Pakistan Wednesday stuck to its traditional position on Kashmir even as India offered to consider various options for the resolution of the dispute on Jammu and kashmir, but emphasised these should be based on "ground realities."

Jammu and Kashmir and the proposed gas pipeline to transport natural gas from Iran to India overland via Pakistan figured prominently in the first meeting between Prime Minister Manmohan Singh and his Pakistani counterpart Shaukat Aziz 
at the Hyderabad House here.

"We are willing to look at various kinds of options that might be there but these options must be based on ground realities," Foreign Secretary Shyam Saran told journalists.

But Aziz, speaking to reporters at the Taj Mahal Hotel where he is staying, referred to Jammu and Kashmir as the "core issue" between the two countries and linked progress on it to forward movement on the continuing talks on confidence building measures between the two countries.

"As regards Jammu and Kashmir, we believe this is an issue and we all need to discuss and address. Progress on other issues will be made in tandem with it," he said.

Saran, in response, said: "We move forward in a measured fashion. We regard the process of confidence building as not separate from dealing with the issue of Jammu and Kashmir.

"They are, in fact, linked together" and New Delhi was willing to address all issues in a "sincere and purposeful manner," he said while emphasising the need for expanding the areas of peace and friendship between the two countries "so that it becomes easier to deal with this complex issue."

But despite reiteration of their known stands on Kashmir, both sides expressed satisfaction over the progress of the Composite Dialogue process and expressed their commitment to carry it forward.

Aziz said Pakistan had not made any proposal to India on resolution of the Kashmir dispute and "no reaction was expected from India."

He was referring to a proposal by President Pervez Musharraf to divide Jammu and Kashmir into seven regions, demilitarise them and grant them independence or place them under the administrative control of India, Pakistan or the UN. Aziz said the proposal was meant for internal debate in Pakistan.

In response, Manmohan Singh reiterated India's known stand on Jammu and Kashmir - that there could be no redrawing of the map of the region.   

There were no major agreements or announcements at the end of nearly two hours of talks between the two prime ministers, first with only selected aides present and later at the delegation level.

This was because, as Saran pointed out, the Pakistan prime minister's visit was in his capacity as the chairman of the South Asian Association for Regional Cooperation (SAARC).

"We have taken advantage of his visit to also revisit bilateral relations. This is not a negotiating session between the Pakistani delegation and the Indian delegation," he said.

"There was satisfaction that relations have gone forward and there was common commitment to take it forward on all issues on the basis of the composite dialogue we have already agreed," he said.

"It is a long journey but both are keen to move forward."

"Pakistan wants peace with its neighbours and peace with India," he said, adding: "It is a great opportunity, an opportunity of potential, an opportunity for peace, and opportunity for growth and a better future for all of us."

Both sides said the atmosphere at the Hyderabad House, venue for their meeting, was "very friendly and constructive."

Aziz, who arrived here Tuesday on a two-day visit, also discussed the proposed gas pipeline to transport natural gas from Iran to India overland via Pakistan.

India had linked the proposals to general easing of restrictions on trade and commercial ties between the two countries and said the project could not be looked at in isolation.

Aziz said with Pakistan's energy requirements set to go up, it had decided to go it alone even if India opted out of it.

The Pakistani prime minister, who returns home Wednesday night, headed a high-level delegation that includes six ministers, three senators, seven members of the national assembly, seven leading businessmen and seven editors.

Among the invitees to the luncheon hosted by Manmohan Singh to the visiting dignitary were Mehbooba Mufti, leader of the ruling People's Democratic Party (PDP) of Jammu and Kashmir and the leader of the main opposition in the state, Omar Abdullah of the National Conference.

Aziz also met various factions of Kashmiri separatists at the Pakistan High Commission Tuesday night but his appeal to them to for a united front went unheeded.

During the visit, Aziz held talks with External Affairs Minister K. Natwar Singh, Petroleum and Natural Gas Minister Mani Shankar Aiyar, Commerce and Industry Minister Kamal Nath.

He also called on President A.P.J. Abdul Kalam and former prime minister Atal Bihari Vajpayee, who initiated the pace process with Pakistan last year.

Aziz, who was accompanied here by his wife, returns to Islamabad Wednesday night.