NEW DELHI, Nov 24: Pakistan has offered India 'a last chance' to salvage their bilateral talks over the disputed Baglihar dam project by the end of this month or face mediation by the World Bank , officials close to prime minister-level talks between the two sides said on Wednesday.

The officials said Prime Minister Shaukat Aziz had raised the issue forcefully in his interaction with Indian Prime Minister Manmohan Singh, but it was not clear if the virtual ultimatum was delivered at the official-level meetings or at the summit talks.

"The Pakistan side said there could be no further delay on a decision on this vital issue of Baglihar. The Indian side heard them out. The Pakistan side offered one last round of talks by next weekend before referring the matter to the World Bank, guarantor of the Indus Water Treaty," one official told Dawn.

He said the Pakistan side had pointed to a lack of progress on almost any issue on the composite dialogue menu, and the Baglihar issue, if addressed, could be considered as progress.

Pakistan's position is that the structure of the dam's gated spillways violates the Treaty and it wants India to stop work on the project until a resolution is arrived at.

The revelation did not contradict the overall perspective that Mr Aziz stressed in his interaction with Indian businessmen, the last item on his tour before leaving for Islamabad by a special plane at close to midnight.

"If we discuss issues with an open mind and sincerity, it can never go wrong," he told Dawn during a brief chat. "Moreover, I enjoy a unique equation with Prime Minister Manmohan Singh with whom I have a good understanding. So we had a very good exchange of views."

The deadline of seeking an Indian response this month on Baglihar is close to the proposed meeting of President Gen Pervez Musharraf with US President George W. Bush in Washington on Dec 4.

Diplomatic sources said any perceived lack of progress on Kashmir or related issues such as the dam could prompt adverse American interest in the matter. Mr Aziz tersely told an Indian businessman who sought to inquire about the possibility of Indian companies picking up shares in Pakistan that he should not jump the gun.

"We are not in a 100-metre dash. This is a marathon race, believe me," he said, describing the way ahead in ties with India. "After nearly half a century of acrimony and tensions, Pakistan-India relations are now on historic crossroads," Mr Aziz told a meeting of businessmen and diplomats.

"With sincerity and courage borne of conviction that our destinies are indeed intertwined, both countries can open a new chapter of friendship and cooperation." Mr Aziz said it was time that both countries accommodated in full the aspirations of the Kashmiri people.

"I discern distinct warmth in sentiments in Pakistan and India to engage constructively. Constructive engagement requires vision, sagacity and purpose. There is a huge area of convergence. Divergences can be minimized."

He said investments and joint ventures could take-off in a big way if "we are able to create an enabling political environment of peace ... We should work towards attaining these objectives."

The prime minister then counselled that a peaceful resolution of the Kashmir dispute would create the requisite political framework conducive to economic cooperation.

He said his visit to Delhi was useful. "I have conveyed to the Indian leadership that Pakistan sincerely desires peace. We want good neighbourly relations based on sovereign equality. We have the courage to take bold decisions to move the relations forward."

"We must think out of the box," he said, adding that by adhering to old mindsets the present opportunities could be easily lost. "If India takes a step forward, Pakistan will take two. We will demonstrate flexibility, if India chooses to show the same.

In short, we are sincere and serious and expect this to be reciprocated. My visit has hopefully contributed to re-invigorating the Pakistan-India process. Let us prove the pundits of gloom and doom wrong. A new beginning, a news dawn awaits the peoples of South Asia. Let's work together for a promising tomorrow," he said.