Still No Coke or Pepsi Products in Indian States

As reported by the Associated Press, August 23, 2006

By Rajesh Mahapatra

NEW DELHI, India -- Several Indian states on Wednesday insisted they would continue to ban the sale of Coca-Cola and PepsiCo soft drinks even though the federal Health Ministry dismissed allegations that the beverages contained pesticide residues.

Analysts said Indian authorities need to do more to end the health scare, which erupted three weeks ago, saying it could hurt India's image.

At least seven Indian states have banned sale of soft drinks made by the Indian subsidiaries of Coca-Cola Co. and PepsiCo Inc. at schools, colleges and government offices after the Center for Science and Environment in New Delhi said the levels of pesticides in the drinks made them unsafe for humans.

The southern state of Kerala went even further, imposing a total ban and asking the two companies to shut plants there.

But Indian Health Minister Anbumani Ramadoss told Parliament on Tuesday that his ministry found the center's data flawed. He said a government-appointed committee found that the sampling method followed by the Center for Science and Environment didn't have "a scientific and statistically valid basis."

While Coca-Cola India and PepsiCo India welcomed the announcement, the CSE claimed the Indian government was trying to shield the companies.

The CSE said almost all soft drinks sold in India contain high levels of pesticides, but the focus was on Coke and Pepsi because the two account for nearly 80 percent of India's $2 billion soft drink market.

Similar allegations of pesticide contamination in drinks surfaced in India in 2003, but the government has yet to set and enforce quality standards for such products.

"The issue has been around for three years. It impacts India's image," said Rajeev Malik, a JPMorgan Chase & Co. analyst based in Singapore.

Malik said the ban imposed by some of the states will unlikely have any immediate impact on foreign companies looking to invest in India and its booming economy. But "it doesn't speak well of how things are done there, and in the long term there could be some impact," he said.

Still, authorities in Kerala insisted the state's ban stands.

"Repeated studies have proved that the colas are not good for health. So we have banned them for people's welfare," said P. K. Sreemathi, Kerala's health minister. "Our decision is final ... We will enforce it strictly."

Both Coca-Cola and Pepsi have bottling plants in Kerala. Both insist their products are safe and have already challenged the ban in the state's High Court. The case is scheduled to be heard Thursday.

Authorities in three other states — Gujarat, Karnataka and Andhra Pradesh — said they had no plans to reverse the ban on sale of the soft drinks at schools, colleges, hospitals and government offices.

"There is no question of going back on the (ban) order," said Gujarat Health Minister Ashok Bhatt.

It was not immediately clear if the states of Rajasthan, Madhya Pradesh and Chattisgarh, which also imposed a similar ban, would review their decisions.

Indian states have broad autonomy to make their own health and education policies, and they cannot be overruled by the federal government.

In Karnataka, authorities have filed a case of food adulteration against Coca-Cola India and PepsiCo, said R. Ashok, the state's health minister. Ashok said the state had conducted independent tests at its government laboratories, which supported the disclosure made by the Center for Science and Environment.

He said the federal health minister's statement on Tuesday "surprised" him.