COLOMBO, May 1 (Reuters) - Tiger rebels on Thursday rejected a government offer to relocate some of its troops in the Tamil heartland of Jaffna, deepening a standoff over stalled peace talks that could threaten an aid conference.

The rejection comes a day after Prime Minister Ranil Wickremesinghe told the Liberation Tigers of Tamil Eelam (LTTE) that delays in rehabilitating war-hit areas were unavoidable and urged the rebels to return to the negotiating table.

“We regret to note that we don’t see any meaningful change of status in the new proposal,” the LTTE said in a letter to the Ministry of Defence.

The ministry had proposed shifting military and police establishments from one part of Jaffna city to the west of the city, but the LTTE said that would still hinder public movement and normal life.

“Early action to relocate military complexes from densely populated areas would be very much appreciated,” the letter said.

“This issue has created...a sense of frustration in the minds of the public and would go against our intended goal of confidence building,” it said.

The occupation of so-called high-security zones in Jaffna peninsula by Sri Lankan troops has been a sticky issue, with the military saying it was too dangerous to vacate the camps and the rebels saying that was stopping any return to normalcy.

The issue and a lack of improvement in living conditions were cited by the Tigers last week as some of the reasons they had suspended the peace talks to end the two-decade separatist war that has killed more than 64,000.

The government and Norway, which brokered a truce signed in February 2002, have been scrambling to get the peace process moving again before a major aid donors’ conference in June

The meeting in Japan was expected to raise $3 billion over three years to rebuild war-hit and other parts of Sri Lanka, but diplomats have said they are worried donors may shy away if the peace talks are still stalled.