Maoist guerrillas holding an Italian hostage said on Friday talks to free the kidnapped tour guide were a farce and threatened to take "an extreme step" unless the government releases a group of imprisoned rebels within four days.
The leftist fighters from Orissa did not specify what action they would take if their demands were not met but said they were not ready to release Paolo Bosusco, the Italian taken hostage three weeks ago.
"If the demands are not fulfilled we will be forced to take extreme step," rebel leader Sabyasachi Panda said in an audio message aired on local TV stations, giving a 96 hour deadline.
An Italian foreign ministry spokesman said Rome was "concerned" at the news but had no further comment.
On Thursday, the Orissa state government said it would facilitate the release of 27 prisoners, including Panda's wife, in exchange for Bosusco's freedom and that of another hostage.
However, the list did not included the names of several prisoners the Maoists want released.
Also known as Naxals, the rebels have fought for decades in a wide swathe of central and eastern India including many resource-rich regions where tensions run high between poor farmers and industrial developers.
The government calls them the main internal security threat and an obstacle to higher growth and more jobs in Asia's third-largest economy. Hundreds die annually in the conflict, although levels of violence have fallen in recent years.
Bosusco was seized in Orissa state, along with another Italian, Claudio Colangelo, on March 14, in what is believed to be the first time the rebels have targeted foreigners. Colangelo was handed to a group of reporters on March 25.
The fighters said they took the Italians because they were taking photographs of indigenous tribeswomen bathing in a river, an allegation Colangelo denied after his release.
On March 24, another group of Maoists kidnapped Jhina Hikaka, a state legislator, adding to the tension.
The rebels are insisting the government fulfil a total of 13 demands including an end to tourism in sensitive areas of the state and an end to police operations against them.