The government has inked a RM220 million ringgit to buy 20 locomotives from China in exchange for palm oil to boost the freight business of its state railway firm, reports said today.

The possible postponement of a multi-billion-dollar project to lay a dual track and electrify the main rail line straddling the length of peninsula Malaysia is not a hindrance to Keretapi Tanah Melayu's (KTM) expansion, Transport Minister Chan Kong Choy was quoted as saying by The Star .

He said the diesel-electric locomotives from China Railway Communication Co Ltd (CRC) are compatible with existing railway tracks in Malaysia.

"The expansion has nothing to do with the double-tracking project," he said. "There is ongoing work done by KTMB to upgrade the tracks."

Under the deal, CRC will receive 110,000 tonnes of palm oil in exchange for the 20 locomotives, which will be delivered to KTM from April 2005 and are expected to be fully operational by August that year, Chan said.

Heavy haul

With the deal, KTM will have 40 high-powered diesel locomotives to boost its heavy haul and cross border services and its freight revenue is expected to increase by 40 percent in 2005, he said. KTM's current freight revenue is around RM100 million, the daily said.

Prime Minister Abdullah Ahmad Badawi last week said the cabinet would make a final decision at its weekly meeting on Wednesday whether to shelve the double-track rail project amid reports that it would be "postponed indefinitely."

The project, one of Asia's biggest infrastructure contracts, forms part of an ambitious 5,600-kilometre trans-Asia link. It ran into controversy recently when Malaysia dropped a consortium of Indian and Chinese contractors in favour of a politically well-connected local group.

The move prompted concerns that relations with China and India would be affected and worries the two countries would cut their purchases of Malaysian palm oil in retaliation.

CRC vice-chairman Peng Peng was quoted by the Business Times as saying that any decision on the project was Malaysia's perogative but China hoped for "future cooperation once the Malaysian government decides." - AFP