UPDATED 11.20AM | Putrajaya has decided to terminate the controversial RM81 billion East Coast Rail Link (ECRL) project, according to a news report.

Quoting a cabinet source, news outlet Sin Chew Daily reported that the matter was discussed and determined at yesterday's cabinet meeting.

The report further stated that the government is discussing compensation with Chinese firm China Communications and Construction Company (CCCC), which was the contractor for the project.

One minister has confirmed to Malaysiakini that cabinet had discussed the matter, and said the matter would be handled by the Finance Ministry.

Yesterday Prime Minister Dr Mahathir Mohamad had denied knowing if the ECRL project had been terminated.

He, however, also reportedly said: "One of the ways to tackle this matter is to terminate the contract, but when it's done, (we) have to pay compensation worth billions (of ringgit)." 

This comes off the back of previous news reports last week, first by The Edge Markets, which quoted a source as saying that the government had terminated CCCC's engineering, procurement, construction and commissioning contract for the ECRL project.

This was followed by another report by Singapore daily The Straits Times that the Malaysian government was seeking a new contractor after CCCC was unable to meet conditions set by the government.

Malaysia had reportedly sought for the maximum cost of the project to be capped at RM40 billion, and for more local materials to be used.

When questioned on the matter, Finance Minister Lim Guan Eng refused to comment on the report.

"Can I answer this question at a different stage? I am sorry but this (event) is for the Cameron Highlands by-election.

"The government will make an announcement (on the ECRL project) at a more suitable location, if needed," he told reporters at the Bersatu operations rooms in Kuala Medang in Cameron Highlands today.