Search the Internet          Tips  Sites: Finance, Investment

Malaysia plans rail for palmoil deal with India

Malaysia plans to offer India a 6 billion ringgit ($1.6 billion) railway project as a counter trade deal for New Delhi to buy Malaysian palm oil, a minister said on Thursday.

The contract would involve dual-tracking and electrification of railway lines from Ipoh to Padang Besar in northern Malaysia, primary industries minister Lim Keng Yaik said.

Malaysia has about 2,000 km of mostly single track rail network it plans to modernise and electrify over the next decade.

The government wants to upgrade the link between the capital Kuala Lumpur and the Thai border, with a long-term goal of making up part of a trans-boundary route from Singapore to China.

Lim said he would raise details of the offer next week when he meets Indian government officials in New Delhi. He is due for a joint visit with Indonesian Trade and Industry Minister Luhut Pandjitan.

The two ministers want to convince India to buy more palm oil from their countries, the world's top producers of the commodity.

"I am going to talk about the 6 billion ringgit project which we were going to offer them," Lim said.

India was Malaysia's biggest palm oil buyer in 2000, taking 2.03 million tonnes.

But exports to the country are slowing after India slapped a 75 per cent import duty on crude palm oil and 85 percent on refined palm oil since February 28 under its budget. Its import duty on soyoil is considerably lower at 45 per cent for crude oil and 50.8 percent for refined material.

According to data from cargo surveyor, Societe Generale de Surveillance, India bought only 58,590 tonnes of Malaysian palm oil between April 1 and 10 compared with 110,530 tonnes in the first 10 days of March.

Lim also said the government would enter the market to buy palm oil directly once the burning of crude palm oil as industrial fuel got under way.

"We will be coming into the market on our own but please don't see it as an intervention," the minister said.

"It is basically to buy CPO at market prices so that we can continue burning. There will be no manipulation of any kind."

Malaysia plans to burn 400,000 tonnes of crude palm oil as fuel this year to cut down excess stocks and prop up prices.

The government has bought 50,000 tonnes of crude palm oil from the industry at 725 ringgit a tonne, which will be used as industrial fuel by state power firm Tenaga Nasional.

The government, which will officially launch the burning of CPO as industrial fuel at Tenaga's plant in Prai district in northern Penang on Monday, will purchase the remaining 350,000 tonnes at market prices.

Tell us what you think of this report