SRINAGAR, Nov 29: Two people were killed and one injured Monday when Indian troops allegedly opened fire on protesters in Indian Kashmir, while 14 people were wounded in two separate grenade explosions , as New Delhi reported a 60 per cent fall in alleged guerilla incursions from Pakistan.

The grenade was aimed at a police patrol in the centre of Srinagar but exploded on the street wounding mostly pedestrians, a police officer said. Residents of Dangerpora village in the central Kashmir district of Budgam claimed three people were hit when Indian troops opened fire at villagers protesting alleged abuse by the soldiers during a search operation.

Two of the injured later died in hospital, residents and hospital officials said. Witnesses said villagers chanted anti-army slogans and hurled handheld heating pots and stones at soldiers to protest the alleged abuse.

An army spokesman in Srinagar denied troops had fired on the crowd and said the civilians were injured in a shootout between suspected Islamic militants and troops who had besieged the village.

Villagers said no militants had been present in the village. Senior police and civil officials of Budgam have rushed to the village where the situation is tense, with witnesses saying several hundred villagers had poured onto the streets to protest the shootings.

Earlier, Indian Home (interior) Minister Shivraj Patil was quoted as saying that following the sharp dip in rebel incursions into Jammu and Kashmir from Pakistan, violent attacks had also fallen off dramatically.

"We have built a fence and with proper monitoring by army and paramilitary forces, infiltration is down by 60 per cent," Mr Patil told The Times of India in an interview.

He was comparing infiltration by militants in 2003 with the January to November period of this year. He did not give a number for the rebels crossing over each year or specify how the incursions were counted.

The average number of violent incidents had fallen to a six a day in 2004, compared with nine a day last year and 11 per day in 2002, he said. India has fenced off most of the 742-km Line of Control (LoC), the heavily militarized ceasefire line.

Indian army officers say construction of the 10-foot-high fence has reduced the number of guerillas slipping into Jammu and Kashmir, thus enabling troops to deal with a far smaller number of insurgents more effectively.

This month, security agencies estimated 370 militants crossed into Kashmir in the first 10 months of 2004, down from 1,200 in the same period in 2003. Shops and schools in the northern town of Handwara and adjoining villages remained closed on Monday to protest the alleged custodial killing of a Kashmiri youth by counter-insurgency police, witnesses and police said.

Police claimed the youth was a militant killed with three other rebels during a clash Saturday in Srinagar. But his family claim he was a student who was arrested and killed in a staged encounter.

On Monday Kashmir's moderate separatist Mirwaiz Umar Farooq urged world human rights organisations to take note of such "custodial killings", a statement said. -Agencies