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Nepal says army operation on despite ceasefire row

KATHMANDU, May 11 (Reuters) - Nepal said on Saturday the army operation against the Maoist rebels would continue despite reports the guerrillas had called for a month-long ceasefire.

"The security forces are continuing their operation as usual. There is no let-up in the military action," Jayaprakash Prasad Gupta, Information and Communications Minister, told Reuters.

On Thursday, some Nepali newspapers had received an email believed to be from Maoist commander Prachanda announcing a month-long truce from May 15 in the ongoing conflict that has so far claimed more than 4,000 lives across the impoverished nation.

But a top ranking rebel leader, Dina Nath Sharma, denied the report in an interview with the BBC and said Prachanda would issue a formal statement disowning the email message. No formal statement has been received yet.

Gupta said the government wanted a peaceful resolution to the Maoist problem which has crippled its economy, threatened stability and tarnished its image as a popular tourist destination.

He said the rebels, who are inspired by the revolutionary ideas of China's communist leader Mao Zedong, must lay down arms taken away from army garrisons, stop killing "innocent people" and stop destroying infrastructure to show their sincerity and commitment to talks.

"There cannot be any fresh talks until then," Gupta said.

The two sides held three rounds of peace talks last year. But the guerrillas walked out of the negotiations last November after the government rejected their demand to abolish the monarchy, a centuries-old Hindu institution.

The kingdom has been under emergency rule since the failed talks and troops are struggling to stamp out the rebellion.

Officials said up to 600 guerrillas had been killed in the past two weeks in the latest operations in the rebel stronghold of Rolpa in west Nepal from where the guerrillas began their revolt six years ago.

But rebels say less than a dozen of their "comrades" were killed in the latest offensive. Nearly one hundred soldiers have also been killed.

Nepal is still reeling from the massacre of its popular king Birendra and other members of the royal family by the then crown Prince Dipendra in a drink-and-drug fuelled shooting spree.

Nepal, home to fearsome Gurkhas, acclaimed for their fighting skills, is famous for its pagoda-style Hindu and Buddhist temples and snow-capped mountains.

Tourism is the mainstay of the kingdom's economy where Nepalis on average earn less than a dollar a day.

But Maoist rebels who are against private enterprises have forced factories to shut shop, throwing hundreds out of work. This has sapped business confidence and scared investors from a nation desperately seeking foreign investment.

The United States said this week it would give Nepal $20 million in military aid this year to battle the rebels.

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