A search plane was launched from western Australia to join the search for survivors after a liquid natural gas tanker rescued 17 people spotted struggling in the water in the early morning about 1,600 nautical miles (2,900 km) northwest of Perth.
Australia's Defence Force chief Angus Houston said in Canberra an Australian navy ship was steaming towards the search site but it would take another 28 hours to get to the area, about 650 km northwest of Cocos Islands.
Officials feared for the lives of the missing people as waves in the area were high.
Air Marshall Houston said a Taiwanese fishing boat heard radio calls for help and got to the scene late on Sunday night. The Bahamas-registered LNG tanker Pioneer arrived shortly afterwards to join the rescue.
"When the first ship got there this vessel was still intact," Houston said.
"Somehow or other during the process of the interaction between the ship and the trawler, and also the stricken vessel, there's been a capsize and people have ended up in the water."
The Australian Maritime Safety Authority received calls for help from the tanker late Sunday and at daylight dispatched spotter planes.
The sinking came as a string of rickety boats set out from Sri Lanka in recent weeks carrying Tamil refugees, trying to reach Australia.
Australian authorities have yet to determine whether the boat was carrying asylum seekers or their nationality.
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