KATHMANDU, Dec 14 (Reuters) - Nepal's government may agree in principle to abolish the monarchy in a deal to resolve a political deadlock with Maoist former rebels, but implement the decision only after fresh elections, a top minister said on Friday.

The Maoists quit the government in September demanding an immediate end to monarchy, a move that forced an indefinite postponement of constituent assembly elections that had been set for last month.

Prime Minister Girija Prasad Koirala was set to meet the Maoists on Friday for talks aimed at ending the stalemate that has jeopardised the peace with the rebels, who laid down arms last year.

"We are ready to declare a republic now. But the decision must be endorsed by the first meeting of the constituent assembly before being implemented," Home (interior) Minister Krishna Prasad Sitaula said.

He said the government could also agree to some electoral changes to address the concerns of the Maoists, who want fully proportional elections for the 497-member assembly meant to draw up a new constitution and decide the fate of the Hindu monarchy.

Under an earlier agreement 240 assembly members were to be elected directly through a first-past-the-post system and an equal number through proportional representation. The rest were to be nominated by the cabinet.

"The number of seats for proportional representation might be increased to include more marginalized groups," Sitaula said.

Maoists also said a consensus was likely.

"We expect to reach an agreement in our meeting with the prime minister," their spokesman Krishna Bahadur Mahara said.

The Maoists have already confined thousands of their fighters to United Nations-monitored camps after the government agreed to the elections, their main demand during the conflict that killed more than 13,000 people.

But they are now saying King Gyanendra and his supporters could sabotage the vote and want the monarchy be booted out before the polls, now expected to be held by April next year.

The Maoists also want their fighters to be integrated into the national army, details of the whereabouts of hundreds of people missing in the war and compensation to the victims.

The government says the Maoists must hand back land and property captured during the war, help displaced people to return home and end extortion and intimidation. (Reporting by Gopal Sharma; Editing by Krittivas Mukherjee and Alex Richardson)

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