Coca-Cola’s inimical business practices in India’s heartlands

By KAUSHAL SHROFF | 13 August 2016

On 19 October last year, a joint inspection team of officers from the Central Pollution Control Board (CPCB) and the Uttar Pradesh Pollution Control Board (UPPCB) submitted a report to the National Green Tribunal (NGT). The 13-page report stated that a plant operated by the Hindustan Coca-Cola Beverages (HCCB)—a bottling partner of the Coca-Cola company in India—in Hapur district in Uttar Pradesh was discharging untreated effluents into a nearby man-made pond. It observed that the effluent treatment plant in the fruit-juice section of the facility was in a “defunct state” and that the sewage treatment machines were “non-operational.”

Consequently, the report stated, the quality of the water in the pond had taken a toll. When the joint inspection team tested the effluents to ascertain whether they met the standards set for treated discharge, the results were appalling. In the chemical oxygen demand and biological oxygen demand test—used to assess the concentration of organics in discharge—the pond water showed levels of 404 milligrams per litre and 228 milligrams per litre. The accepted standard is 250 and 30 milligrams per litre respectively. The report went on to note that the company’s failure to treat discharged effluents and the poorly maintained drainage infrastructure meant that nearby agricultural fields were being flooded with water high in industrial waste content, rendering them infertile.

The matter was first brought to the notice of the NGT by Sanjay Kumar, a lawyer, in July 2015. Kumar was concerned by the illegal discharge of untreated effluents in the pond situated behind the HCCB factory at Hapur. After hearing Kumar’s plea, the NGT directed the UPPCB and CPCB to carry out an inspection of the factory premises. On being presented with the report, the tribunal stated that “alarming facts as regards the situation” in the factory had been disclosed in it, and sought the company’s reply.

Although the matter is still being heard by the NGT, the plant has been non-operational since 30 July 2016. On 11 August, the Economic Times reported that the UPPCB halted the facility’s operations because it had failed to meet “certain mandatory environmental requirements.”

On 1 August 2016, I reached out to Coca-Cola India regarding the company’s history of malpractices. Kamlesh Kumar Sharma, the director of public affairs and communication for Coca-Cola India claimed that since the commencement of operations of the Hapur plant, all treated effluents were in conformity with the prescribed standards.

Such tussles, with Coca-Cola India on one side and regulatory authorities in India on the other, are not new. Regulatory bodies have often been forced into action because of the massive popular resistance the company finds itself pitted against within the country. Over the years, Coca-Cola India has been besieged by protests because of many of its running facilities, which include plants in Plachimada in Kerala, Mehdiganj and Hapur in Uttar Pradesh, and Kala Dera in Rajasthan. Those protesting the existence of these bottling plants allege that Coca-Cola’s operations pollute the environment, resulting in the indiscriminate abuse of groundwater resources and loss of farming opportunities for the local community. In most cases, these allegations appear to stem from the organisation’s negligent processes.

Coca-Cola entered the Indian market in the early 1950s and set up its first bottling plant in New Delhi in 1952. In its early years, it ran its operations in India through a branch of its parent company. For over two decades, Coca-Cola conducted business in the country without declaring any profits. This was despite the fact that it had near-total market dominance since Pepsi, one of it major rivals, had exited the country in the late 50s. The company was able to claim that it was not making any profits because its Indian branch was remitting massive sums of money back to its global parent. This state of affairs changed with the Foreign Exchange Regulation Act, which came in to force in January 1974 and saw the company leave the country in 1977 only to re-enter the market in 1993.

By February 1997, the four Coca-Cola subsidiaries that were operating in India at that time merged to form Hindustan Coca-Cola Beverages (HCCB). The company’s Plachimada facility, which is located at Pallakad in Kerala, became operational in March 2000.

A few months after the plant at Plachimada was established, the residents of the area reportedly complained about the water being salty and brackish, and therefore, unsuitable for drinking or cleaning. Subsequent news reports revealed that HCCB’s operations were not just deteriorating the quality of the water at Plachimada, they were also drastically reducing its quantity. In June 2003, the British Broadcasting Corporation’s consumer affairs programme, Face the Facts, took a sample of the waste byproduct produced by the plant in Plachimada and sent it for testing to the Exeter University. They found that it contained high levels of carcinogens such as lead and cadmium. This sludge was often given away to farmers as fertilizer by the authorities at the plant, who had the approval of the then vice-president of Coca-Cola India, Sunil Gupta. In September 2003, at a World Trade Organisation meeting in Mexico, ActionAid, an international organisation that works in the areas of poverty and social injustice, filed a report stating that farmers in Plachimada had stopped cultivating coconut and vegetable crops as the ground water in region had depleted because of excessive use.

In December 2003, the Kerala High Court ordered the company to look for alternative sources of water. The court also ruled that the bottling plant at Plachimada could only use the amount of water that would be used by a landowner owning 34 acres, the same area as that of the plant. In March 2010, a 14-member expert panel set up by the state government calculated the total amount payable by the company to the state as “muti-sectoral” compensation for its abuse of groundwater and for affecting the environment and agricultural productivity in the region by its dumping of solid waste. The figure it came up with was Rs 216.26 crore. According to the panel’s report, a test that the Kerala Agricultural University had conducted indicated that chromium, copper, lead and calcium were present at toxic levels in fodder milk, egg and meat at Plachimada.

In 2011, the then-state minister for water resources NK Premachandran acted on the report and introduced the Plachimada Coca-Cola Victims Relief and Compensation Claims Special Tribunal 2011 Bill. The state assembly passed the bill in the same year. It called for the formation of a tribunal that would decide on the compensation to be offered to those affected by excesses of the Coca-Cola plant. In January 2015, the bill had been deemed unconstitutional by the centre and the state government was directed to withdraw it.

Plachimada isn’t the only region in which Coca-Cola has been accused of exploiting natural resources for its benefit. In February 2016, the company shut down its plant in Kala Dera, a village in Jaipur. The plant had been operational since 2000, and had reportedly resulted in the depletion of ground water reserves there as well. According to data compiled by the Rajasthan Groundwater department, the groundwater levels at Kala Dera dropped from 42 to 131 feet from 2000 to 2011—a rate of 8.9 feet a year.

Early this year, HCCB filed a petition before a civil court in Jaipur and stated that it would not be able to resume production in Kala Dera as it was facing business losses because of diminishing access to raw materials and underground water.

In July this year, I spoke to Amit Srivastava over the email. Srivastava is the coordinator of India Resource Center, a non-governmental organisation that has been vocal in its criticism of and demand for action against Coca-Cola on a national and international level. He said that the Kala Dera case should serve as a major warning to our policy makers.

He continued: “We knew early on that one day, the plant in Kala Dera would shut down, and we would have preferred (and the community worked hard to campaign) that the government shut the plant in the over-exploited area because bottling in such conditions is absolutely not sustainable. The government closing the Kala Dera plant would at least have allowed the community a fighting chance to use the depleted groundwater to make a living.”

However, that did not happen. Instead, Srivastava told me, Coca-Cola shut its bottling operations because the water had pretty much run out, and accessing groundwater was too difficult for them. “Coca-Cola came into an over-exploited area in 1999, built a new plant and started operations in 2000, and left when the groundwater was no longer accessible,” he said.

The worst hit in Kala Dera has been the local farming community. Kala Dera’s agriculture practices are largely dependent on underground water reserves and rain plays a very small role in the total output. Within a few years of Coca-Cola’s operations in the region, using a bore-well to extract water became a necessity. These bore-wells were expensive to set up and would put small and marginal land holding farmers back by a hefty sum—nearly a lakh and a half.

When I asked him about the water depletion claim, the company spokersperson Kamlesh cited the findings of a report that was written by The Energy and Resources Institute, a Delhi-based think tank. The report, which was published in 2008, had been commissioned by Coca-Cola India. It stated that the Kala Dera Plant in Rajasthan was a “miniscule user” of water from the local aquifer and that it was due to intensive agriculture and irrigation demands that the supply of water had dwindled.

Mahesh Yogi, the president of Kala Dera Sangharsh Samiti told me that over the years, Coca-Cola’s production coupled with a dwindling supply meant there was not enough water for basic farming activities. This situation reached a critical point when local farmers realised that farming was unviable but were still debt-laden. Without any workable option in sight, they could do little other than sell their holdings and move out. “With the water depletion, farmers who had 100, 50 or 40 bigha land started gradually working on smaller sections of their fields,” Yogi said, “After some time, these farmers sold off their lands and migrated to Jaipur where they now work as day-labourers or factory workers.”

“Farmers essentially depend on animal husbandry and cultivation for livelihood. Both of them depend on availability of water. Even if you want to carry out animal husbandry, you will have to have some fodder to feed them. Without fodder, no one can have animal husbandry,” Yogi told me. Rameshwar Kudi, the convener of the Kala Dera Sangharsh Samiti, said that there had been instances in which animals in the area had died after consuming the residue of the fertilizer left behind.

“After a number of demonstrations in 2000, Coca-Cola made a few water harvesting mechanisms but these were useless and were only for cosmetic value and to fool the villagers. If you don’t have rain coming in, what is the use of water-harvesting systems?” Yogi said, adding that there had been a gradual reduction in farmable land from 2000.

Kudi told me, “Agricultural fields in the radius of five kilometers around the plant have been rendered unirrigable because of the depletion of water. Overall, there has been a 50 percent reduction in land that can be used for cultivation and more than half the farmers in the area have been affected.” He said that the farmers left in Kala Dera now focus on food grains and crops that are not water intensive, which means that a number of them have shifted to growing guar and millet instead of groundnuts. Yogi added that the Kala Dera Sangharsh Samiti is contemplating putting together documentary evidence on the losses suffered by the farmers and seeking compensation from the soft-drink giant.

It seems to be an ominous pattern that is repeated almost everywhere Coca-Cola sets up a bottling plant. Take for instance, the case of the company’s plant in Mehdiganj, a village located near Varanasi in Uttar Pradesh. Coca-Cola set up the facility in 1999. In June 2014, the UPPCB shut the plant down, stating that the company’s operations had resulted in the depletion of ground water, and that the pollutants being discharged by its plant were beyond permissible limits.

Interestingly, the UPPCB also alleged that Coca-Cola had attempted to mislead the board. From 1999 to 2014, the company had maintained that the total industrial discharge it generated everyday was 600 kiloliters per day. This seemed highly suspect to the UPPCB. In its order regarding the closure of the plant, the board said, “There is a strong possibility of industry bye-passing [sic] the additional generated industrial discharge.” The pollution control body had arrived at this conclusion as Coca-Cola’s plant at Mehdiganj had increased its output from 20,000 cases per day—a case has 24 bottles—in 1996 to 36,000 cases per day in 2014. An 80-percent increase in output without any consequent increase in industrial discharge set alarm bells ringing within the UPPCB, and later, it directed that the company cease production in its plant at Mehdiganj.

Regarding the Mehdiganj plant, Kamlesh told me the company had undertaken extensive water conservation projects and created replenishment potential that was more than the ground water used by their operations, “In other words, the Mehdiganj unit is a positive contributor to water resources.”

In June 2014, Coca-Cola filed an appeal against the UPPCB’s order before the NGT. That same month, the tribunal allowed the company to resume its operations subject to the condition that it would not increase its production beyond 600 bottles per minute.

Meanwhile, the residents of the regions in which Coca-Cola has set up its plants continue to criticise the manner in which it has been conducting its operations. Srivastava told me that locals in Mehdiganj have been protesting the existence of the plant that has been operating in the area since 1999. A common community program named Jal Adhikar Sammelan was held in March 2016 and India Resources Center and Mehdiganj locals are working to strengthen the movement. The event, organised by the National Alliance of People’s Movement and MNREGA workers’ union, concentrated on a number of topics including how water in the area was being exploited by a select few for the sake of profits. A number of speakers gathered for the occasion pressed for the collective use of underground water resources rather than for capital.

Meanwhile, Coca-Cola is planning—as the Business Standard reported in June this year—to move India a pedestal higher from its sixth largest market to its fifth. Its business in India has been lucrative so far. The operational revenue of HCCB for the financial year ending in 2015 was Rs 7,859 crore, 14 percent higher than its operational revenue in 2014. Its net profit had registered an increase of 23 percent.

During a conversation, I once asked Kumar, whose petition had led to the NGT’s actions against Coca-Cola’s plant in Hapur, why he had decided to take on a behemoth such as Coca-Cola. He said, “We invite foreign companies to set up business on our soil so that it improves our economy, but we forget that in the name of economic development they poison our environment.” While Kumar’s petition may have gotten the wheels turning, there is little to indicate that the company will put a freeze on its abusive practices.

Kaushal Shroff is a former fact checker at The Caravan.

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