"It is going to be a win-win situation," Pakistani Water and Power Secretary Ashfaq Mehmood told reporters after high-level talks here with his Indian counterparts. "The issues are almost now resolved."

His Indian counterpart V.K. Duggal also appeared optimistic.

"We have discussed all the issues with an open mind and we have taken them very close to a point of resolution. We would now be reporting to our respective governments," Duggal said, without elaborating.

The two sides met to narrow differences over the sharing of water under the 1960 Indus Basin Treaty, which divides between Pakistan and India six rivers which run through or start in Indian-controlled Kashmir.

The provisions of the treaty give India exclusive rights over the waters of the Sutlej, Ravi and Beas rivers, while Pakistan has rights over the Indus, Chenab and Jhelum rivers.

According to Pakistan, India is violating the provisions of the treaty with its construction of the Bagliar dam on the Jhelum river and the proposed Krishna Ganga dam on the Chenab in the Indian-controlled side of Kashmir.

Islamabad says construction of a 330-megawatt hydroelectric project on the Jhelum will affect water flows to Pakistan, which New Delhi is not permitted to do, though the treaty permits India to generate electricity.

New Delhi says the technical design of the project, not involving storage, is well within the provisions of the Indus Water Treaty and national and international practices.

"The talks were held in a very cordial, very friendly atmosphere with utmost mutual understanding and cooperation," Duggal said after the marathon nine-hour discussions.

Asked repeatedly about the controversial dam and the issues surrounding it, officials on both sides said "all issues were discussed" and that "very good progress" had been made.

On Sunday officials of the two South Asian nuclear rivals held talks and decided to set up a hotline to reduce the likelihood of nuclear conflict.

These talks come ahead of a major meeting June 27-28 between the foreign secretaries of the two countries with the dispute over Kashmir, which is divided between India and Pakistan but claimed in full by both, and peace and security topping the agenda.

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TERRA.WIRE