Making this revelation, Fernandes said that was one reason why he has asked for a substantial increase in the defence budget, but refused to divulge what percentage of his budget had been sliced away by counter-insurgency operations during the past few years.

``The defence outlay needs to be increased substantially, keeping in view so many aspects, including the salary hike,'' Fernandes remarked, adding that a sizeable amount of funds allocated for defence was being regularly diverted to tackle the insurgency situation at the expense of the defence of the country's external boundaries.

Fernandes, who refrained from making any remark on the porous borders of the country in the north-eastern region, had on April 2, on his arrival on a five-day tour of the region,also stated that the government needed to discuss the issue of trans-border terrorist movement between India and Bhutan with the government of the neighbouring country.

The Defence Minister who is familiar with the region compared to most of his Cabinet colleagues in the new government, also expressed optimism that the armed underground groups would come out for talks in response to the government's appeal for a peaceful negotiation.

He also underlined the need for unconditional talks unlike members of the previous regimes including the Congress and the United Front, and said ``talks must be held and there can be no conditions for holding talks.''

The minister also made it clear that he was individually prepared to go to any length to discuss the issues with the rebel leaders and that it was up to the underground leaders to choose the venue.

Fernandes attributed the rise of insurgency to the growing unemployment problem of the region, and said he was in favour of taking up an integrated policy totackle the peculiar problems of the north-east.