By Kamran Haider

ISLAMABAD, Nov 24 (Reuters) - Pakistani Prime Minister Yusuf Raza Gilani invited ethnic Baluch leaders for talks on Tuesday in an effort to ease a separatist insurgency in their gas and mineral-rich province bordering Afghanistan and Iran.

Baluch nationalists have for decades campaigned for greater autonomy and control of the southwestern province's abundant natural gas and mineral resources, which they say are unfairly exploited to the benefit of other parts of the country.

Separatist guerrillas have also been fighting a low-level insurgency for decades in Pakistan's biggest but poorest province.

Gilani's olive branch comes as security forces grapple with a growing Taliban insurgency in the volatile northwest, which also borders Afghanistan.

"We are extending a hand of reconciliation and talks to all our disgruntled brothers. I hope they will give a positive and encouraging response to our invitation," Gilani told a joint sitting of parliament.

The government also unveiled a package of reforms to address grievances in Baluchistan, which the two-chambered parliament will debate next week.

The thinly populated province of mountains and deserts has Pakistan's largest gas discovery at Sui, with reserves in excess of 10 trillion cubic feet, equivalent to 1 billion barrels of oil.

Baluchistan also has one of the largest copper deposits in the world with estimated ore reserves of 412 million tonnes. Pakistan's third port, built with Chinese help, is at Gwadar in Baluchistan.

"FRAUD"

Hundreds of people have been killed in assassinations and bomb attacks in Baluchistan in recent years but tension increased sharply after a 79-year-old Baluch nationalist leader, Nawab Akbar Khan Bugti, was killed in a military operation in 2006.

Baluch militants frequently attack gas pipelines, electricity infrastructure and railway lines. They kidnapped a U.N. refugee agency official in the provincial capital, Quetta, in February and held him for two months before releasing him.

Pakistan accuses old rival India of stirring up trouble in the province, which India denies.

The militants and Baluch politicians complain of a lack of political representation and say their province's resources are exploited to the benefit of Pakistan's other provinces, in particular Punjab, the most populous and prosperous province.

Under the package, the federal government would pay the provincial government arrears of a gas development surcharge amounting to 121 billion rupees ($1.4 billion) over the next 12 years, according to the proposals presented in parliament.

It also promised to release all political workers and help exiles return home, except those involved in "terrorism".

The government also promised to stop all military operations in the province, except those against Islamist militants. The separatists have no links with the Islamists, analysts say.

But Mir Hasil Bizenjo, a member of parliament from a Baluch nationalist party, rejected the package as a "fraud".

"There is nothing in this package for the people of Baluchistan. It's jugglery," he said.

(For full coverage of Pakistan and Afghanistan, click on [ID:nAFPAK] (For more Reuters coverage of Afghanistan and Pakistan, see: http://www.reuters.com/news/globalcoverage/afghanistanpakistan) (Writing by Zeeshan Haider; Editing by Robert Birsel and Paul Tait) ((E-mail: zeeshan.haider@thomsonreuters.com; Reuters Messaging: zeeshan.haider.reuters.com@reuters.net; Islamabad newsroom: +92 51 281 0017)) (If you have a query or comment about this story, send an e-mail to news.feedback.asia@thomsonreuters.com)

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