"Allow maximum governance, self-governance to the people, demilitarise and take some actions to make the border irrelevant," the President said.
Musharraf spoke glowingly of his rapport with Indian Prime Minister Manmohan Singh, saying all disputes should be settled while they were both still in power.
"We have an understanding, we have harmony, we have complete understanding between ourselves. This I think is a very big difference between now and the past," the President said.
"I personally feel it must be done within the tenure or the presence of Prime Minister Manmohan Singh and myself. I may be talking big but this is a reality."
APP ADDS: President Musharraf called for grasping the "fleeting moment" for ultimate peace in South Asia and expressed the desire that Pakistan and India resolve the root cause of their conflict.
Musharraf observed that while a strict timeframe cannot be laid down, it should be seen that the fleeting moment is dependent on time.
He said the peace opportunity has been possible due to factors, inc1uding conducive international environment as the world believes that root causes of tensions, political disputes, must be resolved; secondly South Asia happens to be a nuclear flashpoint and the world is concerned about resolution of the disputes; thirdly the two countries have tried military solutions but have realised that coercive diplomacy is no more the option; and fourthly the people of Pakistan and India want peace.
Musharraf said the peace process between the two countries has become irreversible because 'the people have overtaken their leadership in the desire for peace and harmony in the region.'
He emphasised that both the confidence-building measures and conflict resolution should move in tandem.
The time for conflict management is over, the President stressed and added that the past accords between the two countries failed as they brushed the underlying cause of tension under the carpet.
Responding to a question, Musharraf said the three statements - borders cannot be re-drawn, the LoC cannot be accepted as permanent border and borders should be made irrelevant - are conflicting and the solution lies somewhere in compromise on these. He expressed the optimism that a solution to the decades-old Kashmir dispute, acceptable to all three parties concerned - Pakistan, India and the Kashmiris - could be found.
On South Asian Association for Regional Co-operation (Saarc), he said, Pakistan believes that the organisation should be made more potent.
"If bilateralism is failing, a regional forum should be available to all member countries for conflict resolution," he added.
Commenting on arms race in the region as mentioned in South Asian Free Media Association (Safma) Declaration, the President stated that Pakistan would like to reduce it. "Let's resolve it, Pakistan would like to reduce it," he said.
Pakistan, he told the gathering, has already floated the idea of a nuclear-free South Asia and has also suggested reduction in forces.
He asked the media to debate possible options for resolution of the lingering Kashmir dispute.
Musharraf, answering Safma's call for free movement of media personnel, said the government will pass special instructions to ease the travel of journalists.
On the occasion, the President pinpointed instances of unbalanced reporting in the regional and global media and said these created misperceptions. He expressed the hope that South Asian media would be more discreet and responsible in their reporting.
Musharraf said he considered free media as an important pillar of democracy but said there should be some in-built mechanism of checks within the media itself.
He informed the regional gathering that media in Pakistan was enjoying freedom of expression like never before. It was his government, Musharraf said, which allowed introduction of private TV and radio channels.
The President dilated on the failure of democracy in Pakistan in the past and said he has been striving to introduce essence of democracy in the country.
"I am a great believer in democracy," he held out.
"The Senate, the National Assembly, the provincial assemblies and the local governments are functioning fully - this is the essence of democracy - we would ensure that there are institutional checks and balances in the system," the President said, declaring that the National Security Council would ensure sustained democracy.