Three companies in India dealing in chilli powder have been identified as the source of the contamination, the Food Standards Agency said.
The 'Sudan I dye', linked to an increased risk of cancer, was in the chilli powder used by Premier Foods to make a Worcester sauce and a range of popular pasta sauces, used in other products, the agency said.
According to BBC, three companies in India had a licence to trade. It has been suspended by the Indian Spice Board now for further investigation.
'Sudan I', a red dye used for colouring solvents, oils and waxes, is banned in food items in the UK and across the European Union.
Since July 2003, all chilli powder imported into the UK has to be certified free of 'Sudan I'. The brands affected include Bertolli as well as own-label sauces made for supermarket chains Sainsbury's and Safeway.
'Sudan I' is normally used for industrial purposes in solvents, petrol and shoe polish and is banned in food.
The Food Standards Agency has issued a warning advising people not to eat the products but said there was "no need to panic" because of the "very low risk".
