New Delhi: In a major setback to the multinational soft drinks company Coca Cola, government has rejected its plea for waiver of mandatory disinvestment of upto 49 per cent equity in Indian operations made on the ground of adverse market conditions and company's accumulated losses.

Highly placed official sources told reporters that Commerce and Industry Minister Murasoli Maran conveyed to the company on May 23 the decision on Coca-Cola's plea for relaxation from divesting equity by July 2002.

Coca Cola now hardly has any option but to hit the market either through a public offer or private placement of equity, at a time when its Indian operation's net worth is understood to have been eroded by over 60 per cent.

This is the second time that the government rejected Coca Cola's application for waiver or moratorium during the last seven months, the first instance being in November 2001.

Incidentally, rival company PepsiCo, which entered India ahead of Coke, has no such divestment clause in its agreement for investment in the country.

Although Coke cited certain examples to strengthen its case this time, the government is understood to have rejected the argument saying there was no change in policies relating to such investment/divestment conditions.

However, government sources said the application was considered afresh on account of the provisions that a case could be reconsidered provided the applicant cited new developments.

PTI