India's Ban On Soda May Harm Economy

India's top business groups warned Thursday that the country's investment climate could be hurt by the ban some states have placed on the sale of Coke and Pepsi, and urged officials to reverse their decisions.

Seven Indian states have banned the sale of Coke, Pepsi, Sprite and other soft drink brands from Coca-Cola and PepsiCo at government-run schools, colleges and hospitals after a New Delhi-based research body said last week that the soft drinks have pesticides levels that far exceed national standards.

Both Coca-Cola and PepsiCo insist their drinks are safe.

But the Confederation of Indian Industry and the Federation of Indian Chambers of Commerce and Industry — that together cover more than 90 percent of Indian businesses — said the moves could hurt the broader economy, slowing foreign investment into the country.

The business groupings were particularly disturbed by the decision of the southern state Kerala, which said Wednesday it would impose a total ban on the sale and production of soft drinks by the Indian subsidiaries of Coca-Cola Co. and PepsiCo Inc.

Both companies operate plants in Kerala.

"Without following the due process of law, it is unfortunate that (state) governments have started taking action," said FICCI President Saroj K. Poddar. "If we do that ... it could create a lot of uncertainty about India and will impact India's investment climate."

Poddar said he would urge Kerala's chief minister to review the decision.

"Government actions have to be driven by rule of law and in the overall public interest," said R. Seshasayee, president of Confederation of Indian Industry. "We are concerned that the apparently arbitrary decisions have been taken ... without going through the due process of law."

Both Poddar and Seshasayee said the states should have conducted their own tests and then followed proper procedures, such as sending notices to the companies, before announcing the ban.

Still, India's Supreme Court has already asked Coca-Cola India and PepsiCo India to disclose the ingredients of their soft drinks in six weeks. And two more Indian states, Punjab and Arunachal Pradesh, said Thursday they also were looking into the matter.

Many Indian parents welcomed the ban.

"It is a good decision. My children have been addicts of Pepsi and Coke. Now I can teach them how to drink water," said Molly Kurian, a housewife in Cochin, Kerala's port capital.

Sales of the two companies have been hit since the Center for Science and Environment, or CSE, said last week that its tests on 57 samples of soft drinks made by the two companies revealed they contained residues of pesticides 24 times higher than the Indian standards.

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

But Seshasayee of the Confederation of Indian Industry said the standards cited by CSE were part of a government "proposal" that has yet to be made law and enforced.

Coca-Cola and PepsiCo officials in India continue to avoid speaking to journalists on the issue.

But Kari Bjorhus, a U.S-based spokeswoman for Coca-Cola, said the company is "disappointed that the government (in Kerala) would make a decision like that based on inaccurate information."

"Our products are perfectly safe, and there is no reason to take them away from consumers," she said.

This is not the first time Coca-Cola and PepsiCo have faced charges in India of excessive pesticides in their soft drinks. Three years ago, the Center for Science and Environment had brought similar allegations. At the time, Coke and Pepsi sales declined for several months, but then recovered.

"For three years we have looked very hard at this and engaged the best scientific minds in the world, and all of the data and all of the science point to the fact our products in India are absolutely safe, just as they are elsewhere in the world," said Dick Detwiler, a New York-based spokesman for PepsiCo's international division.