Pakistan's Lakson group has set up a joint venture with a British subsidiary of India's largest tea producer -- the first such partnership between companies of the two South Asian nuclear rivals.

Lakson group signed a partnership deal for a tea blending plant with UK-based Tetley Tea -- owned by leading Indian group Tata Tea -- a few months ago, a senior Lakson official told Reuters.

"The two groups plan to invest around Rs 15 to Rs 20 crore ($2.5 to $3.5 million)," he said, but asked not to be named.

The plant, which is near completion, has been set up in the Hub region of southwestern Baluchistan province and will use mainly Sri Lankan, Kenyan and Indian tea, he said.

"Production is expected to start in the next few months," he said, but declined to elaborate.

For years, India and Pakistan have avoided business links because of thorny political relations between the two countries, which have fought three wars since their independence from Britain in 1947.

In recent weeks, tensions between the nuclear-armed neighbours have started to thaw.

On Tuesday, Pakistani Prime Minister Zafarullah Khan Jamali said that it was time for Pakistan and India to exchange political rivalry for economic cooperation.

There is currently no overland trade between the neighbours and trade in many goods is banned. Official bilateral trade via third countries was just $204 million in the year to March 2002.

Pakistan is the world's third largest tea importer, buying tea mainly from Kenya, Bangladesh, Indonesia and China. Indian tea makes its way into Pakistan mainly through smuggling.

The Lakson group, with interests in tobacco and consumer goods, would deal with Tetley Tea and not directly with Tata Tea company.

"Pakistan is a huge market and we hope to make a place for the Tetley Tea soon," the official said.