8/8/06 KUALA LUMPUR (Reuters) - Free-trade talks between ASEAN and India are being derailed by "foot-dragging" bureaucrats and New Delhi's refusal to include palm oil and other sensitive goods, an ASEAN official said on Tuesday.

India and the Association of South East Asian Nations had proposed to conclude a free-trade agreement by the start of 2007, but the chances of meeting that target now look slim.

Despite the hurdles, the 10-member ASEAN will not drop the idea, the group's Secretary-General Ong Keng Yong said.

"We just want to make sure it's kept on the burner and not taken away and thrown out of the window," he told reporters in the Malaysian capital.

"Now we are just seeing official bureaucrats at the bottom, in the middle trying to drag their feet," he said.

New Delhi had wanted a host of items - from toilet seats to crabs and chewing gum - excluded from tariff cuts.

India had initially put forward 1,414 items on the exclusion list. They included rice, textiles, palm oil, coconut oil and petroleum products.

The list was later trimmed to 854 items. Ong said ASEAN now wanted the list to be cut further to 400, or 40 items per ASEAN member.

"We thought 40 times 10 is a very reasonable number ... but now we have to bargain, it's still 854 items.

"Then on top of that they say our palm oil cannot go there ... you don't produce one tonne of palm oil, why can't we go there?"

Malaysia and Indonesia are the world's largest producers and exporters of palm oil.

ASEAN also comprises Brunei, Cambodia, Laos, Myanmar, the Philippines, Singapore, Thailand and Vietnam.