The boat was sunk after ignoring orders to stop. Two other boats managed to make their escape.

There was no word on casualties, but local residents reported hearing heavy gunfire near the port.

The Tamil Tigers want an independent homeland in the north and east for the country's minority Tamil community.

The boats were seen about 0530 (0000GMT) in a "high security zone" which is out of bounds to unauthorised vessels.

A guard at a lighthouse noticed the boats and alerted the navy. More... Published: Fri Jan 26 22:25:28 EST 2007

In its latest assessment report after the fall of Vaharai, the SLMM said the LTTE has withdrawn from the area and is believed to be regrouping in the jungle north and west of Batticaloa and into Trincomalee district.

"It is plausible that the LTTE has decided not to hold territory in the east, but will remain present. The situation in Kilinochchi is tense, but remains calm and quiet on the surface", it said.

Guerilla war plan

Implied in the observation is the suggestion that though the Tigers might vacate the territory, they would continue to be present in the region to wage a guerilla war.

In response to the fall of Vaharai, the SLMM sent a Rapid Response Team (RRT) consisting of two monitors to Batticaloa. However, the team could not enter Vaharai due to security reasons. The RRT, however, met the commander of the 23 division deployed in the area.

The SLMM report said 8,000 more internally displaced persons have been housed in several camps in Batticaloa district.

"Following the loss of Vaharai, there are indications for the LTTE moving north, towards the jungle between More... Published: Fri Jan 26 18:26:36 EST 2007

"Our Government is one that likes challenges," Rajapakse said while launching a 350-million dollar irrigation project in the north-central part of the island this morning, PTI reported here.

"Terrorism that many once swore cannot be defeated is now crouching in fear because we faced up to that challenge," he said referring to the military operations that led to the capture of the rebel-held town of Vakarai last week. More... Discuss this story Published: Thu Jan 25 20:53:26 EST 2007