The Nepal government and Maoist rebels resumed their crucial summit-level talks on Tuesday to settle major hurdles in the peace process in the Himalayan country, including finalising the interim constitution and deciding the future of the monarchy.

The talks were postponed on Monday as more time was needed for further discussions on crucial issues.

During informal discussions held between Nepali Congress president Girija Prasad Koirala, Maoist chief Prachanda, CPN-UML general secretary Madhav Kumar Nepal and Nepali Congress (Democratic) president Sher Bahadur Deuba most of the issues, including arms management, have been sorted out, Nepali Congress general secretary Ramchandra Poudyal said.

Hectic consultations were on at Prime Minister Girija Prasad Koirala's residence in Baluwatar on certain other issues, including power sharing, formation of the interim Parliament and the procedure to decide the fate of the monarchy, Poudyal said.

The talks might see a breakthrough and some significant decisions are likely on Tuesday, party insiders said.

The issue of arms management has been resolved during the informal talks, Nepali Congress central member Arjun Narsingh K C said.

The delay in resumption of talks is due to differences in matters relating to power sharing and deciding the fate of the monarchy.

The Maoists have agreed to confine their 30,000 plus combatants to seven cantonments and lock up their weapons under United Nations' supervision, party sources said.

The rebels will take the key of the store house where their arms would be kept and a sensitive device would be installed so that any movement in the store will be detected by the UN's monitoring office through a sound alarm system, a party insider said.

The Seven-Party Alliance government and the Maoists have agreed to conduct the constituent assembly polls by June 2007.

Both the SPA government and the Maoists have written letters to the UN seeking its assistance in the arms management process.

Once the interim constitution is ready and the Maoists' arms are managed, the rebels will be invited to join the interim government and the date for holding the constituent assembly elections will be formally announced, analysts said.