By Ayanjit Sen BBC reporter in Delhi

Mufti Mohammed Sayeed, leader of the People's Democratic Party (PDP) in Indian-administered Kashmir, is to become the state's new chief minister.

Mufti Mohammad Sayeed will be leading the government in Jammu and Kashmir

Congress leader Sonia Gandhi

The decision was announced on Saturday by Sonia Gandhi, president of India's main opposition Congress party, after talks with Mr Sayeed in Delhi.

The two parties won a majority of seats in the recent state legislative elections and, acting together, have ousted the National Conference party from power.

Since then, the two parties had argued over who should become the chief minister and their failure to agree on a candidate forced Delhi to impose direct rule on the state.

Now, Mr Sayeed will be the chief minister leading a coalition government in Indian-administered Kashmir, ending a political deadlock in the region.

Common agenda

Mrs Gandhi acknowledged that many of her party members had wanted the Congress to lead the new state administration.

Mrs Gandhi decided to break the stalemate

She said she and her colleagues thought long and hard about it and decided "that, for the larger interest of the people of Kashmir, the right thing to do was to give Mufti the chief minister's post".

"Mufti Mohammad Sayeed will be leading the government in Jammu and Kashmir," she said.

Mufti Sayeed said he and his allies were working on the details of coalition policies.

"We have drafted a common minimum programme which will be the agenda for the alliance," he said.

New administration

Elections held in several phases in September and October produced a hung assembly.

The Congress and the PDP together have 36 seats in the 87-seat legislature.

Although the PDP only won 16 seats to the Congress' 20, it demanded the leadership of the alliance, and the chief minister's post.

PDP leaders argued that they had won most seats in the sensitive Kashmir Valley, the heart of a separatist insurgency since 1989.

Mrs Gandhi's acceptance of this argument opens the way for a new administration to take office in this troubled region of India.