NEW DELHI, June 22: India and Pakistan reported progress in the secretary-level talks on Tuesday to resolve their differences over the Baglihar hydroelectric power project in Jammu and Kashmir.

A joint statement issued at the end of the talks hinted at some 'simmering' differences but the heads of the two delegations appeared to allay such fears about the project that Pakistan says was being built on Chenab river in violation of the bilateral Indus Water Treaty.

The Pakistan delegation was led by Water and Power Secretary Ashfaq Mahmood. He told reporters that the two sides had covered enough ground in their day-long dialogue to expect a breakthrough.

"We have covered sufficient ground. It is a win-win situation," he said. The head of the Indian delegation, Water Resources Secretary V.K. Duggal, was even more emphatic that the issue was almost resolved, saying: "We are close very to a solution."

The joint statement said: "The talks were held in a very cordial and friendly atmosphere and with the spirit of goodwill and cooperation." It said that the secretaries "discussed ways and means to resolve technical concerns relating to the project and shared their assessments on this issue.

They will now report back to their respective governments." The secretary-level talks come just two days after the successful conclusion of the expert-level talks on nuclear confidence-building measures.

The foreign secretaries of the two countries are due to meet on June 27 to discuss the key issue of Jammu and Kashmir. India says the Baglihar project is nearing completion and is expected to augment electricity supply to Jammu and Kashmir, which faces huge power shortage.

Agencies add: Mr Mehmood later told APP that both sides had reached the broad agreement on the modus operandi to address the issue and discussed all aspects of the problem.

"We have discussed all issues with an open mind... and we have taken them very close to resolution," Mr Duggal told reporters. "That is the important breakthrough. There has been some agreement how these issues can be resolved."

The Press Trust of India quoted Indian External Affairs Minister Natwar Singh as saying in the Chinese city of Qingdao on Tuesday that "we are moving ahead quite fast". "This does not mean that there are no difficulties. Complex questions are there," Mr Singh said. "Important questions will come up. But I think there will be no differences."