India water crunch leaves beverage firms scrambling to manage community fallout

Foreign companies operating in India have long grappled with complex regulations and confusing tax laws.

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In the northwestern state of Rajasthan, some of the world's biggest beverage firms face the additional challenge of securing and managing dwindling water supplies while navigating strict government rules and grievances of some local people who only get the resource piped-in once a week.

Nearly two-thirds of Rajasthan is covered by the Thar Desert, and its groundwater extraction ranks among the highest in India, adding to the economic pressures for the state in balancing the needs of its 85 million people, booming tourism business, industry and its big agricultural sector.

Laws in India, the world's most populous nation, bar the movement of liquor across state borders without a special permit, effectively forcing companies to set up production in every state they want to sell in despite the water scarcity. So global giants like Diageo, Carlsberg and Heineken have to maintain factories in Rajasthan if they want to distribute their products in the state.

"(Water stress) is a growing issue in India," said Sonia Thimmiah, senior director of global sustainability at Heineken, the market leader, adding that a few years ago, water demand in some cities had come close to exceeding supply.

Heineken, Carlsberg and Diageo said that they are increasing water efficiency in Rajasthan and other water-stressed regions, have worked to improve communities' access to water and aimed to replenish 100% of the water their factories use back to its source.

The challenges for the brewers in Rajasthan mirror a wider crisis across India, which holds 17% of the world's population but just 4% of its freshwater. As the world's fastest-growing major economy, India's thirst for growth means more production and more strain on its scarce water resources.