US Defence Secretary Donald Rumsfeld has said there are indications that members of Osama Bin Laden's terror group are operating along the Line of Control dividing Indian and Pakistani Kashmir.

It has been a situation that has been tense and it continues to be a tense situation

Donald Rumsfeld

The defence secretary was speaking after meeting Indian Prime Minister Atal Behari Vajpayee in Delhi, before setting off for Pakistan on a regional tour aimed at reducing the threat of war between the two nuclear-armed rivals.

"I have seen indications that the al-Qaeda is operating in areas near the Line of Control," Mr Rumsfeld said.

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Indian officials have previously insisted that al-Qaeda militants were operating in Kashmir, but this is the first time as US official has backed the claim.

Pakistan has not formally responded, but BBC regional analyst Owen Bennett-Jones says the suggestion of an al-Qaeda presence in Kashmir will cause concern.

Pakistan's President Pervez Musharraf is already facing complaints about giving in to US and Indian pressure, and now that pressure is likely to increase from Washington to arrest any al-Qaeda members.

Mr Rumsfeld has now arrived in Islamabad, where he is due to hold talks with General Musharraf on Thursday.

Mr Musharraf is under pressure at home over Kashmir concessions

Our analyst says the US envoy is expected to ask Pakistan to make permanent its new Kashmir policy of blocking the Line of Control to militant separatists.

In Delhi, Mr Rumsfeld said he and Indian Prime Minister Vajpayee discussed the participation of international troops in Kashmir, and the possible use of American surveillance technology to monitor militant incursions across the line.

But he added that no firm decision had been reached.

Naval withdrawal

Mr Rumsfeld backed the steps taken by India to resolve its crisis with Pakistan and said the moves were "constructive".

The situation will remain grim till we disengage on the borders

President Musharraf

"I must say the leadership in India has demonstrated their concern and interest in seeing that things are resolved in an appropriate way," Mr Rumsfeld told journalists after meeting Indian Defence Minister George Fernandes.

Pakistan's reaction has been lukewarm, with the foreign ministry pointing out that hundreds of thousands of India's troops remain massed on along the Line of Control and the international border "in a dangerous posture of confrontation".

Mr Rumsfeld has described his role as that of a friend rather than a mediator and pointed out he was not bringing any new proposal to help the two neighbours resolve their differences over Kashmir.

Mutual mistrust is still running high

His arrival in the region comes soon after India began pulling back warships from waters close to Pakistan in a bid to reduce tensions - a move that followed its earlier ending of a six-month long ban on overflights by Pakistani aircraft.

Mr Rumsfeld said there were encouraging signs that a conflict could be avoided after what he called the very firm commitment from Mr Musharraf to stop Islamic militants infiltrating the Indian-controlled part of Kashmir.

But US envoy admitted the situation "continues to be tense"

General Musharraf has called the Indian naval withdrawal "a very small beginning" and said more needed to be done.

The BBC's Zaffar Abbas, who is in Pakistan-administered Kashmir, says there has been a lowering of tension timed to coincide with Mr Rumsfeld's visit to the region.

But an Indian defence ministry spokesman said the two sides had continued to trade heavy fire at many points along the Line of Control.