UPDATE 3-Pakistan urges Taliban to lay down arms

* Pakistan urges Taliban to lay down arms

* Army says scores of militants killed

* Militants say offensive violation of peace pact

(Updates with interior ministry chief's comments)

By Zeeshan Haider

ISLAMABAD, April 26 (Reuters) - Pakistan called on Taliban fighters to lay down their arms after security forces launched an offensive on Sunday to stop their advance in a troubled northwestern region.

"These extremists have no other option but to lay down arms because the government is serious in flushing them out," interior ministry chief Rehman Malik told Reuters.

The military operation in the North West Frontier Province came amid growing worries in the United States about the stability of its nuclear-armed ally after militants began extending their influence.

A military spokesman said scores of militants, including a commander, and a soldier had been killed in the operation in Lower Dir district.

Malik said security forces had almost taken control of the entire Lower Dir. "We will not allow the Taliban to impose their rule in Dir or in any other part of the country," said Malik, who is in the cabinet and advises the premier on internal affairs.

The operation began after militants opened fire on a convoy of paramilitary Frontier Corps in the region, wounding four soldiers.

"Helicopter gunships are pounding militants' positions in the hills. There has been intense fighting. A curfew has been imposed. We are now confined to our houses," Ali Shah who runs a grocery shop in Timergara, the main town of Lower Dir, told Reuters by telephone.

Lower Dir is part of Malakand division where President Asif Ali Zardari reluctantly sanctioned the imposition of Islamic sharia law aimed at ending militant violence.

Emboldened after winning that concession, Taliban fighters moved into the Buner district of Malakand -- just 100 km (60 miles) northwest of the Pakistani capital -- from the neighbouring Swat valley.

CONCERN IN WASHINGTON

The Taliban's advance towards Islamabad has heightened concern in Washington that its ally is in danger of sliding into chaos. U.S. officials want Pakistan to take a stand rather than cede more territory to militants through policies of appeasement like the introduction of Islamic law.

Western governments that need Pakistan's support to defeat al Qaeda and succeed in stabilising Afghanistan, dread the idea of any threat to the security of Pakistan's nuclear weapons.

"We can't even contemplate that," U.S. Secretary of State Hillary Clinton said in an interview with Fox News in Baghdad.

"We cannot ... let this go on any further. Which is why we're pushing so hard for the Pakistanis to come together around a strategy to take their country back."

Pakistan's allies want to see a coherent, decisive action by Islamabad against militants, and analysts say Zardari may want to show some steel before talks in Washington with President Barack Obama and his Afghan counterpart Hamid Karzai on May 6-7.

A militant spokesman in Dir said the government offensive was a violation of the peace pact and they would take revenge for it.

"We know the people who launched this offensive and they are on the top of our hit-list. We will not spare them," militant spokesman Dadullah Mansur said.

On Saturday, 12 children were killed by a bomb hidden in a football in Lower Dir and Malik on Sunday blamed the Taliban.

"The Taliban have exposed their real face by killing innocent children," Malik earlier said in a statement.

As the clash erupted between the security forces and the militants in Dir, thousands of people rallied in Buner to call on the government and the Taliban to avoid conflict. Residents fear they will have to flee their homes. (Additional reporting by Javed Khan)