"It does not respect full equality of all ethnic communities in Kosovo," Milutinovic told Serb officials in Kosovo, where he was due to meet ethnic Albanian negotiators.

The Albanians failed to show for direct talks with a representative of Belgrade - the 17th non-appearance.

Kosovo Albanian leader Ibrahim Rugova said any talks should be held only through the mediation of US envoy Christopher Hill.

Belgrade has refused to agree to the request which it has described as "international interference" in the crisis.

The BBC's correspondent in Pristina, Jacky Rowland, says that the plan is understandably criticised by the Serbs, as the proposals would effectively raise Kosovo to the status of a third republic within Yugoslavia on a par with Serbia and Montenegro.

Kosovo would no longer be allocated seats in the Serbian parliament, but would instead send 30 representatives to the Yugoslav Federal parliament.

Only defence, foreign affairs, customs, foreign trade and monetary policy would be in the hands of the Yugoslav federation.

Separatist KLA soldiers - fight for total independence

Kosovo's ethnic communities would share power according to ethnic structure - leaving Kosovo's 90% Albanian with the majority of power - and solve internal disputes in the Kosovo Supreme Court.

Mr Milutinovic said the American draft went beyond last month's agreement between the Yugoslav President Slobodan Milosevic and the American envoy Richard Holbrooke, syaing it contravened Serbia's "territorial integrity".

He said Kosovo Albanians could have self-rule but the province must remain a part of Serbia.

"The form is clear - democratic self-rule within the republic of Serbia, and thus the Federal Republic of Yugoslavia," Milutinovic said, adding this would give Kosovo its own parliament, government, judicial system and police.

Mr Hill discussed the American draft with the separatist Kosovo Liberation Army guerillas on Tuesday.

The KLA's support is crucial if the an uneasy ceasefire that has ended nearly eight months of fighting.

A top ethnic negotiator in the camp of the moderate Kosovo Albanian leader Ibrahim Rugova indicated that his side could settle for less than the long-proclaimed goal of complete independence, but it remains to be seen whether the rebel Kosovo Liberation Army would agree to any deal short of what they have been fighting for.