A worker unloads palm oil fruit bunches from a lorry inside a palm oil mill in Malaysia

MUMBAI (Reuters) - Indian refiners have resumed buying Malaysian palm oil after a gap of nearly a month and contracted around 70,000 tonnes of shipments in December as Kuala Lumpur has been offering a $5 per tonne discount over supplies from rival Indonesia, five traders told Reuters on Thursday.

The resumption in purchases by India, the biggest buyer of Malaysian palm oil this year, could support Malaysian palm oil prices, which are near their highest in two years.

Palm oil is crucial for Malaysian economy as it accounted for 2.8% of Malaysia's gross domestic product last year and 4.5% of total exports.

Indian refiners stopped purchases from Malaysia last month, fearing New Delhi could raise import taxes or enforce other measures to curb imports after Kuala Lumpur criticised New Delhi for the centre's Jammu and Kashmir move.

Malaysian palm oil is available at a $5 discount amid congestion at Indonesian ports, said a Mumbai-based dealer with a global trading firm.

"This is giving a few buyers a reason to start buying Malaysian oil in small quantities to run their refineries."

Malaysian crude palm oil (CPO) for December shipment on the Indian west coast was available at $603 on a cost and freight basis (C&F) on Thursday, while Indonesian CPO was quoted at $608, dealers said.

Indonesia is the world's biggest producer of palm oil, followed by Malaysia.

In October, India's top vegetable oil trade body told members to stop buying palm oil from Malaysia in a call aimed at helping New Delhi punish the country for criticising India over its policy towards Kashmir.

India's government was angered after Malaysian Prime Minister Mahathir Mohamad said at the United Nations that India had "invaded and occupied" Jammu and Kashmir and asked New Delhi to work with Pakistan to resolve the issue.

The Centre has not made any public remarks about imports of palm oil from Malaysia.

"The dispute has been going on for a month but still India hasn't come out with concrete measures. Some traders have started taking risks, assuming it may not impose a duty on Malaysian palm oil," said a Mumbai-based importer.

Palm oil accounts for nearly two-thirds of India's total edible oil imports. India buys more than 9 million tonnes of palm oil annually, mainly from Indonesia and Malaysia.

In the first 10 months of 2019, India bought 4.1 million tonnes of Malaysian palm oil, Malaysian Palm Oil Board data showed.

Indian refiners have contracted around 70,000 tonnes of CPO for December shipments and a small quantity was also bought for January shipment, said a Kuala Lumpur-based palm oil dealer.

India, the world's biggest importer of edible oils, also buys soyoil from Argentina and Brazil, and sunflower oil from Ukraine.

"As palm oil futures have jumped in the last few weeks, Malaysian traders are eager to sell at higher levels before India imposes any restriction," said a New Delhi-based trader.