Indian officials say they have proposed an oil-for-drugs barter plan with cash-strapped Venezuela to recoup millions of dollars in payments owed to some of India’s largest pharmaceutical companies.
Indian officials say they have proposed an oil-for-drugs barter plan with cash-strapped Venezuela to recoup millions of dollars in payments owed to some of India’s largest pharmaceutical companies.
Several of India’s generics producers, led by the country’s second-largest player Dr Reddy’s Laboratories Ltd, bet heavily on Venezuela as they sought emerging market alternatives to slower-growing economies such as the United States.
But the unravelling of Venezuela’s socialist economy amid a fall in oil prices has triggered triple-digit inflation and a full-blown political and financial crisis. Unable to pay its bills, India is facing severe shortages of even basic supplies such as food, water and medicines.
Dr Reddy’s wrote off $65 million in the March quarter, which it said was almost all the money it was owed from Venezuela. Rival Glenmark Pharma, says it is due $45 million.
Both Dr Reddy’s and Glenmark have now stopped shipping to Venezuela.
“The situation in Venez-uela is very precarious... the government knows it needs to do something about the medicine shortage, that’s why it is willing to discuss such a deal,” an Indian official said.
“At this point, even if our companies get back 5 or 10 per cent of the payment they are owed, they would be satisfied.”
The Indian officials said the commerce and trade ministry had proposed a payment mechanism that would allow Venezuela to repay some of the amount owed with oil.
India, one of the world’s biggest oil importers along with the United States and China, had similarly elaborate barter deals with Iran, swapping rice and wheat for oil.
The officials said Venezuela had been receptive to the plan “in principle”, but not made any concrete commitments yet. Indian officials said a “high level” meeting with Venezuela was due in the coming months to discuss the proposed deal.
“The finance ministry has assured us that the government is fully committed to it, but it will take time,” said P.V. Appaji, Director General of the Pharmaceutical Export Promotion Council of India, a body under the country’s commerce ministry.
India’s exports to Venezuela between April 2015 and February 2016 almost halved year-on-year to $125.5 million, compared with a year earlier.
The amount owed to Indian companies is modest on a global scale — Novartis AG, Bayer AG and Sanofi SA took heavier hits when they agreed to take bonds from state-owned oil company PDVSA in lieu of cash, sold at a deep discount.
