US warns India on cola ban

'Pesticide controversy may set back foreign investments'.

As Coca Cola and Pepsico lose their fizz in the country, the US government and business leaders are warning of a potential fallout in investment in India.

The soft-drinks giants are suffering a publicity nightmare after the NGO Centre for Science and Environment (CSE) alleged that their sodas contained toxic levels of pesticides, leading to full or partial bans in six states.

Some in the US see the clamour against Coke and Pepsi as an unwelcome reminder that India, despite more than a decade of economic reforms, remains a hazardous place to do business. "This kind of action is a setback for the Indian economy," Undersecretary for International Trade Franklin Lavin said.

"At a time when India is working hard to attract and retain foreign investment, it would be unfortunate if the discussion were dominated by those who did not want to treat foreign companies fairly," he said.

The soft-drinks giants have hit back with a barrage of press statements and publicity campaigns in India to insist that their beverages are perfectly safe.

"So I'm hoping that (US) companies don't use this as a measure to decide whether to invest in India," said Kiran Pasricha, the US head of the Confederation of Indian Industry (CII).

"I see it as local politics in the Indian context. Investors have to see the bigger picture. We hope that better sense will prevail," she said.

Coca Cola and Pepsico have been under fire since the New Delhi-based CSE said 11 of their drinks contained average pesticide levels that are 24 times higher than limits agreed to by the government.

Those limits are not yet the law, the US companies have noted, while insisting that their drinks conform to all safety standards applied not just in India but in the European Union, the toughest in the world.

"The Coke you drink in India would be as clean as the Coke you get in Paris," Coca-Cola Asia Group Communications director Kenth Kaerhoeg said.

The US is India's largest investment partner, with a 17 per cent share. India's total inflow of US direct investment topped $1 billion last year, according to US government data.

Coca-Cola's statement came a day after two leading Indian industry bodies, including the CII, criticised the state bans as potentially harmful to India's investment image abroad.

"We would like this to be resolved as soon as possible before it does have any impact, before it does take on proportions that would have repercussions on India," Pasricha said.