During a visit here last week, Norwegian envoy Jon Hanssen-Bauer failed to secure agreement on a venue for talks even though both sides appeared to have settled on the end of October as a date.
As Hanssen-Bauer travelled to New Delhi to brief Indian authorities, heavy fighting erupted between Sri Lankan troops and Tamil Tiger rebels in the island's east with dozens of casualties on both sides.
"What we have is a commitment to start talks, but not an agreement, at least not yet," one Asian diplomat said.
"It is clear that the time is not right for talks."
The diplomat said the government believed it had the upper hand on the battlefield against the Tigers, fighting for a separate homeland for the Tamil minority in a decades-long conflict that has claimed thousands of lives.
"The government believes it is militarily stronger and any talks will only give the Tigers some breathing space, while the Tigers feel that if they sit at the table, they will be negotiating from a position of weakn