Talks on the Kartarpur Sahib Corridor project were held at the Attari border in Punjab on Wednesday.
Sources in India's Ministry of Home Affairs said that Pakistan insisted on charging a fee of $20 from each pilgrim. "It showed inflexibility and described its redline. The Indian side strongly opposed this. They were asked to reconsider their position," the official said.
A second disagreement was over the number of pilgrims allowed to cross the border to visit Kartarpur. Pakistan did not agree to approve 10,000 to allow for additional pilgrims on special occasions.
They cited infrastructure constraints and said they could agree to allow "more pilgrims" on special occasions subject to available capacity.
Pakistan also showed inflexibility in allowing Indian consular presence or permitting protocol officials to travel every day to extend facilitation to pilgrims going to Gurudwara Kartarpur Sahib through the corridor.
"It seems they came with a brief not to agree. They wanted to indulge in propaganda more than serious talks," the official added.
Nevertheless, the two countries, which engaged on the Kartarpur Corridor Project despite tension over the Kashmir issue, agreed on visa-free travel for 5,000 pilgrims daily. As per the agreement, the corridor will be operational throughout the year, seven days a week.
"Both sides agreed to build a bridge at the Budhi Ravi Channel. Pending the construction of the bridge on the Pakistan side, both sides agreed to crossing point coordinates for the temporary service road being built," the source said.
The corridor will link two shrines considered holy by the Sikh community - in Pakistan's Kartarpur, the final resting place of the religion's founder Guru Nanak and Dera Baba Nanak, located in India's Punjab state. Both shrines are just three kilometres from each other, across the international border between India and Pakistan.
Both the countries have announced the Kartarpur Corridor will be completed before the 550th birth anniversary of Guru Nanak in November 2019. The construction of a passenger terminal and highways are also underway on both sides of the border.