Coca-Cola has been dealt a severe blow by an Indian court ruling that prohibits one of its major bottling plants in southern Kerala state from extracting groundwater beneath it in order to produce the world-famous beverage.
The Kerala High Court ruled earlier this week that Coke could own the land in Plachimada village, 60 miles north of the state capital, Thiruvanthapuram, on which its bottling plant was located, but not the water beneath it. The groundwater reserves were "property held in trust" by the company, the court decreed.
The court held that if Coke, operating the Kerala plant for over three years, was allowed to draw large quantities of water, then similar claims by other land-owners would have to be allowed, leading to a drying up of precious resources.
Thousands of tribal and low-caste locals have been protesting outside the state's lone Coke plant for over a year, demanding compensation from it for causing environmental degradation and threatening the area with drought by extracting excessive water.
Local farmers who grow rice, coconut, rubber and pepper allege the waste generated from Coke's plant was adversely affecting their crops.
Earlier this week Justice K. Balakrishnan Nair gave Coke a month to locate "alternate sources" of water.
Once this deadline expires on January 16th the soft-drinks maker could only extract water equivalent to that pumped up by a local farmer owning 34 acres of land, the area the bottling plant covers.
This meagre amount of water is far from adequate for the huge plant that daily produces thousands of bottles.
According to local environmental activists the plant daily pumped up 1.5 million litres of water. But a company officer, Mr Sunil Gupta, rejects this, claiming that Coke extracted only 300,000 liters per day, some 200,000 less than the amount allowed by the state government.
Coke's Plachimada plant, one of the country's most profitable units, largely services neighbouring Tamil Nadu state. The company registers record sales in the semi-arid state that has faced drought for several years and where the aerated drink is hugely popular.
It is not yet clear from where Coke will get the water after the 30-day deadline expires, but locals said transporting it to the plant via tankers or through a pipeline would be hugely expensive. It would also substantially eat into its profits, a local resident said.
Coke, meanwhile, has filed a petition against the court's order claiming that the villagers' allegations are baseless and quotes scientific studies to back up its assertions.
It has also sought an injunction against the threatened closure of its bottling plant.
No date has been set for a hearing.