Carlsberg India has shelved plans to build a brewery in Hyderabad. It is in talks with Anheuser Busch InBev India for a strategic relationship that would enable the two companies to use each other’s breweries for beer production and potentially reduce costs, a person familiar with the development said.

The strategy would likely entail Carlsberg using AB Inbev’s brewery in Hyderabad, the main reason behind Carlsberg India shelving its plans of building a brewery in the same city.

If talks fructify, the deal would help the global rivals in saving costs and in ensuring higher utilisation of idle beer capacities. About half of both Carlsberg India and AB Inbev’s total installed beer capacity remain unutilised, a person privy to the discussion between the two companies said.

Carlsberg India sold 5.6 million cases while AB InBev India sold 3 million cases in 2009, leaving a large portion of their respective capacities idle.

AB Inbev India CEO Kapil Agarwal said, “I am not aware of the development. I am new to this company.”

Two queries on a mail sent to Carlsberg India remained unanswered.

India’s annual per capita beer consumption remains low at 0.8 litres per year, prompting global beer companies to enter the highly lucrative market. Vijay Mallya’s United Breweries, which sells Kingfisher and Sand Piper, and SABMiller, maker of Fosters and Haywards 5000, together account for more than 80 per cent of India’s 200 million cases annual market.

In 2006, Carlsberg entered India through a joint venture with South Asia Breweries. It has four breweries in India in Rajasthan, West Bengal, Himachal Pradesh and Maharashtra with a total installed capacity of 10 million cases annually. It sells the beer brands Carlsberg, Tuborg and Okocim Palone in India.

Carlsberg had started work on its fifth brewery in Hyderabad in late 2009, which was scheduled to go on stream by October 2010.

AB InBev entered the Indian market in 2007. It has three breweries making Budweiser and Tennent’s beers, with a total annual capacity of 9 million cases.