from the investor like the World Bank or International Finance Corporation (IFC). These systems were created for the sake of compliance and for mobilizing moneys.
The emphasis of the ESMS has been generally to address risks but rarely to seize the opportunities. So, systems do get created, but are used on a perfunctory basis (more like tick marks) and do not add “value” to the investments/projects/partners. We need therefore a paradigm shift and convincing case studies, especially for the CEOs/CFOs.
On November 30, when I was leaving my office on the 9th floor of IL&FS, I was thinking of walking to Hari’s desk to say “good bye”. I saw him at a distance, busy on his cell phone, with hair now grey and a pair of spectacles drooping on his nose. The past 20 years had aged him a lot like me.
I decided however not to see him. I was afraid that if I see him, he would ask “how about some coffee?” and start some exciting conversations. These conversations could be so engaging that I may perhaps change my mind
So, instead I walked straight to the elevators and exited quietly from the ground floor, rather unnoticed.
If you like this post, then follow me or forward to your colleagues