Sri Lanka has seen a surge in violence in the past few months, raising doubts about the success of peace talks between the government and the Liberation Tigers of Tamil Eelam (LTTE) in Geneva on Oct. 28-29.
In the latest clash on Friday evening, rebels and government forces fought for 3-12 hours off the coast of the troubled Jaffna peninsula in the island nation's Tamil-dominated north.
"Subsequently, we chased them and attacked their withdrawing boats. A total of seven boats including one suicide (vessel) have been destroyed and we believe more than 35 (rebels) killed," Commander D.K.P. Dassanayake told Reuters.
He added two sailors were wounded in the fight.
Leaders of the Tamil Tigers, who are fighting for an independent homeland for the ethnic Tamil minority in the north and east, were not available for comment.
On Wednesday, the rebels launched a sea-borne suicide raid on a naval base in the southern city of Galle, losing 15 fighters and killing one sailor.
"We feel the Tigers were trying something to boost the morale of their cadres after they failed in Galle," Dassanayake said.
President Rajapakse used the Hindu festival of Deepavali -- which signifies victory of good over evil and is being celebrated on Saturday -- to appeal for peace, ahead of the talks.
"Celebrating Deepavali, let us resolve to enhance our endeavours to bring lasting peace to our land so that people of all communities and faiths could live in happiness and dignity," Rajapakse said in a statement.
Most Tamils, who make up 18 percent of the population of largely Buddhist Sri Lanka's population, are Hindus. "Today our society is plagued by violence and hatred between communities, and tolerance so characteristic of Hinduism and other great religions has given way to animosity and conflict," the president said.
Foreign powers have also urged both sides to stand down.
"In the end, people have to understand that the only real solution to their grievances is going to be a political one," US Assistant Secretary of State Richard Boucher told a news conference in Colombo late on Friday.
Since July violence has soared and about 1,000 people have died, including many soldiers. A 2002 truce exists only in name.
More than 65,000 people have been killed in the two-decade conflict, fuelled by complaints of discrimination by the state and sections of Sinhalese majority from members of the Tamil minority.

Copyright Reuters, 2006