Sri Lankan troops, supported by supersonic aircraft and artillery, moved towards the Mavil Aaru dam in Trincomalee district on Monday, but were met with "stiff resistance" from the LTTE, the Sri Lankan Army said.
The army website said that the LTTE was putting up stiff resistance to advancing Sri Lankan troops with incessant mortar and small arms fire.
The area around Mavil Aaru had been heavily mined, said the government defense spokeman, Keheliya Rambukwela.
"The LTTE lost 35 cadres while the army lost six men. Six troops were wounded," an army spokesman said.
But according to the pro-LTTE website Tamilnet, the army lost 12 troops including two officers, while the LTTE lost three men and two were wounded.
The army was "defeated" at Valkottu even as the Sri Lankan Air Force's Kfir and MIG fighter bombers and Multi-Barrel Rocket Launchers shelled the area incessantly, the rebel website claimed.
"The army could not move far, even a kilometre from the Thirumangalam camp," said Ilanthirayan, the military spokesman of the LTTE.
The army had moved from the camp towards Ankodai in the LTTE controlled area, en route to Mavil Aaru.
The nearest army camp was 5 kms from the dam site.
The LTTE also said that the army's bid to take Eachchilampattu, further east, had also been "defeated".
A column of the army had moved from the Kallaru camp, near Mavil Aaru, to Eachchilampattu, in a bid to divert the LTTE's attention.
The area around the Mavil Aaru dam is heavily mined by the LTTE.
Government defense spokesman Keheliya Rambukwela said that this was impeding the advance of the troops.
The Sri Lankan government and the LTTE have been fighting for the past ten days over the Mavil Aaru dam in an LTTE-controlled area of Trincomalee district.
On July 20, the LTTE had closed the sluice gates of the dam which was supplying water to 15, 000 families and irrigating 30,000 acres of paddy land in a government-controlled area.
The LTTE had said that it would not open the gates until the government took steps to supply water to Muttur East and Eachchilampattu, areas controlled by it and met three other demands, unrelated to water.
Six days of talks through the Nordic truce monitors having failed, the government launched air strikes to clear the area of the LTTE so that government engineers could enter and reopen the gates, Rambukwela said.
He described the air raids on many parts of the North East held by the LTTE as a "humanitarian operation" and not "military action".
He said that the Air Force was attacking areas in Batticaloa and Mullaitivu districts to prevent the LTTE from sending military assistance to its cadres in Mavil Aaru.