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ISLAMABAD, Wednesday (Reuters) Pakistani President Pervez Musharraf, speaking after meeting lawmakers from India, called on Tuesday for a ceasefire along the Line of Control separating the nuclear-armed rivals in the disputed Kashmir region.

In the latest step towards improving relations between the foes, Pakistan's military ruler also urged peace talks "as soon as possible" and said the insurgency in Indian-ruled Kashmir could end if New Delhi ceased human rights violations there.

But the Indian government poured cold water on his comments, saying they contained "nothing new".

"I have also said that we should have a ceasefire on the Line of Control," Musharraf said, referring to the de facto border between the countries in Kashmir across which they regularly trade artillery and small arms fire.

"It is very reassuring that government functionaries, the leaders, are talking about Kashmir being included in peace talks between India and Pakistan. When should these formal peace talks start? We need to start them as soon as possible."

India said it was disappointed by Musharraf's suggestions.

"They have not been found effective in the past because Pakistan has continued to sponsor terrorism directed against India and provided support to cross-border infiltration," the Indian foreign ministry said in a statement.

Violence continued in Indian Kashmir on Tuesday and police said 11 people, including six militants, were killed in separate incidents.

Pakistani police said a 10-year-old boy was killed and two children wounded by Indian shelling into Pakistani Kashmir.

Musharraf's comments came as Hizbul Mujahideen, an influential Pakistan-based Kashmiri rebel group, urged Hindus who fled India's Muslim-majority Kashmir to return to their homes.

At least 300,000 Kashmiri Hindus, known as Pandits, have left the valley since the revolt began 14 years ago. Some 10,000 remain behind.

Musharraf said Indian abuses would have to stop for the insurgency to end. "Yes, one could attempt to facilitate, one could encourage a ceasefire also inside Kashmir, but there is a reciprocation involved in this."

He called for a cessation of atrocities, a reduction in the level of Indian troops in Kashmir, which he pegged at 600,000-700,000, and greater tolerance of political activity. "If that is a possibility from one side, the possibility of facilitation on the other side, of a ceasefire, is certainly possible. It is practical," Musharraf added.

Pakistan and India have taken largely symbolic steps towards the negotiating table, restoring diplomatic ties and restarting a bus service that had been suspended for 18 months.

But mistrust between them remains high. Pakistan reacted with alarm on Tuesday to a U.S. announcement this week that it had dropped opposition to Israel selling airborne Phalcon early warning radar systems to India now regional tensions have eased.

"By giving a green signal to the sale, the U.S. appears to be undermining its own efforts to ease tensions in the region and to promote a peace process," a foreign ministry spokesman said.

Islamabad is worried about lagging New Delhi in conventional and nuclear arms. Musharraf failed to convince Washington to approve the sale of F-16 fighters during a trip there in June.

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