State-owned rail construction company Ircon International is in talks with Malaysia to execute a $1-billion railway project.
What makes this unique is the barter deal, which may see Malaysia exporting palm oil to India in return.
“We are looking at this project in Malaysia and checking whether they can pay 70 per cent of the project cost in the form of palm oil,” SK Chaudhary, chairman and managing director of Ircon, told Moneycontrol.
Barter deal with Malaysia not new
This is not the first time India is opting for such a barter deal with Malaysia. In early 2000, both countries had signed a deal for the construction of a 31.5-km railway line between Ulai to Tanjung Pelapas in return for palm oil.
The current talks are for the engineering, procurement and construction of a railway project in the western side of Malaysia, starting near Kuala Lumpur. The discussions are still in a preliminary stage, he said.
Palm oil trade row with Malaysia
The palm oil trade between the two countries had derailed in January 2020 after the then Malaysian Prime Minister Mahathir Mohammad criticised India for “stripping the special status of Jammu and Kashmir by removing Article 370”.
In retaliation, India had issued a boycott order on Malaysian palm oil. However, trade was restored after Muhyiddin Yassin came to power in that country in March 2020.
India is the largest importer of vegetable oil in the world. Before COVID-19, India used to import nearly 15 million tonnes (MT) of vegetable oil per annum, of which around 9 MT was palm oil and the rest were soybean and sunflower.
Prior to the pandemic, India’s annual palm oil imports were growing in double digits and the country imported more than 90 percent of its requirement from Malaysia and Indonesia.
India’s other barter deals
Though India had initiated talks for commodity swap deals with African nations like Zambia, Ghana and Rwanda in return for copper and gold in 2019, nothing has so far materialised.
Ircon International and the State Trading Corporation of India (STC) were in talks with these countries for minerals in return for project imports from India.
During the UPA regime, Iran and India were doing a similar deal by exporting food items and medicines in rupee terms, in return for crude oil from Iran, owing to US sanctions.
A similar agreement was signed in 2018 between both the countries after the ongoing US sanctions. As per the deal, Indian refiners had to make payments in rupee through the UCO Bank account of the National Iranian Oil Co (NIOC), so that those funds can be used to settle payments for the export of Indian goods to Iran.