(AFP) Plans to privatise the national railway firm Keretapi Tanah Melayu (KTM) have been put on hold after the government rejected a proposal by a Renong Bhd-led consortium, a minister said today.

Transport Minister Ling Liong Sik said the government would next year take back KTM from Marak Unggul, which has been managing KTM since August 1997 pending privatisation.

Troubled conglomerate Renong and its partners in Marak Unggul said yesterday the Economic Planning Unit had turned down the consortium's proposal for privatisation submitted in March.

They said in separate statements to the stock exchange that the government had also decided not to extend Marak Unggul's management contract, which expires at the year-end.

"I think this (rejection) is something because of the uncertainty that hangs over UEM Renong (group) at this point in time," Ling told reporters.

"We are putting it on the shelf at the moment. We will review whenever necessary. If some very, very good proposal comes in, we will consider. The government will take KTM back and we will find the right managers."

Ling declined to comment when asked if the turn-about was because the Renong proposal was not good enough.

Renong, which has some RM13 billion in group debt, is expected to be restructured after the government last month took over its associate company, United Engineers Malaysia (UEM).

Renong holds a 50-percent stake in Marak Unggul, DRB-HICOM Bhd has 25 percent, Bolton Properties Bhd. 20 percent and Jasa Meta Sdn Bhd five percent.

Lack of capital

The New Straits Times quoted industry observers as saying ongoing talks between Malaysia and Singapore on the development of KTM's railway land on the island-state also prompted the reviewal.

The Business Times cited fears the privatisation of KTM may fail after the government was forced late last year to rescue two light rail transit companies for six billion ringgit amid an economic downturn.

KTM has posted losses of more than RM400 million for the past four years and had borrowings of RM953 million as at December 1998.

The New Straits Times said Marak Unggul had failed to make a capital injection of RM100 million into KTM as pledged when it took over.

"Based on the current scenario, KTM can only break even if it can get a subsidy from the government. Hence the government finds privatising KTM at this point in time is not feasible," the source said.

The government must compensate Marak Unggul about RM30 million if privatisation is not awarded to the company.

Analysts said there may be renewed competition to gain control of KTM due to its valuable land bank. KTMB owns prime properties in Kuala Lumpur, Johor and Singapore.