Coca-Cola has been asked to pay $50 million in compensation for alleged environmental damage caused at a bottling plant in southern Indian.

The Palakkad plant was forced to close in 2005 after activists and residents protested, accusing the company of depleting the groundwater and damaging farmland and the local environment by dumping waste.

The company insists the charges against it are unfounded.

But the state of Kerala's Communist-run government has accepted the findings of a panel that investigated the allegations and recommended the fine.

"Several studies were conducted and they revealed that the Coca-Cola plant has contaminated the water and soil of the area. So the company must pay for it," NK Premachandran, the state minister for water, said.

Mr Premachandran says Coca-Cola must pay for the damage it has allegedly caused.

Coca-Cola dismissed the panel's findings, saying that any claim must be taken to the courts.

It said numerous investigations by the state government and others had cleared the company of any wrong-doing.

"Based on scientific evaluation, our Palakkad plant operations have not been shown to be the cause of local watershed issues," it said in a statement.

"It is unfortunate that the committee in Kerala was appointed on the unproven assumption that damage was caused, and that it was caused by Hindustan Coca-Cola Beverages."

- ABC/AFP