"A plebiscite under the supervision of United Nations representative and guarded by forces of United Nations should be held in both sides of the Kashmir," he said while talking to reporters in his Ashram here.
The Shankaracharya said while "referendum is a time consuming process", there should be dialogue even with separatists to "douse the present crisis".
"The government should not hesitate in talking with (separatist) Hurriyat for peace in Kashmir," he said.
Referring to his recent visit to Kashmir, Shankaracharya, said the Kashmiri people complained that their voice was being "crushed even though they want to stay in India".
"Further attempt to crush the agitation may not pay dividends as the government is morally bound to listen genuine problem of its people," he stated.
He termed the Jammu and Kashmir Chief Minister Mehbooba Mufti's statement that only a handful of people were leading the agitation as baseless, saying "Had it been possible to crush the handful people by force, the curfew in Kashmir would not have lasted for 50 days".
The Shankaracharya said the government should continue dialogue with Pakistan.
He said the government should understand the "difference" between terrorists and Kashmiri loyalists who are demonstrating on the roads.
"While terrorists should be dealt with severely, the problem of the loyalists should be heard and solved in order to prevent them from going to opposite camp," he said, adding the demonstrators in Kashmir were in pain as neither they are being heard nor is their economic problem, including mass unemployment solved, despites economic packagesgiven to Kashmir.
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