Government in favour of 'medicines for oil' barter system with Venezuela

The government is 'in favour' of a 'medicines for oil' barter system with Venezuela to correct the problem of Indian pharma exporters inability to repatriate their sales revenues due to restrictions imposed in that country, a senior Commerce Ministry official has said.

Both the commerce and finance ministries are currently engaged in discussion on the issue, Pharmaceuticals Export Promotion Council of India ( Pharmexcil) Director General P V Appaji said.

"The commerce ministry is positive and in favour of the barter system with Venezuela. We requested the government to make the payment for pharma exports (to Venezuela) here and deduct the same in the oil import bill of Venezuela," Appaji told PTI.

The pharma industry is going through a crisis in Venezuela as foreign exchange controls have made repatriation of funds difficult for companies operating in the country.

Indian pharma companies like Dr Reddy's, Glenmark, Claris, Sun Pharma and Stride operate in Venezuela through subsidiaries and are finding it difficult to get the amounts back to India due to restrictions there.

A GlenmarkBSE -0.51 % official said that at present, Indian pharma companies continue to serve the Venezuelan market, despite not being paid its outstanding dues from its own subsidiary in that country.

"The viability of these operations, sooner or later is under threat despite the severe shortages of medicines that the country is witnessing," the official said.

The government is importing significant amount of oil from Venezuela. It is the third largest country in terms of oil imports into India.

"We have also received representation from some of the leading pharma exporters to Venezuela. We have recommended government for a solution to be worked out on the basis of the present arrangement with Iran or alternatively to adjust the payments to be made to Venezuela towards our crude oil imports against the receivables by our pharma exporters in dollar values," Appaji said.

According to reports, the medicine prices have been frozen in Venezuela since 2003, which is compounded by difficulties in accessing foreign currency together with the lack of a serious payment plan.

As per Dr Reddy's latest annual report, Venezuela accounted for 7 per cent of its global generics segment's revenues in the year ended March 31, 2015.

Glenmark Pharmaceuticals Venezuela, CA, Venezuela reported revenues of Rs 62.7 crore in FY15 as against Rs 51.5 crore in the previous financial year.

(Image credit: BCCL)