Five people have been arrested in connection with a racket in which blood was extracted from the captives and sold to various city hospitals, reported the Times of India.

The victims had been kept hostage for over two and a half years.

The horrifying tale came to light when the police, acting on a tip off, raided a house in Gorakhpur, a town near Lucknow, the capital of Uttar Pradesh state, on Saturday evening.

Besides arresting the five racketeers, police rescued 17 captive donors in a small house in the remote area.

The victims were 'so weak that they could not stand', said investigating police officer Deepak Srivastava.

'They were just reduced to skeletons,' he added.

The alleged gang leader, local resident Pappu Yadav, and three others managed to escape.

The five people arrested had experience working as lab technicians at various hospitals, reported the Indian newspaper.

'Every day a hired pathologist would arrive and collect blood,' said police Inspector-General D.K. Chaudhary.

Police recovered two units of blood and a large quantity of blood bags from the house.

India's booming economy has grown by an average of about 8.5 per cent per year over the past five years, but more than 300 million of its nearly 1.1 billion people still live on less than US$1 (S$1.40) a day.

Many of them become victims of such illegal scams.

The gang allegedly lured poor labourers to the town by promising them jobs.

It persuaded them to undergo blood tests.

Then, it paid them 1,500 rupees (S$51) a month for giving blood on a frequent basis.

The victims soon became too weak to challenge their captors.

The gang reportedly sold the blood to local hospitals for between 800 rupees and 4,000 rupees a unit, depending on the rarity of the blood type.

It was able to earn as much as 30,000 rupees per 'donor' each month.

The five people arrested had been charged with illegal confinement of people and attempt to murder, said Mr Chaudhary.

If convicted, they could be jailed for up to 14 years.

Meanwhile, police are also trying to find out whether the racket has links in the government-run BRD Medical College.

A severe shortage of blood has seen 'unscrupulous elements' trying to make money from donations, said Mr Khushroo Poachaa, founder of

indianblooddonors.com, an online registry of 45,000 voluntary donors.

'There are huge shortages,' said Mr Poachaa, who estimates a gap of about 40 per cent.

'People have to run about from here to there to find a blood donor.'

The blood donor racket case comes just months after police in Gurgaon, a suburb of the Indian capital, busted an organ theft gang that also lured poor labourers with job offers, only to steal their kidneys.

ASSOCIATED PRESS, AGENCE FRANCE-PRESSE