Musharraf said the two countries made progress since April by reappointing ambassadors to each others' capitals and reviving a cross-border bus service, but "we haven't started talking to each other."

The last formal talks were held in July 2001 at Agra in India.

He said he had offered a immediate ceasefire on the Line of Control (LoC) dividing the disputed Kashmir state between the countries and proposed reinforcement of UN troops at the LoC to "satisfy Indian concerns" on cross border terrorism.

But the Indian response of accusing Pakistan of sponsoring attacks by Islamic militants across the de-facto border was "shocking," he told a news conference here on the sidelines of the Organisation of the Islamic Conference (OIC) summit.

"It is high time that we start the process of dialogue because that ultimately will lead to a peaceful resolution to our disputes. Otherwise, this tension will continue to the detriment of both our countries and also the entire South Asian region," he said.

It is impossible also to improve bilateral trade ties because there is "too much of hatred between the two countries," he added.

The rivals are in the midst of a delicate peace process after coming close to their fourth war last year.

The 57-member OIC, in a declaration released Friday, expressed alarm at India's refusal to cut troops at LoC and said it was "deeply disturbed" because nuclear weapons made the tension "infinitely more dangerous."

It warned of the "terrible consequences of a war" and urged India to start a "meaningful and sustained dialogue process" with Pakistan.

Indian Foreign Minister Yashwant Sinha on Thursday said talks with Pakistan had not begun because Islamabad had done "nothing at all" to stop cross-border terrorism in Kashmir. But he stressed the peace process was continuing.

WAR.WIRE