Nepal's government and Maoist rebels were set to met for the fourth time in a week Sunday in an ongoing effort to hammer out a peace deal aimed at ending a bloody, decade-long insurgency.
"We are yet to reach a consensus on arms issue and the position of the king. But we are optimistic that there will be some kind of breakthrough on several key political issues on Sunday," Ramesh Lekhak, a government negotiator and labour minister, told AFP.
The two sides have struggled to overcome differences on the role of the monarchy, what to do with rebel weapons and an interim constitution that will allow the rebels to join an interim government.
"The seven parties are willing to give political space to the rebels and in return they (the rebels) should also agree to separate their arms from their militia before constituent assembly elections," the minister said.
The government has agreed to hold polls for a body that will rewrite Nepal's constitution permanently, a key rebel demand.
"We are making a collective effort to reach an agreement on Sunday," said Krishna Bahadur Mahara, co-ordinator of the rebel negotiating team.
In talks last week, the two sides agreed to hold elections by mid-2007 for a body that will rewrite the constitution and decide on whether the monarchy can stay.
The Maoists have said they are prepared to keep their 35,000-strong People's Liberation Army and weapons in camps supervised by the United Nations, but the multi-party government wants them to disarm.
The rebels, who control of large swathes of Nepal's countryside, also want to see Nepal's 90,000-strong army confined to barracks in the run-up to the elections.
A cease-fire has been in effect for the past five months between the government and the rebels since massive street protests forced King Gyanendra to give up 14 months of absolute rule and restore parliament.
This is the third time the two sides have tried to hammer out a peace deal to end an insurgency that has claimed more than 12,500 lives. The other two attempts ended in a return to fighting.