* Higher polymer prices hurt bottled water industry

* Industry worth $5 billion has big multinational players

like Pepsi, Coca-Cola

* No retail impact yet but distributors feel the pinch

* Aava mineral water raises prices for resellers by 18%

By Aditya Kalra

NEW DELHI, March 12 (Reuters) - The Iran war is rattling

India's $5 billion packaged water market just ahead of the

sweltering summer season.

One of the world's fastest growing bottled water markets is

seeing some manufacturers hike prices for distributors, as

supply disruptions linked to the war fuel higher costs in

everything from plastic bottles to caps, labels and cardboard

boxes.

Though retail prices are yet to feel the heat and bigger

companies are absorbing the pain, about 2,000 smaller bottled

water makers have increased rates for their resellers by around

1 rupee per bottle, a 5% hike, which will rise by a further 10%

in coming days, according to the Federation of All India

Packaged Drinking Water Manufacturers' Association.

Consumers usually pay less than 20 rupees, or around 20 U.S.

cents, for a one-litre bottle.

"There is chaos and within the next 4-5 days, this will

start impacting customer prices," said Apurva Doshi, the

federation's secretary general.

Rising oil prices have increased the cost of polymer, which

is made from crude oil and is a key material for the industry's

plastic bottles.

The cost of material used in making plastic bottles has risen by

50% to 170 rupees per kilogram, while the price of the caps has

more than doubled to 0.45 rupees apiece. Even corrugated boxes,

labels and adhesive tape are costing much more, industry letters

showed.

Clean water is a privilege in the country of 1.4 billion

people where researchers say 70% of the groundwater is

contaminated, leaving people reliant on bottled water. Companies

including Bisleri, Coca-Cola's Kinley, Pepsi's

Aquafina, billionaire Mukesh Ambani's Reliance and

Tata all compete for a share of the $5 billion market.

The companies did not respond to Reuters request for comment.

PREMIUM WATER FACES HEAT TOO

Within the broad bottled water market, natural mineral water is

a $400 million business in India and a new, fast-growing

wellness product for India's wealthy.

The premium water segment accounted for 8% of the bottled

water market last year in India, compared to just 1% in 2021,

Euromonitor says.

Aava, which sells mineral water sourced from the foothills

of the Aravalli mountains, has increased prices of its water

bottles by 18% for resellers, Shiroy Mehta, CEO of the company,

told Reuters.

"Most manufacturers are absorbing 40-50% of the cost to

ensure that they don't lose clients. It's a poor situation for

the beverage industry ahead of the summer season," he said.

The mass market, however, is dominated by companies that

produce "drinking water" to be sold in 1-litre bottles to

customers.

Clear Premium Water, a brand of India's Energy Beverages, said

in a notice to its distributors there had been an "unprecedented

and continuous surge" in prices of key raw materials used in

packaging and production.

"It is no longer possible for us to absorb the escalating

costs while maintaining existing product prices," the notice

said.