Water officials from the two countries met last week in New Delhi to discuss their drawn-out row over the Baghliar Dam in India's section of the divided Himalayan territory, but could not agree to a solution.

"It will have indirect impact on the dialogue process because both sides have been talking about a trust deficit and such an impasse of course widens that deficit," foreign ministry spokesman Masood Khan told a regular briefing.

Khan said the Pakistani negotiating team had returned home and was due to report to the prime minister, after which the next steps would be taken.

Islamabad says the dam violates a 1960 water-sharing treaty, which bars India from interfering with the flow of the three rivers feeding Pakistan -- Indus, Chenab and Jhelum -- but allows it to generate electricity from them.

The treaty, brokered by the World Bank, is one of the South Asian foes' most enduring agreements and has survived two wars between them.

But Pakistan fears the dam could block water from the Chenab river and deprive it of vital irrigation in Pakistan's wheat-growing Punjab province. New Delhi says the fears are groundless.

Khan said Pakistan had already decided that if bilateral talks to resolve the row failed it would ask the World Bank to appoint a neutral expert in line with the treaty.

He said India should halt building work until the issue is resolved. "Stopping construction, that is something that India can do. This is a minimal step... until we find an amicable solution," he said.

The hydroelectric dam in Indian-controlled Kashmir's Jammu region is being built in two 450-megawatt phases. The first phase was due for completion in 2004 but has been delayed by the dispute.

Islamabad and New Delhi began a step-by-step peace process in January 2004 to solve key issues, including the core problem of Kashmir, but it has crawled almost to a halt in recent months.

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