India looked back in the running to win part of a multi-billion dollar rail contract through new negotiations with the government after being cut out of the deal in favour of a local group.

Works Minister S Samy Vellu told reporters he had held talks with Indian ministers and state-owned Indian Railway Construction Co (Ircon) and "they have agreed to come down to a certain price."

Without revealing what the new offer was, he said: "I think that price will be much more acceptable to the government of Malaysia."

If the deal is finalised, it would be awarded on a government-to-government basis as previously agreed and Ircon would undertake 70 percent of the work on the northern half of a dual track railway running the 600-kilometre length of peninsular Malaysia, he said.

"You can call it a nominated sub-contract. There are nominated subcontractors which are appointed by the government and the government pays them directly, not through the contractor," Samy said, adding that the local consortium would remain the lead contractor.

Status of China Railway unknown

The double-tracking rail project, which forms part of an ambitious 5,600-kilometre trans-Asia link, was originally promised to Ircon and China Railway under a government-to-government deal involving a barter trade of some eight million tonnes of palm oil worth RM12 billion.

However, Malaysia dropped the Indian and Chinese contractors despite signing letters of intent last year, citing overpriced bids of RM42 billion, which were later reduced to RM24 billion.

The job was then handed to politically well-connected local infrastructure group Malaysia Mining Corp (MMC) and its partner Gamuda Bhd. for RM14.45 billion, just days before former premier Dr Mahathir Mohamad retired on Oct 31.

When asked if China Railway Engineering Corp (CREC) would be included in the construction of the railway's southern half, Vellu said: "There should be a discussion between the Chinese party and the government but we have not discussed anything about it.

"We are working on the northern part still. The southern part, we may have other arrangements."

Technical issues

Second Finance Minister Jamaluddin Jarjis said in remarks published today the government would announce the final contract agreement after concluding discussions with MMC-Gamuda on technical details, sub-contract works and funding.

"We need to first resolve the technical issues ... before we can sign the agreement," Jamaluddin said.

"They have already come out with some proposals and we also have some models. We will present all these to the cabinet for a formal decision," he was quoted as saying by the Star .

Although MMC-Gamuda had been given the letter of award, the contract was by no means finalised until the final agreement was signed, he added.

As to whether Ircon would be awarded a slice of the project, Jamaluddin said: "That would only be known after the contract agreement is finalised. The government will make the necessary announcement." - AFP