Any worsening of a debt crisis in Venezuela is unlikely to cause much imbalance in India’s trade or investment scenario, thanks to limited exposure. However, an escalating crisis would most likely delay the payment of roughly $520 million of backlog dividends that Venezuela’s state-run oil firm PDVSA still owes to ONGC Videsh (OVL) and millions of dollars for supplies of pharmaceutical products from India. Also, given the strong state control over the use of foreign exchange in that country, Indian generics companies like Dr Reddy’s and Glenmark could find it even harder to do business there and repatriate profits. “A high-level team of OVL is in Venezuela to discuss the issue and the country has assured us payment. They will allocate us oil in case payment cannot be done and we believe it will honour its commitment,” said NK Verma, managing director, ONGC Videsh.
While India’s export to that country was never too high (even that has already plunged to just negligible levels over the past two years), import, too, has crashed. India’s exports to Venezuela crashed from $258 million in 2014-15 to just $62.22 million last fiscal, with pharmaceutical products accounting for less than a third of the supplies. Similarly, imports from Venezuela (almost entirely oil) plunged from $13.94 billion in 2014-15 to just $5.51 last fiscal. This indicates India still has some leverage against the Latin American nation to clear the dues.
OVL had invested $200 million in the San Cristobal field to pick up a 40% stake but the company hasn’t received any dividend since 2009, barring the $19.75 million transferred to it in January this year through Russia’s state-run Gazprombank. The Pharmaceuticals Export Promotion Council of India (Pharexcil) last year pegged the total money stuck in Venezuela at `2,000 crore, part of which is learnt to have been cleared. It’s still unclear if India’s oil-for-drug barter plan is fully endorsed by Venezuela.
Doing business in Venezuela and payments against supplies to that country have turned out to be extremely challenging due to the Latin American nation’s restrictions on transferring money out after it ran short of foreign exchange because of a slump in crude oil prices, worsening economic fundamentals and western sanctions. Venezuelan President Nicolas Maduro insisted on Monday that his country would “never” default, as he prepared to meet with creditors in Caracas to discuss rescheduling part of the country’s massive $150-billion debt. Venezuela is seeking a restructuring of around $60 billion of its bonds, with some analysts terming the move a signal of its bankrupt state.
“The issue of resolving outstanding payments due to Indian companies has been taken up with Venezuelan government. To boost India’s exports to Venezuela, products in which India holds export competence are targeted,” a senior commerce ministry official said. Dilip G Shah, the secretary general of Indian Pharmaceutical Alliance (IPA) and the CEO of Vision Consulting Group, said India’s pharma exports to Venezuela have already crashed in the last few years, so the impact on exports won’t be much.