• Rebels in Sri Lanka said to have lost 90% of fighters • Aid agencies fear for fate of civilians in north-east

The Liberation Tigers of Tamil Eelam, a rebel army that has fought a 25-year civil war against the Sri Lankan state, is "finished", having lost more than 90% of its fighters, the group's former military commander said yesterday.

In an interview with the Guardian, Colonel Karuna said around 1,500 surviving rebels, who have made their last stand on a sliver of the north-east coast, are surrounded by 65,000 troops of the Sri Lankan army, with no way out. At the height of their powers the Tigers could muster more than 15,000 men at arms.

"It is a do or die battle for the LTTE," said Karuna. "The battle is now street to street and door to door."

Karuna is the nom de guerre of Vinayagamoorthy Muralitharan, who until 2004 was the Tigers' military commander. Many see his defection as a turning point for the LTTE. Not only was Karuna privy to all the Tiger's best-kept secrets, he also brought with him 6,000 battle hardened fighters.

The 45-year-old now describes his former leader, Velupillai Prabhakaran, as "a mad man". "He wanted to be a king, a duke ... he had a totalitarian mindset. I told him the LTTE could never win. I had spent 22 years on the battlefield. But he did not listen."

Prabhakaran, he said, had made a series of tactical blunders in the war culminating in the suicide gamble of holding territory. "After he lost [the Tigers' capital] Kilinochi he knew he could not make a stand. But he thought the Tigers could survive among the people. Now the LTTE has trapped 100,000 people and [Prabhakaran] has gone to the jungles [preparing for] a guerrilla war."

Aid agencies have warned of a looming humanitarian catastrophe as the Sri Lankan army has pounded the Tiger positions, which have been placed amid the cornered population. The UN says that 2,800 civilians have been killed and more than 7,000 injured in the fighting.

Karuna says he has warned the country's president Mahinda Rajapaksa "this is a critical situation. They have listened. The army do not use sea or air power. I have told them be careful."

For as long as the Tigers exist, Karuna cannot live in the open - and his family remain in the UK. The Guardian met him after passing a line of armed guards at a secret location in Colombo.

Officials in Sri Lanka admit he has "blood on his hands" but say he should be forgiven because he renounced violence.

The LTTE's former military supremo says one of the reasons why the Sri Lankan army has been so successful is the new commando units that tracked the Tigers' through their phone calls - pinpointing their jungle lairs. "The LTTE can never be built up again. They can't use any communications. They are finished."

He admits a high regard for the Sri Lankan army commander, Sarath Foneska, who survived a Tiger suicide bombing in 2006. Karuna says he almost killed him on the battlefield. "We bombed him once during an operation, but he escaped. Lost a colonel and few others though. Now we meet frequently and talk about our past. He was a war hero. So was I. We appreciate each other."

Karuna was made Sri Lanka's minister for national integration this week - a remarkable transition for a man who as a teenager joined the Tigers' armed struggle in 1983, enraged by the killings of Tamils in Colombo and beguiled by the Tiger's "big propaganda". "We thought we could save our people ... but that I know now was not the way," he said.

Karuna said he fell out with Prabhakaran who called him a "traitor to his race" for signing an agreement with the Sri Lankan government during peace talks in Oslo in 2003.

Under the terms of the deal the rebels were to consider giving up the LTTE's cherished aim to carve out a separate nation for the island's 3m Tamils in return for the creation of a "federal government".