Government Debates Act Giving Extraordinary Powers to Fight Insurgency; Critics Say It Obscures Human-Rights Abuses.

SRINAGAR, India—India's establishment is split over how to deal with a separatist insurgency in its side of Kashmir, as the disputed Himalayan territory emerges as a critical issue in peace talks with Pakistan.

At the center of the debate in India is the future of the Armed Forces Special Powers Act, which gives India's security forces extraordinary powers to combat Pakistan-backed insurgents fighting against Indian rule in predominately Muslim Kashmir since 1989.

The act permits the forces in Kashmir to search, detain and kill "any person who is acting in contravention of any law" during civil disturbances. Critics say it is fanning anti-India sentiment in the state rather than helping to defeat the insurgency.

Indian Central Reserve Police Force members patrolled the Kashmiri capital of Srinagar Monday.

Opponents of the act, which include the state's pro-India government and the United Nations, say it has been used as a cover to hide scores of human-rights abuses by security forces and to shield them from prosecution.

"The act is clearly not designed to give immunity to officers who are giving their uniforms a bad name, but that's how it is being used," says Omar Abdullah, the chief minister of Jammu and Kashmir, whose National Conference party backs India's control of the state.

Internal divisions over how to deal with the Kashmir issue could complicate India's efforts to engage Pakistan in peace talks. Officials from both nations' foreign ministries will meet in Pakistan this week to push forward a dialogue started in February.

The issue has taken on greater urgency in recent weeks after the killing in April of three Kashmiri villagers from near the town of Sopore by soldiers who later claimed the victims were Pakistani militants. Police say evidence points to their wrongful killing and has asked New Delhi for the right to prosecute the case locally.

The foreign secretaries of the two nations meet in Islamabad today, the latest in a series of meetings designed to improve relations between the two countries. South Asia Bureau Chief Paul Beckett and WSJ's Tom Wright discuss what's at stake.

After mass protests, the army suspended two senior officers involved in the affair and launched an internal inquiry, which continues. India's Home Ministry recently circulated a discussion paper on amending the act to the Defense Ministry and other related arms of the government. The paper discusses "how to prevent misuse" of the act by armed forces, a senior ministry official said.

Mr. Abdullah, who is involved in the Home Ministry-led discussions, said the state government should be allowed to prosecute crimes committed by armed forces personnel, which include the army and paramilitary units. Under the current act, the government in Srinagar must seek permission to do so from New Delhi, and that is rarely given, he said.

But India's armed forces have publicly opposed any watering down of the act, saying it would put soldiers at risk. Lieut. Gen. B.S. Jaswal, head of the army's northern command which controls Kashmir, earlier this month likened the immunity act to a "pious document," and pledged to internally punish any armed forces personnel who commit abuses. A spokesman for the Defense Ministry declined to comment.

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The former princely state was divided between India and Pakistan in 1947, and both nations claim the territory in its entirety. In the 1990s, Pakistan's intelligence agencies armed and trained insurgents in Indian-administered Jammu and Kashmir state, helping to fuel a conflict that has left 60,000 people dead.

Although Kashmir hasn't been center stage in the India-Pakistan talks, India's Foreign Secretary Nirupama Rao said in a speech last week that India and Pakistan had made progress on Kashmir before attacks in 2008 on Mumbai by Pakistan-based armed militants. Both nations had agreed the borders in Kashmir are unlikely to change but could be made irrelevant through trade and the free movement of people.

"We have to build on these achievements," Ms. Rao said.

Prime Minister Manmohan Singh has promised a "zero tolerance" policy toward human-rights abuses committed by the half a million security forces stationed in Indian-held Jammu and Kashmir, home to 10 million people. Mr. Singh visited Srinagar under high security this month, but separatist political leaders declined to meet him until India revokes armed-forces immunity.

"We're far away from dealing with new Delhi on a serious level," says Muslim Kashmiris' spiritual leader, Mirwaiz Umar Farooq. "Let New Delhi start with the revocation of the Armed Forces Special Powers Act."

The army and Indian government officials say Pakistan continues to train and finance insurgents and hundreds are waiting to cross the so-called Line of Control—the de facto border between the two nations in Kashmir.

On Tuesday, police said they killed a senior Pakistani leader of Lashkar-e-Taiba, a Pakistan-based group that sends fighters to Kashmir, after a gunbattle in Sopore in which a policeman also was killed.

Others say the threat from insurgency is at its lowest point since the rebellion began in 1989. About 500 active militants are now active in Kashmir, about half of them Pakistanis, compared with thousands of local militants at the height of the rebellion to Indian rule in the 1990s, according to local police and government officials. There were 62 cases of Pakistani militant infiltrations from January to March this year, from 433 infiltrations in the whole of 2009, according to security force data.

The reduction in violence, and record-low civilian deaths last year of fewer than 100 fatalities, "is a golden opportunity to rebuild trust between the security forces and the people," says Farooq Ahmad, chief of police in Indian-held Kashmir.