Yonhap News Agency says state funds for the construction of light-water reactors in North Korea could instead go to energy aid to the North under the "important proposal" if the project is cancelled.

The government has asked parliament to allocate 2.72 trillion won (2.63 billion dollars) from the inter-Korean economic cooperation fund over the next five years for the reactor project from next year to 2009.

In a 1994 deal, a U.S.-led international consortium agreed to build two light-water nuclear reactors in North Korea in exchange for Pyongyang's freeze of its nuclear program.

But the 4.6 billion dollar project was suspended in 2003 after the United States accused the North of secretly producing uranium-based nuclear weapons.

South Korea, which was to shoulder 70 percent of the reactors' cost, has already spent 1.1 billion dollars.