2 Suspected terrorists gunned down ahead of R-Day

Wait and see... I suspect the Indian federal govt is simply speaking on behalf of the state govt. I think the feds are in the dark about the real happenings as anyone else, while the police and perhaps some local UP politicians will know what really happened.
By the time the Indian govt firgures out whats really the case, they will have realized its another fake encounter, and they are made to look bad once again.

Its now weeks since the encounter, and it appears it actually has been swept under the rug...

Same thing that happened to Kashmir Singh. He spent 30 years declaring his innocence only to admit to being a spy when he was released.
Sarabjeet was probably just a drunken bufoon who accidentally crossed the border (is the border that easy to cross?). But, unfortunately, innocent people often get caught in the middle of all this.
I can guarantee you one thing however, Sarabjeets case will end better then the case of Khalid Mahmoud who was apparently tortured to death in Indian custody not long after Kashmir singh was released.