03/12/2008 (Reuters), Nusa Dua, Indonesia - Indian buyers who defaulted on palm oil imports from Indonesia have begun to ship out a portion of the old contracts following protests from producers, an industry official said.

"I have received reports that Indian defaulters have asked for shipments although so far they have not asked for the entire amount," Akmaluddin Hasibuan, chief of Indonesian Palm Oil Producers Association (GAPKI), told Reuters late Tuesday night.

He said the defaulters are willing to pay prices agreed under the old contracts.

About 30 Indian importers had previously cancelled contracts to buy about 100,000 tonnes of palm oil from Indonesia in recent months following sharp falls in prices, he said.

Used in a range of products such as soap to biodiesel, palm oil has lost nearly two thirds of its value from a record high of 4,486 ringgit per tonne in March, pressured by a combination of factors such as faltering crude oil prices and slowing demand.

The Indonesian producers association has openly complained about the defaults by sending letters to its counterpart in India as well as Indian trade ministry.

The response has been quite good and the relationship between Indonesian producers and Indian buyers have now improved, Hasibuan said.

But Indonesia producers are seeking stricter contract requirements with Indian buyers from next year, he said.

India, the world's biggest vegetable oil importer after China, buys almost half of its annual edible oil requirement of around 11 million tonnes -- mainly palm oil from Malaysia and Indonesia, and soyoil from Brazil and Argentina.

Top industry analyst Dorab Mistry praised GAPKI's move.

"For first time as long as I can remember, the association has had the guts to take it up. Normally when defaults happen people tend not to talk about it," he said.

Indonesia, the world's largest palm oil producer, is expected to export about 13.5 million tonnes of palm oil this year, about 4 percent below the initial forecast of 14 million tonnes, Hasibuan said.

He said exports may drop further to 11.5 million in 2009 as Indonesia may use about 2 million tonnes of palm oil to produce biodiesel, while some replanting plans may reduce output.