"It has been branded a terrorist training camp, an ideological hub for the 2008 Mumbai bombers, and the seat of a preacher considered so dangerous that the US has offered USD 10 million (6.2 million pounds) for information leading to his arrest.
"But rather than trying to close it down, the Pakistani authorities are helping the religious seminary and school in Muridke, a town 50 miles from the Indian border in Punjab province, revamp itself and retrain its teaching staff," The Guardian said in a report.
In the coming months teachers and vocational trainers employed by the government of Punjab will join the staff at Muridke as part of a pilot scheme being run in 18 radical religious schools in the province, it said.
"The programme deepens the Pakistani state's involvement in a centre which it supposedly took administrative control of soon after the Mumbai attack but which most observers say remains firmly under the authority of Hafiz Saeed, a burly preacher closely associated with the Lashkar-e-Taiba (LeT) militant group and its preaching wing, Jamaat ul Dawa (JuD)," the report said.
The move should "open a window of influence" on the "closed environment" of the JuD madrasa and help to halt the radicalisation of students, Mushtaq Sukhera, a senior counter-terrorism officer in Pakistan's Punjab Province was quoted as saying.
"More importantly, the government says it will help JuD disentangle itself from its long tradition of jihad and terrorism outside Pakistan's borders by encouraging it to focus exclusively on its political work and building up its extensive network of schools and health services in Pakistan," the daily said.
Although LeT is technically banned, "its fighters have remained within JuD, Sukhera said".
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"What to do with these cadres? You have to divert their energies. As a government policy we want to encourage them towards philanthropic and social work," he was quoted as satying.
However, the report said "there are doubts about how much the state's blessing for the non-violent activities of groups such as JuD could really help to neutralise a terrorist organisation that almost sparked a war with India in 2008".