Dozens of people have been killed in heavy fighting in Burma near the Thai border.

The Burmese army has been attacking positions captured recently by the rival ethnic Shan group, the Shan State Army, opposite Thailand's Chiang Mai province.

We are on full alert for any incursion into Thailand

Thai Defence Ministry spokesman

Military sources say about 150 Burmese soldiers have been killed or injured, but this has not been confirmed officially.

It is also unclear how many Shan rebels have died or been wounded.

Hundreds of villagers have been evacuated from the Thai side of the border after several shells landed inside Thailand.

Thai prime minister Thaksin Shinawatra is facing mounting criticism of his conciliatory approach towards Rangoon, but he has brushed aside speculation of military discontent with his border policy.

Burma has accused Thailand of feeding, arming and assisting the rebels from the Shan and another ethnic army, the Karen National Union.

Internal affair

Mr Thaksin said the situation on the border was not a serious problem for Thailand, describing the fighting as Burma's internal affair.

"Burma has informed us about the crackdown and that it will try very hard to prevent shells from landing inside Thailand. We must not interfere."

However, the border between the two countries has been closed for the last week and Thailand has been closely monitoring the situation.

"We are on full alert for any incursion into Thailand and we are reinforcing positions along the border that may be at risk," Thai Defence Ministry spokesman Surapan Poomkaew told the Reuters news agency.

Massive manhunt

Emotions are running high in Thailand after masked gunmen opened fire on a school bus that killed three teenagers and injured 14 others earlier this week.

The bus was sprayed with bullets

The attackers wore masks and jungle fatigues, similar to those worn by ethnic minority fighters.

Mr Thaksin has said the evidence seemed to point to armed militias but said the KNU was unlikely to be involved because 80% of Thai children living in the area where the attack happened are Karen by descent.

The Thai media speculated that Burmese troops could have been behind the attack, but both Rangoon and the KNU denied involvement in the shooting.

On Wednesday more than 300 Thai police and soldiers backed by helicopters were combing a 100 square kilometre (39 sq mile) section of the border for the gunmen, a police spokesman said.