* Big companies concerned about tighter India food regulations
* Businesses fear hit to sales, plan to lobby government
* Health advocates say measures needed to tackle obesity, diabetes
* India's idea of "fat tax" on "junk" food worries foreign chains
By Aditya Kalra
NEW DELHI, March 16 (Reuters) - Several food and drink multinationals and trade groups met in recent weeks to discuss how to lobby more effectively against Indian proposals for higher taxes and stricter labelling rules on fatty or sugary foods, sources familiar with the talks said.
According to officials, Prime Minister Narendra Modi's administration has begun to look closely at policy proposals under discussion since at least 2015, raising concerns over the possible impact on the $57 billion sector.
Alarmed by rising rates of obesity and diabetes, India plans to frame draft rules within a month requiring manufacturers to display the fat, sugar and salt content of products on packaging.
It is also considering a nationwide "fat tax" for so-called "junk foods", a senior government official said, although that is unlikely to be rolled out in the near term.
Last month, executives from companies including PepsiCo , Nestle and Indian consumer firm ITC met trade groups in New Delhi to coordinate efforts and urge the government to resist pressure from health advocates, according to an industry source aware of the meeting.
The attendees, who felt their efforts to push back had been too piecemeal, talked about forming a core group to unify their message when engaging the government, the source said.
PepsiCo and Nestle in India did not comment directly on the meeting or its outcome. ITC did not respond to requests for comment.
Trade group All India Food Processors' Association (AIFPA), whose members range from street vendors to global conglomerates, said two industry-wide meetings were held in February.
Its members, who also discussed ways to offer more nutritious products, plan to send a joint representation to the government and approach health and food officials to express concerns about stringent regulations.
The stakes are high for companies like PepsiCo, Coca-Cola , Nestle and McDonald's, which have collectively committed billions of dollars to expand in the world's fastest growing major economy.
India's carbonated drinks sector is estimated to grow an average 3.7 percent annually between 2017 and 2021, while the packaged food sector will grow by 8 percent a year during the same period, Euromonitor International estimates.
Government pressure comes in various forms.
Modi recently told PepsiCo CEO Indra Nooyi that her company needed to focus more on public health, an aide to the prime minister said.
Separately, the prime minister's office asked PepsiCo to outline how it would reduce sugar in beverages sold in India, the aide added.
PepsiCo did not comment on those remarks by Modi and his office. It referred Reuters to its October 2016 global commitment "to transform its portfolio and offer healthier options". Modi's office did not respond to an email seeking comment.
A Coca-Cola India representative referred questions on proposed regulatory changes to the Indian Beverage Association, which said their impact was "under evaluation".
Nestle corporate affairs executive Sanjay Khajuria said the company was "working to improve the nutrient profile" of their products.
"These are complex public health issues which require (a) holistic multi-stakeholder approach and we are committed to work with authorities," Khajuria said in an email.
The CEO of the Food Safety and Standards Authority of India (FSSAI), Pawan Kumar Agarwal, welcomed industry concerns about tougher rules.
"It is a good thing if it helps in providing healthier options," he told Reuters in an interview.
The number of obese men and women in India rose to about 30 million by 2014 from 1.2 million in 1975, according to a study by British medical journal The Lancet, although the comparative figure for China was around 90 million.
Concerns about the health effects of fast food and soda drinks have been growing globally in recent years.
Mexico imposed higher taxes on sugar-sweetened beverages, for example, while South Korea placed television advertising restrictions on specific food items.
But India has been slow to finalise rules on products high in fat, sugar and salt, whose consumption health advocates say urgently needs to be checked to safeguard public health.
Agarwal denied industry pressure was affecting the implementation of tighter regulations, adding that India was nudging companies to make healthier products while working on new rules.
The FSSAI is considering advertising norms to check on health claims made by companies and is working on educating consumers about the health effects of foods containing high levels of sugar or fat.
One government official said the regulator was deliberating whether disclosures about the nutritional value of food should be placed on the front of packages.
Another labelling proposal under review was a "traffic light" system, where red, yellow and green colours depict nutritional value, similar to one used in the United Kingdom.
"Traffic light is making (reading labels) simple," Agarwal said. "Red people associate with danger, green is okay".
But trade body AIFPA said such labelling was of no use.
"Most Indian foods will be red. So what purpose does it serve?" said the group's president, Subodh Jindal.
Potentially more significant for major brands would be a nationwide "fat tax", which authorities are discussing and was last year announced by the southern state of Kerala.
There, branded restaurants like McDonald's and Domino's Pizza face a 14.5 percent tax, higher than that applied to smaller, indigenous outlets serving the same fare or Indian cuisine often high in sugar and fat.
"It makes the larger players nervous," said an industry executive, calling the discourse on "junk food" in India discriminatory and unscientific.
McDonald's India did not comment on the government's discussions on a nationwide "fat tax". Domino's India said its spokesman was not available.
Additional reporting by Rupam Jain and Sudarshan Varadhan; Editing by Mike Collett-White and Paritosh Bansal