Venezuela knocks on FinMin, State Bank of India doors for rupee trade

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Giving a major relief to ONGC Videsh (OVL) and pharma majors like Dr Reddy’s, Venezuela has approached the ministry of finance and State Bank of India (SBI) to start a rupee account to trade with India, following sanctions imposed on the country by the US.

Payments of around $400 million to OVL and $350 million to pharma majors such as Dr Reddy’s, Glenmark, Claris, Sun Pharma and Stride are stuck because the government in Venezuela has so far not allowed repatriating money by subsidiaries of companies to their parents abroad. 

If India gives its nod to the proposal, Venezuela will become the first country after Iran and Bhutan to trade in rupees.

“We have approached SBI to start a rupee account. A formal proposal for an approval in this regard was also submitted to the finance ministry. We were informed that the ministry was in talks with other stakeholders like the Department of Commerce, the petroleum ministry and the Ministry of External Affairs in this regard,” a Venezuelan official told Business Standard.

Announcing its fourth-quarter results, Dr Reddy’s had said that though it had stopped supplying medicines to the crisis-hit South American country, the dues to the company from there were $80 million. 

According to media reports, Glenmark too had around $45 million to be repatriated from Venezuela.

OVL, the overseas subsidiary of Oil and Natural Gas Corporation, or the Ministry of Petroleum is yet to get any official communication regarding this, said sources. 

“The move may be advantageous to India because Venezuela was offering discounts to India on crude oil imports. Moreover, Indian pharma companies have a lot of money stuck there,” said a government official.

According to reports, India’s oil imports from Venezuela averaged around 300,000 barrels per day (bpd) between November 2017 and February 2018, a drop of about 20 per cent from the same period a year earlier.

Defending this, the country’s Foreign Minister, Jorge Arreaza, said early this month Venezuela wanted India to pay for oil in rupees. 

“We don't want to use dollars. We want to import technology, food products and medicines by paying (Indian) rupees and they will pay us (Venezuela) not in (US) dollars but in rupees,” Arreaza reportedly told the media. Venezuela is doing trade with countries like Turkey, China and Russia in the latter’s currencies.

The drop in production in Venezuela by 33 per cent in two years, along with US threats of oil sanctions on Iran, is considered the major reason for the spike in international prices earlier this month.

Officials said talks with India on strengthening bilateral ties might gather steam after the re-election of Nicolas Maduro as president recently.

  • Around $750 million: Total dues to Indian companies
  • Affected companies: ONGC Videsh, Dr Reddy’s, Glenmark, Claris, Sun Pharma, Stride
  • Iran, Bhutan: Countries with which India does trade in rupees
  • Around 300,000 barrels per day: India’s oil imports from Venezuela

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