AMRITSAR, India (Reuters) - India and Afghanistan are planning to set up an air cargo service to help increase trade that both say is stymied because of their tense political relations with Pakistan that lies between them, Indian and Afghan officials said on Saturday.

Afghan President Ashraf Ghani (L) and India's Prime Minister Narendra Modi pose for the media outside Hyderabad House in Delhi, India September 14, 2016. REUTERS/Cathal McNaughton/Files

The cargo service will aim to improve landlocked Afghanistan’s connectivity to key markets abroad and boost the growth prospects of its fruit and carpet industries while it battles a deadly Taliban insurgency, Indian officials said.

An announcement on the service is expected after a meeting between Afghan President Ashraf Ghani and Indian Prime Minister Narendra Modi on Sunday in the northern Indian city of Amritsar, a short distance from the Pakistan border. The two leaders are attending the Heart of Asia conference aimed at stabilising Afghanistan.

Afghanistan depends on the Pakistani port of Karachi for its foreign trade. It is allowed to send a limited amount of goods overland through Pakistan into India, but imports from India are not allowed along this route.

Nuclear-armed India and Pakistan have gone to war three times and remain bitter foes while ties between Pakistan and Afghanistan have become strained despite their shared religious and cultural identities.

Pakistan’s top foreign policy official Sartaj Aziz, who was due to attend the conference on Sunday, arrived a day earlier opening the possibility of a meeting with his Indian hosts to try and break a chill in ties.

Indian officials have been steadfast that there cannot be any dialogue with Pakistan until it acts against militant groups operating from its soil. Islamabad denies the allegation and says New Delhi must hold talks on the future of Kashmir, the dispute at the centre of nearly 70 years of hostility.

Afghan director general for macro fiscal policies Khalid Payenda said the potential for trade with India, the largest market in the region, was far greater than allowed by land and so the two countries had decided to use the air route.

“We have a lot of potential for trade on both sides. On our side, it’s mostly fruit and dried fruit and potentially through India to other places for products like carpets and others,” he said in Kabul ahead of the conference.

He said that a joint venture involving an Afghan and an Indian cargo firm would be set up and that the two governments were working to build the infrastructure at Kabul and Delhi airports.

An Indian government source attending the meeting in Amritsar said air cargo route details were still being worked out and could include Kandahar as a point of origin for shipping fruit directly to India.

Indian foreign ministry official Gopal Baglay, who oversees Afghanistan, Pakistan and Iran, said several proposals were being discussed to improve Afghanistan’s trade and transport links.

“There have been very many ideas on how to enhance connectivity, overcome current challenges and also expand the trade basket,” he said.

Afghan ambassador to India Shaida M. Abdali said measures to fight terrorism was key. Afghanistan says Pakistan has failed to rein in the militant groups operating from its soil.

“Unless we take a collective measure to fight terrorism, to fight the breeding ground for terrorism, the safe sanctuary, we will not be able to bring peace and stability either to Afghanistan or to anywhere else in the region, including India,” he said in Amritsar.

Pakistan says it is itself a victim of terrorism and says India is using its close ties with Afghanistan to stir trouble in its restive Baluchistan province.