The hotel was being used by the Central Reserve Police Force (CRPF) which is replacing the paramilitary Border Security Force (BSF).
The fighters hurled bombs and fired automatic rifles at the Scindia Hotel in the Indira Nagar residential area in the high security Badamibagh Cantonment, on Tuesday.
The fighters quickly forced their entry into an adjacent building after killing a CRPF personnel and wounding three others, police said. A few civilians were also injured in the shootout.
Soon troops from the cantonment arrived and sealed the area. The CRPF and the army launched a joint operation. As the fighting continued through Wednesday, the holed up fighters hurled a grenade from the second floor of the building, resulting in injuries to three army personnel, including a commanding officer and his deputy.
As the firing continued, security forces tried to rescue the officials and other staff at the building housing a telephone exchange.
A senior security force officer said, "We want to evacuate the employees of the exchange before launching the final assault."
The al-Mansoorian group claimed responsibility for the attack.
The government claims an
improvement in the situation
The phasing out of the paramilitary BSF involving eight battalions (about 8000 men) is being projected by Chief Minister Mufti Muhammad Sayyid as an indication of improvement in the ground situation in Kashmir.
However, Muslim separatists have ridiculed the assertion insisting it will not change the life of an average Kashmiri.
“We see it only as the replacement of one occupation force by another,” said pro-independence Jammu Kashmir Liberation Front (JKLF) leader Javed Ahmed Mir.
K Srinivasan, a deputy inspector general of the BSF said, “By the end of this month the process (pullout) will be complete.”
BSF Director General Ajai Raj Sharma said the substitution was being carried out on the recommendations of the Group of Ministers (GoM), set up to suggest measures to strengthen the country's security.
The GoM had suggested that each force be deployed for the duties it had been created for.
In this context, it said that BSF was created for guarding borders and should be sent back to the frontiers. Sharma said the pull out would help the BSF "strengthen the country's Eastern and Western borders" as more personnel would be available for deployment.
Sharma asserted that because of deployment of BSF for internal security duties, its manpower availability for the borders was reduced considerably, leaving gaps on the frontiers which allowed more infiltration.
In the 14-year-old insurgency, about 39,000 people have died according to official statistics. The local Muslim groups and human rights activists put the toll at about 80,000.
India accuses neighbouring Pakistan of arming and abetting what it alleges is "terrorism" unleashed in its administered part of Kashmir. Islamabad strongly denies the charge and says it extends only political, diplomatic and moral support to the “Kashmiri freedom fighters".