Talks aimed at securing the hostages' release had been continuing discreetly as fears for their safety increased after the kidnappers claimed that two of them, including one of the Britons, had been wounded.
The fate of the hostages has been further complicated by a fierce dispute over a Hindu pilgrimage to a shrine in Kashmir which led to a threat by Muslim extremists to kill a radical Hindu leader yesterday.
Keith Mangan, 34, from Middlesbrough, Cleveland; Paul Wells, 23, from Tooting, south London, and Donald Hutchings, 42, from the United States, were taken hostage on 4 July. Dirk Hasert, 26, from Germany, and Hans Christian Ostro, 27, from Norway, were seized four days later.
They were captured while on trekking holidays by Al-Faran, a Kashmiri group which is fighting for secession from India. The group originally demanded that 21 separatists be released from Indian jails but has now reduced this demand to 15.
According to Al-Faran, Mr Mangan was seriously wounded during a shoot- out with Indian troops in July. At the weekend the group issued a photograph said to be of him bandaged and attached to a drip and pictures of Mr Hutchings in bloodstained dressings, the latter saying in an accompanying tape recording that Mr Mangan is seriously ill.
The Indian government has denied that any such clash with its troops has taken place and has accused Al-Faran of faking the photograph of Mr Mangan in an effort to step up the pressure for the release of the prisoners.
A Foreign Office spokesman in London said: "At the moment we have no information on whether or not these claims are true. A degree of scepticism has to be the order of the day."Two Foreign Office officials, Philip Barton and Chris Sainty, both first secretaries at the British High Commission in New Delhi, are in Kashmir liaising with the Indian authorities.
However, despite a Foreign Office claim that contacts with Al-Faran were continuing, Rajander Tikoo, a senior police officer in Kashmir who had earlier been in contact with the separatists, said yesterday that he had lost touch with them.
Confirmation of this came from a senior Kashmiri government official who said: "Despite our best efforts in the previous 24 hours we have not been able to re-establish the contact." Mohammad Amin, the district police chief in Pahalgam, the area where the hostages were captured, admitted yesterday that the crisis might not end until after a contentious Hindu pilgrimage finishes later this month.
Separatists have threatened the Hindu pilgrims in Kashmir and yesterday another Muslim organisation, Lashkar-i-Taiba, threatened to kill Bal Thackeray, leader of the militant Hindu Shiv Sena party, who pledge retaliation against Muslim pilgrims to Mecca if Hindus were attacked.