Lanka's hopes of reviving peace talks with Tiger rebels were raised after India gave its backing to a controversial aid-sharing deal with the guerrillas, a senior diplomat and analysts said yesterday.

President Chandrika Kumarat-unga Friday secured support of the powerful northern neighbour for a deal with Tamil Tigers who remain outlawed by New Delhi since 1992 for their role in the slaying of former premier Rajiv Gandhi.

New Delhi's support, announced in a joint statement, capped months of efforts by Kumaratunga to line up billions of dollars in international donor aid to rebuild the country after the December 26 tsunamis.

The worst natural disaster to hit the island left 31,000 dead and one million people initially homeless, with the rebel held northeast bearing the brunt of the devastation.

Kumaratunga is now expected to tackle opposition from her main coalition ally to the aid deal which analysts say will assure the rebels that the government is committed to rebuilding the country and pursuing peace talks.

"India supports it, the US and Europe supports it, the IMF and the World Bank and other lending agencies support it, so she can't retract now," said political analyst

Harry Gunatillake, a former air force chief.

"This is the best thing that can happen for the country."

The aid deal would bring the government and rebels into close cooperation on rebuilding, including from the decades of civil war that has left tens of thousands dead, and act as a spur to peace talks brokered by Norway that have been stalled since April 2003, a seniorAsian diplomat said.

Gunatillake noted Kumaratunga was now in a position to ignore opposition from Buddhist monks and her coalition ally, the Marxist JVP, because of the overwhelming backing from others in parliament and the international community.

Press reports said the JVP had threatened to sit in the opposition if Kumaratunga went ahead with the deal, called a joint mechanism.

"This won't lead to the collapse of the government because the others (opposition parties) will have to support her given their commitment to the joint mechanism," Gunatillake said.

Meanwhile, unidentified gunmen shot dead two men in the Sri Lankan capital Colombo yesterday in killings that may be linked to factional fighting among Tamil rebels, a defence ministry spokesman said.

The victims were gunned down ins Colombo's Kotahena area on Sunday morning, the spokesman said.