DRB-Hicom today said the government's takeover of a RM2.6-billion rail project was mutually agreed by both parties.

"We were somewhat taken aback when the government said it had decided to take back the project," chairman Saleh Sulong told reporters.

"We have initiated talks with the government for some time and it was mutually agreed that the government will take back the remaining portion of the job," he said.

The transport ministry announced at the weekend that the electrified double track rail project given to DRB-Hicom in July 2000 had been terminated. It did not state its reasons.

Salleh said there were several reasons why DRB-Hicom wanted to pull out of the project, including "the issue of payment".

He declined to say how much money was owed to DRB-Hicom but added that "the remaining portion not paid is substantial."

A source close to the company said the government has yet to pay DRB-Hicom RM900 million for the Ipoh-Rawang double tracking project.

Salleh also denied there was a cost overun, saying additional costs were due to a variation order - a reference to an order by the government to do something outside the original contract.

Not paid by govt

Salleh said the issue of payment as well as the variation order amounting to RM700 million were factors that led to the mutual termination of the contract.

DRB-Hicom had finished 88 percent of the rail project by April 30, leaving only 12 percent for completion, he said. The transport ministry said it was finalising the appointment of the entity that would take over the project.

Salleh said that IJM Corp, Perspec Prime (M) Sdn Bhd and UE Construction Sdn Bhd were among subcontractors for the DRB job and they would only be paid after DRB-Hicom was paid by the government.

"DRB-Hicom cannot make a progress payment if we are not paid," he said, adding: "We hope it will not take too long."

Tycoon Syed Mokhtar Al-Bukhary owns more than 15 percent of the DRB-Hicom group, whose major businesses include autos, property and infrastructure.