Pakistani Foreign Secretary Riaz Mohammad Khan and Indian counterpart Shyam Saran shook hands as they sat down to review the peace process, that has made little headway over the main dispute in Kashmir since it was relaunched early last year.

They were putting their focus on possible restructuring of the complex and slow-moving peace process and were reviewing the progress of the ongoing "composite dialogue" launched by India and Pakistan in January 2004.

"The talks have started," a Pakistani foreign ministry official told AFP. A statement on the talks may be issued later.

The peace process has so far produced a number of largely symbolic steps, including a historic bus service across the divided Himala-yan territory of Kashmir and the resumption of sporting ties.

The two countries also recently agreed to set up a hotline and other measures to stop an accidental nuclear exchange.

But progress has been sluggish on central issues such as Kashmir itself. The restive region is divided between the two nations but claimed in full by both, and has sparked two of their three wars since independence in 1947.

Other issues covered by the peace dialogue include a decades-long military standoff on a glacier high up in the mountains of Kashmir and boosting trade and cultural ties.

Officials said privately that the two sides were also expected to discuss changing the format of the process, under which each individual topic is discussed by relevant ministries at different times.

Instead India is likely to propose setting up ministerial commissions on each side to discuss all subjects at the same time and cut down on the number of meetings.

An Indian army spokesman said on Thursday troops had encountered a large band of infiltrators overnight in the Nowgam area northwest of Srinagar.

"A heavily armed group of terrorists tried to infiltrate in Nowgam sector. Nine were killed in a night-long gun battle," spokesman Lieutenant-Colonel V.K. Batra said.

India has expressed rising disquiet over militant activity in Kashmir, describing Pakistan's efforts to halt infiltration by insurgents across the border as half-hearted.

Islamabad denies involvement in the revolt in Indian Kashmir but accuses New Delhi of dragging its feet in discussing the dispute over the Himalayan region, cause of two wars.