KUALA LUMPUR, Oct 30 (Reuters) - A Malaysian minister on Wednesday said a boycott of the country's palm oil by Indian traders will likely not be prolonged as there were not enough supplies from top producer Indonesia to cover the shortfall.

Indian traders have been told to stop buying palm oil from Malaysia, the second biggest exporter of the commodity, after remarks by Prime Minister Mahathir Mohamad on Kashmir sparked anger in New Delhi.

Mahathir told the U.N. General Assembly late last month that India had "invaded and occupied" Kashmir, a disputed Muslim-majority region also claimed by Pakistan.

The boycott of Malaysian palm oil was likely temporary as supplies from Indonesia alone were not enough to meet demand in India, Malaysia's economic affairs minister, Azmin Ali, said.

"We are confident that very soon, we will be able to resolve this matter effectively," Azmin told parliament on Wednesday.

Azmin also defended Mahathir's remarks, saying that Malaysia should be free to voice its opinions on international issues.

Mahathir has said he will not retract his comments despite the palm oil boycott.

India revoked the status of its Jammu and Kashmir state in August and on Wednesday moved to split the state into two territories.

New Delhi has rejected criticism from foreign countries on its actions in the region, insisting it was an internal affair. (Reporting by Rozanna Latiff, editing by Louise Heavens)