The statement is being seen as an indirect appeal to the militants to withdraw from the region.

It was released by the cabinet defence committee after talks with the prime minister, Nawaz Sharif, who agreed with President Clinton earlier this week that "concrete measures" should be taken to restore the line of control separating Indian and Pakistani-controlled Kashmir.

One militant group immediately responded by saying that there was no question of withdrawal.

"Our war is not for withdrawal, but to move forward, so any appeal for withdrawal stands rejected," Fazalur Rehman Khalil, chief of Harakatul Mujahideen, told Reuters news agency.

The BBC's Owen Bennett-Jones: "A statement appealed to the militants to help solve the problems"

Meanwhile, India says it has flushed out the militants from almost the entire Batalik sub-sector in Kargil. Indian air and ground attacks continued as officials spoke of "fierce resistance."

Pakistan's defence committee said in a statement that it wanted the militants to "provide an opportunity to the international community to play an active role for the realisation of the legitimate aspirations of the Kashmiri people."

Foreign Minister Sartaj Aziz said the meeting was attended among others by the army chief, General Pervez Musharraf, and intelligence chiefs.

Mr Sharif faces criticism from the militants and opposition groups who are unhappy with any deal he may have struck with President Clinton.

Government sources say he is due to address the national assembly on Monday, instead of making a television statement that had been scheduled for Saturday.

Counter attacks

The BBC's Altaf Hussein in Srinagar says a senior Indian Army officer, Brigadier A K Chopra, told journalists that Indian troops captured four more strategic peaks in the Batalik sector on Thursday.

(Click here to see a map of the area)

The BBC's Mike Wooldridge: "There are still intense battles going on"

He said the infiltrators were still holding a couple of pockets in the area but was confident they would be pushed out within the next 48 hours.

The Brigadier also said some infiltrators had counter-attacked, particularly in the Muskoh Valley.

India said there had been no let up in fighting since Mr Sharif's joint statement with President Clinton in which he agreed to persuade the militants to pull back from their positions.

Indian officials said enemy forces - which is says are a mix of Pakistani soldiers and militants - were strongly resisting attempts to drive them out.

A spokesman said: "They are being supplied by yaks, mules and snowmobiles. We also know their helicopters bring supplies into valleys on our side of the Line of Control."

The official figure for the number of Indian soldiers killed since fighting began almost nine weeks ago is 321.

Militants funeral

Several thousand people have attended funeral services in Muzaffarabad for six militants killed in Indian-administered Kashmir.

Five of them belonged to the militant group Tehrik-e-Jihad and one to the Al-Badar Mujahideen.

The coffins were draped in the Pakistan flag and were buried by members of the militant groups, who shouted slogans.

Earlier, Washington said it was confident that Islamabad wanted to resolve the crisis and would be able to secure a withdrawal of the fighters.

State Department spokesman James Foley said the US believed Pakistani Prime Minister Nawaz Sharif had enough influence over the militants to convince them to pull out.