"We are negotiating a contract to do a railway project in Malaysia, which has offered to give palmolein as payment," Ircon general manager (marketing) Desh Deepak said.

Ircon has bid to construct a 34-km long railway line in Malaysia at a cost of $100 million.

"We are confident of getting the contract," Deepak said.

If the deal is struck, it could mark a significant step in initiating counter trade in the south Asian region.

Malaysia and India are in the forefront of mooting counter-trade within south Asia to avoid "over dependence" on the US dollar.

The measure is also seen as the one to overcome foreign exchange crisis being faced by some south-east nations like Malaysia and Indonesia.

In addition to the trade offer for Ircon project, Malaysia has also offered to tradepalmolein for rice, All India Rice Exporters' Association (AIREA) executive director Brig Anil Adalakha said.

Commerce ministry sources, when contacted, said negotiations were on with Malaysia for counter trade.

Apart from Malaysia, Indonesia has also offered to buy rice and pharmaceuticals from India on credit.

India, keen on gaining a strong hold in the south-east Asian rice market which has an enormous potential, is also toying with the idea of trading these commodities for timber and palmolein.

Commerce ministry officials say India could sell up to five lakh tonnes of rice to Indonesia, while they also plan to go all out to sell the foodgrain in the south-east Asian region, where besides Malaysia and Indonesia, Philippines also require to import rice.

Rice production in these nations was hit last year due to "El Nino", a hot weather phenomenon caused by temperature rise in the Pacific Ocean.

Malaysia, on the other hand, is all set to begin counter-trade within the Association of South Eastasian Nations (Asean) by buying rice from Thailand in return for palmolein.

As far as Indonesia's offer is concerned, Indian trade and industry is unwilling to sell rice or drugs on credit in view of Jakarta's financial problems.

Though Indian commerce ministry feels counter trade is an option that could be considered, the problem was with opening a escrow account in a third country, especially Singapore.

The escrow account is where all the proceeds of trade are credited and in case of default by either of the trading partners, the other gets access to the account.

Moreover, India also wants Indonesia to identify the government body which will do the trading with Indian state-owned companies, commerce ministry sources said.

India has, however, decided to bid for the International tender to be floated by Indonesia for rice, the sources added.