According to police reports, a Cordon and Search Operation (CASO) was launched early Tuesday morning in Pehlipora village near Larnoo, following "inputs of presence of militants in the area".
"As the security forces closed in on the hiding terrorists whose number was estimated to be around five, they were fired triggering an encounter", said the police official.
He identified the slain as Mohd Furhan Wani son of Ghulam Mohd Wani r/o Wangund, Khudwani and Mohd Farnham Wani son of Ghulam Mohidin Wani r/o Wangund Kaimuh.
One civilian has succumbed to injuries during the clashes in Khudwani village of district Kulgam.
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The police said that Farhan was a "hardcore stone-pelter turned militant" against whom several cases were registered in Kulgam police stations. "Two militants have been killed in the gunfight and operation is in progress".
Wani's death agitated the crowd further and it started pelting stones at a nearby Army camp, officials said. Soldiers allegedly opened fire in retaliation and two civilians sustained bullet injuries in the ensuing crossfire. "One of the militants has been identified as Mohammad Farhan Wani of Hizbul Mujhadeen", said an army spokesman at South Kashmir based Victor Force.
The other injured, Yasir Ahmed Dar, 30, who was hit in the shoulder, is stated to be stable.
Meanwhile, authorities blocked internet services in the southern district.