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By Sheikh Mushtaq and Terry Friel

SRINAGAR, India, Sept 12 (Reuters) - A federal Indian minister and Kashmir's premier on Thursday fled a funeral for a colleague assassinated in rising pre-election violence, after suspected Islamic militants attacked an army convoy nearby.

Junior Foreign Minister Omar Abdullah and his father, Kashmir Chief Minister Farooq Abdullah, flew out by helicopter after the 25-minute battle involving heavy gunfire and loud explosions, witnesses said. Several soldiers were injured.

The skirmish occurred less than a kilometre (0.6 miles) from a funeral for state Law Minister Mushtaq Ahmed Lone, who was gunned down as he addressed an election rally on Wednesday, stoking fears of heightened tensions between nuclear neighbours India and Pakistan.

Mourners panicked at the sound of gunfire, but the funeral procession later continued peacefully with Lone's body wrapped in a white shroud covered in red, white and pink petals.

Police said seven people, including a political activist, were killed in separate clashes overnight and on Thursday.

The Kashmir Press Service said two Islamic Kashmiri separatist groups had called to say they killed Lone. One, Lashkar-e-Taiba, is one of two major militant groups India blames for a December attack on its parliament that triggered a military stand-off and near war with nuclear neighbour Pakistan.

Farooq Abdullah blamed the election attacks on Pakistan, which India has said wants to sabotage the poll.

"These killings and attacks are meant to disrupt the poll in the state, but you will find no change in our resolve to go ahead with the process," said Farooq, whose National Conference party is part of the ruling federal coalition.

DEFENCE MINISTER IN TOWN

Indian Defence Minister George Fernandes met state security chiefs in the summer capital, Srinagar, on Thursday to discuss the rising violence, officials said.

He had been due to attend the funeral in Lone's remote home village of Sagam, near the frontier with Pakistan, but had not arrived by the time of the attack.

Islamic separatists have vowed to sabotage the election and kill politicians.

More than 300 people have been killed, including another candidate and several party workers, since the election was announced in early August.

Voters go the polls on Monday for the first of four staggered days of voting to elect a new 87-member assembly for mainly Hindu India's only Muslim-majority state.

Pakistan, which also claims Kashmir, has dismissed the poll as a farce.

Analysts said Lone's death was unlikely to dramatically raise tensions, especially while Prime Minister Atal Behari Vajpayee is in New York for the U.N. General Assembly.

"The point is that we are at the highest level of tension," Jawaharlal Nehru University South Asia expert Kalim Bahadur told Reuters.

"There can be no further rise in tension without going to war."

Political analyst Inder Malhotra, a former Times of India editor, said the rise in tensions would be limited.

"The policy seems to be to grin and bear it for the election to be completed on time. That is the top priority," he told Reuters.

SECURITY TIGHT

India has said the level of election violence would be a crucial test of Pakistan's commitment to honouring its pledge to stop Islamic militants slipping into Kashmir.

Pakistan denies arming and training the rebels, but has said it will do its best to stop them crossing the frontier, although it has said a total halt is not possible.

The deaths of Lone, three of his bodyguards and 12 other people in another attack on Wednesday came as the world marked the first anniversary of the September 11 hijack attacks in the United States that Washington blamed on Osama bin Laden's al Qaeda.

Some militants fighting alongside Kashmiris are believed to have trained with al Qaeda.

An extra 45,000 security personnel have been brought into Jammu and Kashmir for the election, in addition to 450,000 already here.

India wants a big voter turnout to bolster the legitimacy of its rule.

But the main separatist alliance, the All Parties Hurriyat (Freedom) Conference, which groups almost two dozen parties and organisations, is not running and has urged a boycott.

The 13-year-old revolt against Indian rule is one of the world's bloodiest. India says more than 35,000 people have died, but separatists put the toll above 80,000. 

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