PepsiCo to shell out more for water in Maharashtra

Supreme Court upholds high court decision on higher water charges

By Bharat Lal Seth, Vasu Sharma
Published: Wednesday 14 September 2011

On September 12, the Supreme Court dismissed an appeal filed by PepsiCo India, questioning increased water charges with retrospective effect from 2001. They must now clear Rs 70 lakh as arrears in water bills. A 2009, the Bombay High Court directive had upheld the Maharashtra government'ss decision to charge industries which use water as a raw material (soft drinks, mineral water) a higher rate (ten times the existing) with effect from September 2001. Against this decision, PepsiCo filed the appeal in the Supreme Court.

The Maharashtra Industrial Development Corporation (MIDC) is responsible for infrastucture including provision of land, water and electricity for all industries in the state. In 2001, the government issued a resolution to increase the water cess which differentiated the users.

Category 1: Water used for purpose of drinking—rates were doubled.
Category 2: Water for industrial use—rates were tripled.
Category 3: Industries where water is being used as a raw material as drinking water, for such industries (cold drinks, mineral water etc)--rates increased ten times.
The rates were declared effective as of September 2001. For PepsiCo, the rates were increased from the existing Rs 3.65 to Rs 36.50 per cubic metre. The resolution also specified that the rates would increase by 15 per cent, every July. In 2005, PepsiCo were issued a bill of Rs 69,97,385 for arrears accumulated between November 2001 until November 2005.

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The Supreme Court says in its judgement that the “requirement and use of water in these industries is huge and, therefore, they are placed as one distinct category or class of their own”. For this reason, the court rejected PepsiCo's appeal that the higher and retrospective charges were discriminatory. The decision to cross-subsidise water costs was taken as the MIDC financial loss was increasing.

Industrial water rates in India range from Re 1 to Rs 100 per cubic metre. But the biggest challenge has been to monitor and charge for groundwater, the most common and freely available source for bottling plants. The only available charging mechanism is through water cess which was introduced in 1977 and the rates were increased three-fold in 2003. The soft drink industry is charged 10 paise per cubic metre, which is paid on the basis of the pollution content in the waste water generated by the industry.

Soft drink majors (Coke and Pepsi) have 92 plants in India and use more than 11 billion litres each year in bottling production.


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