India says Pakistan still supporting militants

"Pakistan has not yet abandoned exporting cross-border terrorism as an instrument of state policy," the ministry said.

"Most of the earlier restrictions imposed on terrorist outfits by Pakistan have been gradually rolled back," the report said, referring to Islamabad's crackdown on hardline Islamic groups in Pakistan two years ago.

The ongoing rebellion by Islamic militants against Indian rule in Kashmir has been the focus of revived peace talks between Indian and Pakistan, which denies supporting the insurgency that has killed tens of thousands since it began in 1989.

During talks on terrorism held in Islamabad last week, the two sides in a joint statement "reaffirmed their determination to combat terrorism."

A Pakistani official said both sides had expressed concern over alleged sabotage training camps in each other's territory.

He said Islamabad told the Indians that Pakistan had done everything possible to rein in militants.

But the Home Ministry's report said the security situation in Kashmir was "delicately poised", and that Pakistan was sustaining the Kashmir rebellion though "foreign mercenaries" who were sponsored by Pakistan's military Inter-Services Intelligence (ISI).

India and Pakistan have fought two of their three wars over Kashmir, which is divided between them but claimed in full by both.

They came to the brink of a fourth war after an attack on India's parliament complex in December 2001 by gunmen New Delhi claimed were sponsored by Islamabad.

Meanwhile, grieving relatives yesterday cremated victims, mostly women and children, of a separatist bombing in northeastern India, while hundreds of angry people rallied against the rising bloodshed.

"It was a very tragic scene to see sobbing parents lighting funeral pyres for their sons and daughters," social activist Khirod Saikia said by phone from Dhemaji town, where 22 people died on Sunday in one of the worst attacks of a long revolt.

"Some mothers fainted on the funeral ground."

Shops, businesses and schools in the town shut down through the day in response to a call by a local students' group to protest against the killings.

About 500 people from villages in the area took out a torchlight march in Dhemaji to condemn the killing, residents said. The powerful All Assam Students Union called for a 12-hour general strike across the state on Wednesday.