Finding itself on a sticky wicket on the issue of freeing 37-year-old Davis, the government is looking at a face-saving option under which the relatives of the two men killed by the American agree to withdraw charges in exchange for money to be paid by Davis.
Davis, who was arrested in Lahore on January 27 after he shot and killed two men he claimed were trying to rob him, may have to spend at least three more weeks in custody with a Pakistani court on Thursday putting off till March 14 the case to decide his diplomatic status.
Police have rejected his claim that he was acting in self defence and charged him with murder.
The government had planned to provide details about the diplomatic status of Davis during the hearing of petitions seeking his prosecution by the Lahore High Court, but dropped the move after former Foreign Minister Shah Mahmood Qureshi`s assertion that the accused is not entitled to "blanket immunity", official sources said.
The government yesterday sought three weeks to inform the High Court about Davis` status, following which the case was put off till March 14.
At the same time, Prime Minister Yousuf Raza Gilani has raised the possibility of "blood money" to settle the double murder case under Islamic and Pakistani laws.
Gilani made references to such a settlement during his speech to a gathering of Islamic scholars and clerics and also his meeting with US Senate Foreign Relations Committee Chairman John Kerry on Wednesday.
The Premier told Kerry, who was sent to Pakistan by the Obama administration to calm tensions over the diplomatic row, that the "expression of remorse and regret by the US over the loss of lives as well as the option of benefiting from the Qisas and Diyat Law (which was part of the Pakistan Penal Code) should be considered to cool down the rising temperatures in bilateral relations."
Pakistan`s leaders, fearful of a public backlash, have publicly said that Davis` case will be decided by the courts.
Media reports earlier this week had said that the Pakistan People`s Party-led government was planning to certify in the Lahore High Court that Davis had immunity.
However, the sources said the government scuttled this plan after Qureshi told a news conference on Wednesday that Davis could not be granted "blanket immunity" as desired by the US administration.
Qureshi, who skipped the swearing-in ceremony for Gilani`s new Cabinet after the PPP decided not to reallocate him the foreign affairs portfolio, said he had been told by Foreign Office officials it would not be possible to grant immunity to Davis.
Following Qureshi`s remarks, the "focus appears to be shifting from immunity for US national Raymond Davis to a possible blood money deal for ending the row," the Dawn newspaper quoted its sources as saying.
A diplomatic source told the newspaper that the two countries were considering "a face-saving compromise in which the US government apologises to the heirs of the victims, pays compensation and promises to investigate the incident as a criminal matter."
Kerry too announced in Pakistan that the US Department of Justice will conduct a criminal investigation into the shooting.
The diplomatic source told the daily that heirs of the victims had been contacted but they initially turned down the offer and insisted on Davis` trial.
The blood money deal was complicated by the suicide of Shumaila, the widow of Muhammad Fahim, one of the two men killed by Davis.
An unnamed US official too told the daily that a "blood money" deal is "one of the options on the table."
However, relatives of the two men killed by Davis have told the media in Lahore that they rejected the idea of `Diyat` or compensation and wanted the American to be punished.
Muhammad Wasim, the brother of Fahim, said his family wanted "blood for blood."
Imran Haider, the brother of Faizan Haider, the other man shot dead by Davis, too said his family was against the idea of compensation.
Imran told the media that he wanted Davis to be "hanged for murder."
Pakistan Tehrik-e-Insaaf party leader Tariq Chaudhry told reporters that businessmen and industrialists were willing to support the families of the dead men if they did not accept compensation from the US.