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 US.

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, the country 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 Pharmaceuticals, another major investor, says it is due $45 million.

"The situation in Venezuela 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," one Indian official told Reuters.

"At this point, even if our companies get back 5 or 10 percent of the payment they are owed, they would be satisfied."

Venezuela's Health Ministry did not immediately respond to a request for comment.

Like pharmaceutical companies globally - which used to enjoy a preferential exchange rate in Venezuela - Indian producers have been left badly stung by the collapse of the bolivar currency.

PAYMENT PLAN

The Indian officials, who could not be named as they are not allowed to speak to the media, said the trade ministry had proposed a payment mechanism that would allow Venezuela to repay some of the amount owed with oil.

The proposal, seen by Reuters, would use the State Bank of India to mediate the transfer. The plan is now awaiting approval on the Indian side from the finance ministry and the central bank, which regulates such payments.

India, one of the world's biggest oil importers along with the US 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. Most of that was pharmaceutical products. - Reuters