India's hopes for an early resumption of oil trade with Pakistan have been dashed with Pakistan President Pervez Musharraf asserting that trade and cultural ties between the two countries can follow only after an agreement on the vexed issue of Kashmir.

The hopes for diesel exports from India to Pakistan were raised when Pakistan's Secretary for Petroleum and Natural Resources M Abdullah Yusuf had told Indian officials in January that his country planned to import diesel from this country since "it makes more economic sense".

Pakistan imports around 5 million tonnes of diesel, mostly from Kuwait, every year.

"We will be interested in buying this product from India since it makes more economic sense," Yusuf had told newsmen on the sidelines of an oil and gas conference here in January.

With its excess refining capacity, India is surplus in diesel, which it exports regularly. Pakistan is a net importer with a refining capacity of 3 million tonnes and a demand of 7.5 million tonnes.

Yusuf had even said Pakistan was planning to take off diesel from the list of products whose import from India was banned.

"We are willing to do all that is necessary to remove diesel from the negative list of items," he had said.

Even as oil companies, both in the private and the public sectors, had been gearing up for diesel exports to Pakistan, came Musharraf's statement. "This is a big damper. I hope he does not mean it," a senior industry official said.

Petroleum ministry officials, however, refused to comment on Pakistan President's statement.