Document of The World Bank FOR OTICAL USE ONl Repwt No. 12446-IN DLTILATERAL FIUND FOR THE IMLEMENTATION OF THE MONTREAL PROTOCOL MEMORANDUM AND RECOMMENDATION Cl THE CHIEF OF COUNT OPERATIONS. INDUSTRY AND FINANCE DIVISION, COUNTRY DEPARTMT II, SOUH ASIA TO THE DIRECTOR OF THE COUR DEPARTMNT II, SOUTH ASIA ON A PROPOSED OZONE PROJECTS TRUST FUD GRANT IN THE AMOUNT EQUIVALENT OF US$1.252 M11LJION TO INDUSTRIAL DEVELOPMENT BANK OF INDIA FOR THE TECHNICAL SUPPORT AND INVESTMENT FOR THE REDUCTION OF CONSUMPTION OF OZONE DEPLETING SUBSTANCES PROJECT" JULY 26, 1994 Country Operations, Industry & Finance Division India Department MICROGRAPHICS South Asia Region This document has a restricted distnrbtion and thei official duties. content may not ot Repor 12446 IN CURRENCY EOUIVALENTS Currency Unit = Indian Rupee (RS.) US$1.00=Rs. 31.37 (Exchange rate as of May 1994) UNITS AND MEASURES metric ton = Ton (T) = 1000 kg ACRONYMS CFC Chlorofluorocarbons CTC Carbon Tetrachloride GOI Government of India IDBI Industrial Development Bank of India MF Multilateral Eund MFEC Executive Committee of the Multilateral Fund for the Implementation of the MP MFMP Multilateral Fund for the Implementation of the Montreal Protocol MOEF Ministry of Environment and Forests MP Montreal Protocol on Substances that Deplete the Ozone Layer ODS Ozone depleting substance OTF Ozone Projects Trust Fund UNDP United Nations Development Program UNEP United Nations Environment Program UNIDO United Nations Industrial Development Organization FISCAL YEAR Government of India = April 1 - March 31 IDBI = April 1 - March 31 FOR OFFICIAL USE ONLY DIA TECHNICAL SUPPORT AND INVESTMEN9 FOR THE REDUCTION OF CONSUMPTION OF OZONE DEPLETING SUBSTANCES PROJECT Prolect and Grant Summaryp Financial Aaent: IDBI Executinu Arencies : Ministry of Environment and Forests Beneficiaries Shriram Refrigeration Industries Ltd. and Blue Star Ltd. Amount : US$1.252 million Terms Trustee to IDBI: Grant Re-lendincr Terms : IDBI to Beneficiaries: Grants Proiect Cost Summary Component US$ Thousand Shriram Ref. Ltd. 584 Blue Star Ltd. 483 Contingency 160 Financial Agent Fee 25 TOTAL 1,252 Economic Rate of Return Not applicable Staff Appraisal Report Not applicable. A Technical Annex has been prepared. jThis docuDt has a rese distonbo and may be ud by rcipiens ony in th pformnce of thi _ gcWtk ItcuwmyodnneWuwhutod=nb--zu- -_ MEMORANDUM AND RECOMMENDATION OF THE CHIEF OF THE COUNTRY OPERATIONS, INDUSTRY & FINANCE DIVISION, TO THE DIRECTOR OF COUNTRY DEPARTMENT II, SOUTH ASIA ON A PROPOSED OZONE PROJECTS TRUST FUND GRANT IN THE AMOOUNT EQUIVALENT TO US$1.252 MILLION TO INDUSTRIAL DEVELOPMENT BANK OF INDIA FOR THE TECHNICAL SUPPORT AND INVESTMENT FOR THE REDUCTION OF CONSUMPTION OF OZONE DEPLETING SUBSTANCES PROJECT 1. I submit for approval the following memorandum and recommendation on a proposed Ozone Projects Trust Fund (OTF) grant to Industrial Development Bank cf India (IDBI) for the equivalent of US$1.252 million to finance the Technical Support and Investment Project for the Reduction of Consumption of Ozone Depleting Substances (ODS) (hereafter the "Project"). This Project would be the first grant to India under the Multilateral Fund for the implementation of the Montreal Protocol (MFMP). 2. Backaround on Ozone Depletin_ Substanceg. In 1991 India produced and consumed approximately 10,400 metric tons of ODS. ODS per capita consumption is currently estimated to be 10 grams against 300 grams allowed under the Protocol. Most ODS consumption is in foams, refrigeration, air conditioning, aerosols and solvents in electronics and machine tools. India is self sufficient irn production of chlorofluorocarbons (CFCs) and is expected to be self sufficient in the production of halons. Large quantities of ODS are used as solvents in processing and manufacturing sectors. In addition to being used as solvents, carbon tetrachloride (CTC) is also used as a feedstock for CFC preparation, as well as process chemical for manufacturing. 3. India ratified the MP on Substances that Deplete the Ozone Layer in June 1992, and is eligible for grants from the Multilateral Fund (MF), which was established to provide support to eligible developing countries to meet their MP obligations. The Fund is managed by an Executive Committee of the MF for the Implementation of the Montreal Protocol (MFEC). The Bank is an implementing agency, jointly with the United Nations Development Program (UNDP), United Nations Environment Program (UNEP) and the United Nations Industrial Development Organization (UNIDO). Projects are channelled through the Bank's Ozone projects Trust Fund agreement with the MFEC. India has played an active role in MP affairs even prior to ratification, and undertook a National Study on ODS in 1990. India's Country Program on ODS Phase out, supported by UNDP, was approved at the 11th meeting of the MFEC held in Bangkok on November 10-12, 1993 as a first step in the development of a comprehensive phase out strategy subject to India preparing a revised document that would incorporate: (i) the substantive information that was included in the presentation made by India at the Eleventh Meeting of the MPEC; (ii) adjustments based on MF Secretariat's comments on the country program; and (iii) the results of a survey of the small and informal sector. In parallel, the Bank, at the request of Ministry of Environment and Forests (MOEF) undertook project preparation of operations for ODS phase-out. That work which is in line with ODS phase-out strategy outlined in the Country Program includes the first project containing two sub-projects (Shriram and Blue Star), which were approved by MFEC on June 28, 1993, and a larger second project which is currently under preparation. 4. India has a mature and growing industrial sector. Environmental issues are receiving increased attention in India, with the MOEF taking the lead. The Bank has in the past supported industrial development, providing financial and technical assistance to small and medium-scale enterprises and supporting policy changes aimed at increased competitiveness of industrial enterprises. The Bank is also supporting environmental program through the first Industrial Pollution Control Project that was appioved by the Bank in May 1991, and a second Pollution Prevention project which was approved in July 1994. 5. Project Obiectives. The objective of the proposed project is to support India's program to phase out ODS consumption by providing technical assistance, engineering and product development support to the Shriram and Blue Star sub-projects as detailed in An= 1. 6. Proiect Descrilt'on. The Project has two components: (a) Shriram Refrigeration Industries Ltd., to provide assistance for conversion of compressor manufacture from CFC-12 to HFC-134a designs; and (b) Blue Star Ltd. to support funding for substitution of CFC-ll refrigerant by HCFC-123 in Centrifugal Chillers. Both components are designed to assist the participating enterprises in switching from use of ODS to non-ODS materials and technology (Annex 1'. The sub-projects represent measures that must be taken early to enable India to develop a cost-effective program to phase out ODS consumption, and they require no policy actions to be taken. Project Summaries and appraisal reports for the two components are available in the Project File. Each sub-project includes technology (from established technology supply relationships), design, training, equipment and implementation of product and engineering development activities to enable each enterprise subsequently to convert to non-ODS technology. (a) Shriram Refrigeration Industries Ltd.. Phase one of this component, wnich has been funded by MF, will lead to conversion of an existing CFC-12 refrigeration compressor manufacturing facility at Shr'ram near Hyderabad to a facility which manufactures compressors operating with non-ozone depleting refrigerant HFC-134a. In phase one, 1200 compressors will be producea1 for test purposes. The full projecc when completed will provide a major indigenous source of HFC-134a compressors for use in the production of non-CFC domestic refrigerators. (b) Blue Star Ltd.. Phase one oi this component will provide technology, engineering assistance, and training to Blue Star, a major CFC-ll centrifugal chiller manufacturer located near Bombay, to manufacture equipment suited for use of HCFC-123 as the refrigerant. Phase two will provide for regular manufacture of HCFC-123 Chillers. Technology will be obtained from York International Corp (US) under terms of a technology transfer agreement signed in December, 1992, to expand the existing agreement to cover the technology for HCFC-123. An in-house test facility will be constructed for prototype testing and quality assurance. Capacity will be developed to support customers with subsequent retrofit of existing CFC-11 chillers installations to HCFC- 123 centrifugal chillers. Manufacturing facilities will also be modified for production of new HCFC-123 centrifugal chillers. over the life of the project, demand for 540 MT of CFC-11 will be eliminated for the charging and servicing chillers in large office buildings and hotels throughout India. 7. Proiect Costs and Financing Arrangements. Estimated Proiect costs for the two sub-projects including contingencies and financial agent's fee are US$1.252 million. Use of IDBI as financial agent has proven to be the most efficient and economical way of managing the implementation of the project including handling fund transfers. IDBI's fee of 2% oi grant amount is quite reasonable compared to the alternative, of Bank staff carrying out the same functions. During negotiations it was confirmed that IDBI's fee shall be 2% of actual sub-grant amount disbursed. Moreover, the use of a financial agent 's standard practice in other ODS phase-out projects. The financial agent fee has been approved by M.VEC. Grants equal to the sub-projects, incremental cost will be channeled from the OTF to the participating enterprises through IDBI. Funds for these projects have been transferred from the MFMP to the Banks's OTF. The two enterprise.s are receiving 100% of project costs as grants. The proceeds of the Grant will be allocated as follows: (a) Shriram Refrigeration Industries Ltd. $584,000 (b) Blue Star Ltd. $483,000 (c) Contingency $160,000 (d) Financial Agent Fee $ 25,000 Total S1.252.000 Estimated sub-project costs and financing plan are provided in Schedule A. Procurement methods and disbursement table are provided in Schedule B Incremental costs eligible for funding from OTF are defined as capital costs (excluding taxes) plus net present value of operating costs less benefits discounted at 10% p.a. in constant economic terms (for four years); and then multiplied by local equity portion.' S. Proiect Imolementation. MOEF is responsible for project coordination and consistency of operations with the Country Program, it will determine overall objectives and pol':ies, and promote ODS phase-out activities. IDEI will be responsible for sub-project implementation, including sub-project evaluation, supervision, procurement and disbursements. The Bank has completed the sub- projects technical appraisal, and IDBI, has completed the enterprise and financial/economic portions of sub-prcject appraisal. The Grant Agreement is between the Bank and the IDBI, and the subgrant agreements between the IDBI and the participating enterprises. Key conditions for the subgrant agreement would include: (i) the beneficiary to carry out and operate the sub-project with due diligence and efficiency and in accordance with sound technical, financial managerial, environment and ecological standards; (ii) iprocurement of goods, works and consultants services to be financed out of the proceeds of OTF grant would be in accordance with the Bank procurement guidelines ; fiii) the beaeficiaries shall maintain records and accounts of expenditures in accordance with soand accounting practices; and (iv) the beneficiaries shall take out and maintain risk and hazards insurance consistent with sound business practices. During negotiations, assurances were obtained from IDBI that: (i) sub-grant agreements with each participating enterprise will be acceptable to the Bank, (ii) IDBI shall prepare and provide semi-annual sub-project progress reports to the Bank as well as the MOEF, and (iii) IDBI shall prepare and provide annual audit reports. The Bank will supervise the overall implementation of the project. The Project is expected to be completed by September 30, 1996, and the Project closing date shall be March 31, 1997. 9. Procurement and Disbursements. Procurement of goods, works, and aervices will be in accordance with Bank Guidelines for lending through financial institutions. IDBI will satisfy itself that goods and services to be purchased are for the sub-projects and are reasonably priced, by ensuring that the grant recipient has canvassed main sources of supply and purchased from the most advantageous source. Consultants will be selected in accordance with Bank Guidelines for the "Use of Consultants by World Bank Borrowers and by the Bank as Executing Agency". A Special Account of US$200,000 equivalent (about four months of estimated expenditures) would be established for IDBI after the Grant Agreement becomes effective to facilitate disbursements. Withdrawals from the Special Account would be against full documentation except for expenditures under contracts valued below $200,000 for which the Bank will accept Statement of Expenditures (SOB). The expected disbursement schedule is: 50% in FY95, 40% in FY96 and 10% in FY97. Retroactive financing of up to 10% of grant amount is proposed for expenditures incurred after June 1992, when India ratified the Mp.2 Blue Star would be reimbursed for US$100,000 for the transfer of technology an eligible expenditure which is part of Blue Star's project cost of US$483,000 that was approved by MFEC, and has been procured according to the Bank procurement guidelines. 10. Proiect Sustainabilitv. The funds for this project are being provided on a grant basis to introduce new non-ODS technologies. The project will establish an efficient mechanism for developing and implementing sub-projects to compleL.e the ODS phase-out program. The Country Program will focus on strategies, policies, costs and actions to ensure compliance with ODS phase- out Tne eigibl incrmnal costs ame multpied by the pemage of local ownership to determine tbe amot o..OTV granL 2 Uinder MP guidelines die determinant eigibility ctfacr for retroactive financing is the dat of rtfication of die protocol. targets in the medium and long term. The project will provide incentives to enterprises to start phase-out projects quickly. Grant funding will compensate for commercial and technical risks. 11. Rationale for Montreal Protocol Financinc. The project is consistent with MFEC's and the Bank implementation guidelines and criteria for the use of OTF funds. 12. Actions Agreed. Agreement was reached with IDBI on issues including: (a) A fee of 2W of actual sub-grants amount disbursed, to be paid to IDBI froix the proceeds of the grant (para. 7); (b) IDBI shall prepare and provide semi-annual progress report on Project Implementation to the Bank as well as the MORF (para. 8)' (c) IDBI shall prepare and provide annual audit repJorts (para. 8); and td) IDBI shall enter into a £ubgrant Agreernsnt with beneficiaries, the terms and conditions of subgrant shall be satisfactory to the Bank (para. 8). 13. Environmental Aspects. The project is designed to protect the environment by reducing ODS emissions. However, suistitution of ODS with other chemicals or technology may involve other environmental concerns. IDBI will ensure that the enterprises have complied with all governmental environmental regulations. 14. Profect Benefits. The Project will support India's commitment to an accelerated ODS phase out program and provide a practical demonstration to all industries that the phase out program is underway. Enterprises will benefit from timely adjustment to non-ODS technologies. 15. Prof ect Risks. The Project will minimize technical and commercial risks by providing technical assistance to participating enterprises and by providing grant funding for incremental costs of sub-projects. The risk of proceeding with this project prior to completion of the revision of the Country Program is minimal. Both sub-projects represent high priority actions that are being endorsed by the Country Program. 16. Recommendation. I am satisfied that the proposed grant would comply with the relevant provisions of the Ozone Projects Trust Fund in Resolution 91-5 of the Executive Directors, establishing Global Environment Facility, and I recommend that the Director, Country Department II, South Asia Region, approve the proposed grant. Robert Anderson Acting Chief Country Operations, Industry & Finance Division Country Department II South Asia Region Attachments Washington, D.C. July 26, 1994 s 3cheduleA INDIA TECHNICAL SUPPORT AND INVESTMENT FOR THE REDUCTION OF CONSUMPTION OF OZONE-DEPLETING SUBSTANCES PROJECT Estimated Prolect C0st and Allocation of Grant Proceeds Local |Foreign Total Financing __ _ _ __ _ _ _ __ _ _ _ __ _ _ _ --- (USs thousands)--- (t) (a) Component 1: Shriram (i) Materials & Equipment 344 98 442 100 (ii) Consultancy 55 - 55 100 (iii) Salary & Travel 87 - 87 100 Subtotal 486 98 584 100 (b) Component 2: Blue Star (i) Technology _ 100 100 100 (ii) Materials & Equipment 195 125 320 100 (iii) Civil Works 56 _ 56 100 (iv) Training 7 _ 7 100 Subtotal 258 225 483 100 Total 744 323 1,067 Contingency (15%) 160 IDBI Financial Agent Fee (2t) 25 Grant Total 1,252 _ - , ._ _ -6- Schedule B INDIA TECHNICAL SUPPORT AND INVESTMENT POR THE REDUCTION OF CONSUMPTION OF OZONE-DEPLETING SUBSTANCES PROJECT Procurement Methods and Disbursement Schedules Procurement. IDBI will be responsible for procurement under the Project. It will arrange procurement (international and local) for the packages in each sub-project to be 1-lkndled between rhe respective participating enterprises and qualified procureme..t agencies authorized by the Government and acceptable to the Bank. Bidding documents will be prepared based on model bidding documents acceptable to the Bank (e.g. sample Bank bidding documents). The following contracts and bid packages will be subject to prior review: (i) over $1 million3; (ii) over $200,000 but less than agreed number of bids being sought; (iii) for proprietary technology and equipment; and (iv) for selection of cons-:ltants, where the Bank will review the .short list and terms of reference, generic letter of invitation, and award decisions. For procurement of Equipment the following procedures would apply: (i) contracts over $1 muillion (c-:cluding proprietary packages) would be procured under international competitive bidding (ICB); (ii) corntracts between $200,000 and $1 millio. would be procured on the basis of comparison of price quotation solicited from at least three qualified suppliers from at least two countries; (iii) contracts above $50,000 and below $200,000 would be allocated on the basis of comparison of price quotation solicited from at least three qualified suppliers; and (iv) contracts below $50,000 would be according to IDBI's normal procedures for small contracts. Consultants (including those from local institutions) retained under the project would be recruited in accordance with the "Guidelines for the use of consultants by the World Bank", published by the Wcrld Bank in August 1981. All contracts financed through this grant will be subject to ex-post review by the Bank in order to verify compliance with Bank procurement guidelines. 3 In oter ODS phase out projes the tbeshold for ICB has ben st at $2 mfllion Procurement Methods Cate2orv ICB LCB Other Total ---(US$ thousand)---------------- Goods - 894 894 Services - 358 358 Total - 1,252 1,252 Note: Goods worth more an $200,000 would be prcured thruh intermaona shopping by request price quotations from at least three qualfd suppliers fonn at least two counties. These ananemes are judged adequate given the small siz of tde procurem packages aiid the specialized technologies and equipmn equ>d. Although provisions for ICB and LCB have been included in the prwcuement methods. no such prcurement is expected given the proprietary natre of most non4DS equipments. Allpocation of OTF Grant Proceeds Category Amount Allocated Financing (US$ thousand) (") Civil Works 56 100 Techlaology 100 100 Materials and Equipment 762 10011 Consultant Services 55 100 Training & Travel 94 100 Unallocated (contingency) 160 - IDBI Fee 25 100 Total 1,252 - / 100% of ForeignExpendiure 100% of Local Expenditu (ex-factory), and 80% of Local Expenditu for oter imsprcured ocay. Disbursements. The Project is expected to be disbursed within a period of two calendar years. The Bank will disburse against 100* of eligible foreign expenditure and 100% of eligible local expenditures for eligible incremental costs, net of direct import, sales and value added taxes, for grant-financed goods and works contracts. Disbursement procedures have been established as follows: (i) Between the World Bank and IDBI: The World Bank will transfer an initial amoumt up to $200,000 to a Special Account which the IDBI will open. The minimum amount for replenishment of the Special Account will be US$200,000. Requests for reimbursement will be based on Statement of Expenditures (SOEs) for contracts with a value of up to US$100,000. The Bank will accept requests for direct payment to supplier of goods or services (not through special account) only above a minimum of US$50,000. Terms, conditions and schedule for disbursement must be included in the sub-grant agreement between the IDEI and the enterprise. (ii) Between IDBI and Sub-Drolect reciyient: up to US$100,000 per contract, the IDBI ill disburse to the sub-project proponent lor eligible expenses without prior review by the World Bank. Disbursement will follow the guidelines established in the Disbursement Handbook published by the World Bank in 1992. Details of the disbursement procedures will be included in the initial Disbursement Letter to be i.ssued by the World Bank to the IDBI. Estimated Disbursements Bank FY 95 96 97 - -- (US$ thousand)------ Annual 626 500 126 Cumulative 626 1,127 1,252 -9- Schedule C INDIA TECHNICAL SUPPORT AND INVESTMENT FOR THE REDUCTION OF CONSUMPTION OF OZONE-DEPLETING SUBSTANCES PROJECT Timetable of Kev Processiin- Events (a) Time taken to prepare: Seven months (b) Prepared by: World Bank/GOI (c) First Bank Mission: March 1993 (d) MFEC Approval: aune 28, 1993 (e) Appraisal: July/August 1993 (f) Negotiations: May 1994 (g) Bank Approval: July 1994 (h) Planned signing: August 1994 (i) Planned effectiveness: August 1994 (i) Planned completion: September 1996 - 10 - ANNEX 1 INDIA TECHNICAL SUPPORT AND INVESTMENT FOR THE REDUCTION OF CONSUMPTION OF OZONE-DEPLETING SUBSTANCES PROJECT Sub-Proiect Descriotions SBRIRA All refrigeration and air conditioning devices manufactured in India use CFCs or HCFC-22 as the refrigerant working fluid. CFC-12 is mainly used for domestic refrigerators and freezers, water coolers, bottle coolers, and to some extent in industrial refrigeration systems employing both open and semi hermetic compressors. Shriram, a 100% Indian owned company, is a major manufacturer of hermetic compressors in India, and in 1992, it produced 48,000 CFC-12 compressors, and 95,000 HCFC-22 compressors. Present capacity for CFC-12 compressors is 75,000 units per year with a planned production increase by 1997/98 to 500,000 HFC-134a units. Under an existing license agreement with Tecumesh, one of the largest compressor manufacturers in the World, technology for HFC-134a compressor manufacture has been transferred to Shriram. This sub-project, representing essential engineering and manufacturing development, is required to be completed before company can enter the commercial market with non-CFC refrigerators. Commercial production of these non-CFC refrigerators will not be undertaken until subsequent projects are designed and implemented. The commercial production of refrigeration will require India to make a policy decision to mandate industry to convert to non-CFC technology, as is being considered under the ODS Country Program, now under preparation. SUB-PROJECT OBJgECTIVE The sub-project objective is to convert CFC-12 compressor manufacturing to use HFC-134a as the refrigerant. SUB-PROJECT DUSCRIPTION The sub-project will be conducted in two phases. Phase I involves the manufacturing of 12 compressor models in the existing manufacturing facilities. Test manufacturing is necessary as the designs transferred to Shriram under their license agreement must be adapted to local conditions. In particular, the compressor motor must be modified by Shriram to tolerate the power surges common in India. Existing laboratory facilities and test equipment will be used to develop and test the necessary design modifications. Shriram has a major development laboratory in which some of the calorimeter and dynamometer instruments can be constructed in lieu of importing similar equipment. Tecumesh, the Indian Institute of Technology, the Central Mechanical Engineering Research Institute, and the National Chemical Laboratory will support Shriram's development activities. Phase II will entail the full conversion for the manufacturing of EFC-134a compressors. OTF grant was requested and approved for the phase I only. The Phase I sub-project plan is as follows: a) Obtain technology package for HFC-134a; b) Construct testing facilities for compressor evaluation; - 11 - c) Procure necessary materials and components and produce 1200 HFC-134a units; d) Conduct life and reliability tests on 12 compressor models; e) Field test HFC-134a compressors in domestic refrigerators, freezers, and coolers; and f) Prepare a feasibility study, cost estimate, and schedule for a phase II project to completely convert the plant to HFC-134a compressor manufacture. There is no direct measure of the cost effectiveness of this sub-project, as it focuses on test manufacture of new compressor designs. However, the indirect impact after Phase II is completed, would correspond to 15 MT per year of CFC-12 phaseout, based on present capacity of 60,000 units. BLUE STAR All refrigeration And air conditioning devices manufactured in India use CFCs or HCFC-22 as the refrigerant working fluid. CFC-12 is mainly used for domestic refrigerators and freezers, water coolers, bottle coolers, and to some extent in industrial refrigeration systems employing both open and semi hermetic compressors. Water chillers in India provide comfort cooling in hotels, office buildings, hospitals and large structures. Chillers are also found in the industrial sector, particularly in textile manufacturing where climate control is important. Large capacity building chillers are generally of the centrifugal type and use CFC-based refrigerants (mostly CFC-11 and CFC-12, with limited use of CFC-113 and R-500). Technologies for application of the new non-ODS refrigerant, HCFC-123 and HFC-134a to replace CFC-11 and CFC-12 must be imported. This sub-project will be limited to the replacement of CFC-11 with HCFC-123. Blue Star commenced production of Centrifugal Chillers in 1985, using CFC- 11 as the refrigerant, under license from York International Corporation, USA. This agreement will continue until York has fully developed the application of HCFC-123 as a substitute refrigerant for CFC-11 in Centrifugal Chillers. HCFC-123 has already been well proven with a few hundred machines in operation in USA and elsewhere. The sub-project will provide technology and facility to manufacture equipment suited for use with HCFC-123 as the refrigerant. Technology will be obtained from York International Corp (US) under terms of a technology transfer agreement signed in December, 1992 to expand the existing agreement to cover the technology for HCFC-123. An in-house test facility will be constructed for prototype testing and quality assurance. Capacity will be developed to support customers with subsequent retrofits of existing CFC-11 chiller installations to HCFC-123 refrigerant. Manufacturing facilities will also be modified for production of new HCFC-123 centrifugal chillers. Over the life of the project, demand for 540 MT of CFC-11 will be eliminated for the charging and servicing of chillers in large office buildings and hotels throughout India. India has made a decision to phase-out the use of CFCs in the refrigerant and foam sectors in compliance with its obligations under the Montreal Protocol. This sub-project, representing essential engineering and manufacturing development, is required to be completed before the enterprise can enter the commercial market with non-CFC refrigerators. Commercial production of these non-CFC refrigerators will not be undertaken until a subsequent project is designed and implemented. The commercial production of refrigeration and foam systems will require India to make a policy decision to mandate industry to convert to non-CFC technology. - 12 - 8UD-PROJRCT OBJ3CT!VI The object of this project is to eliminate the use of CFC 11 in manufacturing Centrifugal Chillers through conversion to the use of HCFC-123 refrigerant. U8B-PROJRcT DRSCRZPTION This two-phase sub-project will eliminate Blue Star's use of CPC-ll as a refrigerant in Centrifugal Chillers by converting its product line to HCFC-123. Phase I will provide the know-how and engineering assistance and training needed to build and test/evaluate Centrifugal Chillers using HCFC-123 as refrigerant. Phase IT will provide for modifications of production facilities to manufacture of HCFC-123 Centrifugal Chillers. At the conclusion of Phase II, Blue Star will have the capability of converting about 25 Blue Star made chillers per year, operating in the field, from CFC-11 to HCFC-123. Blue Star has approached York International Corporation for transfer of know-how for producing HCFC-123 Centrifugal Chillers in India and phasing out their current range of CFC-ll Chillers. This would also enable Blue Star to offer retrofitting of the CFC-l1 Chillers currently operating in the field to work with HCFC-123. In pursuit of this objective, Blue Star has already made a payment of US$100,000 (in December 1992) for license fee, Plans, Drawings, Specifications Sheets and Engineering Instructions for the selection, conversion from CFC-l1 to HCFC-123 and manufacture of Centrifugal Liquid Chillers using ECPC-123 as refrigerant instead of CFC-1l.