The statement came as heavy artillery fire continued to be exchanged between India and Pakistan for a second day after a lull in fighting.

India said some fighters were still holed up in three areas of Indian-administered Kashmir.

'Real dialogue'

Pakistan Foreign Secretary Shamshad Ahmad told reporters in Saudi Arabia that India was using dialogue as a "tactical ploy" and his country wanted "real dialogue" on the Kashmir dispute.

Jaswant Singh: Ready for talks

"India has been speaking of the language of war, belligerence, hegemony and brutalities ... Hence, it is all the more necessary to have an interpreter," Mr Ahmad said.

Indian Foreign Minister Jaswant Singh said on Tuesday his country would be willing to hold peace talks once the last of the fighters was evicted.

And President Clinton made a surprise telephone call to the Indian prime minister, Atal Behari Vajpayee, offering his support and expressing his interest in visiting the region

Renewed fighting

Indian troops continued to attack Pakistani-backed forces still holding on to positions inside the Indian side of the Line of Control dividing Kashmir.

The BBC's Mike Wooldridge: "India calls it cross border terrorism"

An army official told reporters that 100 to 150 fighters were still in position in the Muskoh Valley, Drass and Batalik sections in the Kargil area of Indian-administered Kashmir.

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He said Pakistan was responding to the firing with shelling of its own.

On Tuesday, heavy firing was exchanged for the first time since last Friday.

Clinton's visit

US President Bill Clinton has made a telephone call to Prime Minister Atal Behari Vajpayee of India.

President Clinton: Wants to visit

In his 20-minute conversation, Mr Clinton applauded India's restraint in the recent conflict in Kargil. The president reaffirmed his interest in visiting the region but no date was set for the visit.

A planned visit to South Asia was called off last year after Indian and Pakistan conducted nuclear tests.

Mr Clinton is understood to have also backed peace talks between the two countries. Bilateral dialogue between India and Pakistan was "important for long term peace in the region" a statement from Mr Vajpayee's office quoted him as saying.

Grenade attack

A hand grenade attack on a market in Indian-administered Kashmir on Wednesday killed two civilians and wounded another 16.

Police said the attack took place in a crowded vegetable market in Baramulla, 55 kilometers (34 miles) north of Srinagar.

In another incident, shooting broke out between the police and separatist militants at Batmaloo in the capital, Srinagar on Tuesday night in which two militants were killed.

In addition, suspected separatists have killed three pro-India activists in separate incidents in the northern section of Indian-administered Kashmir.

The BBC's Binoo Joshi: "Nobody has claimed responsibilty for this attack"

On Tuesday, suspected militants killed 19 people in two attacks.

In Washington, US Secretary of State Madeleine Albright called for an end to violence in Kashmir.

"Acts of terrorism must stop immediately because such actions make the Kashmir conflict more, not less, difficult to resolve," she said.

Ms Albright is scheduled to meet Indian Foreign Minister Jaswant Singh at the sidelines of the ASEAN meeting in Singapore.

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