Exporters are hoping that a barter-deal, in the lines of India and Iran had done around 2012-13

Pharma exporters from India hoping for a barter deal to be worked out with countries in Africa as well as some Latin American countries like Venezuela to help them beat currency blues. Industry sources claimed that the payments of exporters, most of whom are small and medium sized players, are stuck in the wake of liquidity issues in some of the oil exporting countries in Africa. 

Exporters are thus hoping that a barter-deal, something in the lines of what India and Iran had done around 2012-13, to be worked out with some of the key countries like Nigeria or Venezuela, whereby the Indian Rupee is accepted as the trading currency between these nations. 

“With the fall in crude prices, the currencies of the African nations like Nigeria which is an oil exporter, has been badly affected. As a result, they do not have enough liquidity in their system to make payments. Therefore, the payments of Indian exporters are stuck,” said Viranchi Shah, vice-chairman of the Gujarat State Board of the Indian Drug Manufacturers’ Association (IDMA). The situation is snowballing, he alleged, with exports to African countries slowing down. 

The Pharmaceutical Export Promotions Council (Pharmexcil) seemed to agree, P V Appaji, director general of Pharmexcil informed that around 18-20% of India’s pharma exports of around $16.8 billion go to African countries. “The problem is primarily with countries like Nigeria, Angola and Sudan. Business has been dull in the past three to four months and is currently very slow,” he added. 

Pharmexcil has already notified the Centre with regards to the exporters’ issues, and as Appaji said the Ministry of Chemicals and Fertilisers is already working closely with the External Affairs Ministry and others to come out with a solution. “As several departments are involved, these things take a bit of time,” he added. 

India had worked out a barter deal with Iran around 2012-13 in the wake of sanctions on Iran by the US and the UK and the Indian Rupee was used as the trading currency.

“Iran had opened a Rupee account in India and India-Iran trade was done using the Indian Rupee. We can work out something similar with countries like Nigeria,” Shah said. He also claimed that China has been pro-active in this matter, and they have already worked out some agreement with Nigeria about a month back to use the Yuan as the trading currency. “Importers now no longer need to buy the US dollar to pay China, and Yuan rates would remain relatively stable as it is not a very openly traded currency. Trade with China will thus stabilise,” Shah explained. 

The small and medium sized pharma players are the ones who are worst affected, as big pharma’s usual focus is on regulated markets. For example, nearly 50% of Gujarat’s pharmaceutical exports of around Rs 25,000-30,000 crore go to emerging markets. Chirag Doshi, owner of a pharma unit here said that as such there has already been a 25-30% drop in exports to African countries. “Our payments are stuck. The usual payment cycle is around three months, which has now stretched to six to eight months,” Doshi said.

He was exporting nearly 60% of his production, of which about 80% was going to Africa. With business slowing down, he is operating at 50% capacity for the past two months. 

S V Veeramani, president, IDMA too confirmed that the government is thinking of working out a barter deal with some countries like Nigeria and even Venezuela in Latin America which is undergoing a crisis. “Venezuela, however, is taking a lot of time to respond. The government is also trying to work out a similar deal with Nigeria,” he added.

India’s Import and Export with some of the African Nations & Venezuela