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India to get paid in palmoil for railway project in Malaysia

India, the world's top edible oil importer, will accept palm oil as payment for a $1.8 billion railway project offered to it by Malaysia, their officials said on Thursday.

"It's confirmed. The payment is in the form of palm oil, but the period of payment could be between four to five years," an official at Malaysia's primary industries ministry told Reuters by telephone.

"We've got to see the contract first, but I can confirm the payment is in the form of palm oil," he added.

Malaysia, the world's top palm oil producer, has offered New Delhi a contract involving the dual tracking and electrification of rail lines from northern Ipoh city to Padang Besar at the border with Thailand, hoping India will buy more palm oil.

"The deal is very much near culmination point. It will be announced during Vajpayee's visit next week," an Indian official said.

Prime Minister Atal Bihari Vajpayee is expected to sign the contract during his visit to Malaysia next week, the official said.

The palm oil market reacted cautiously on the offer first mooted during last month's New Delhi visit by Malaysian Primary Industries Minister Lim Keng Yaik.

"Are you sure India will take all the oil? It's big money for them. India's buying pattern will not change overnight," said one trader in Kuala Lumpur.

"India will only buy more oil during festive seasons," he added.

Another trader said he expected Indonesia to react to the news by further cutting its export tax."

Indonesia, the world's second largest palm oil producer after Malaysia, imposes a three percent export tax on crude palm oil and one percent for palm olein.

Officials said India's IRCON International Limited, a state firm specialising in construction of roads, bridges and railway tracks, was in talks with Malaysian authorities to put the final touches to the deal.

Arun Prasada, managing director of IRCON International Ltd, will accompany Vajpayee during his visit to Kuala Lumpur, officials said.

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