"We don't know the whereabouts of Sangma, but rescue operations are on," Abraham Sangma, the district police official of South Garo Hills, told IANS.
Combat Battalion for Resolute Action (CoBRA) and Meghalaya's Special Weapons and Tactics (SWAT) commandos have been pressed into service to trace the hostage.
Naga is also a coal exporter to Bangladesh from Gasuapara Land Custom Station, about 400 km from Shillong, the state capital of Meghalaya.
Intelligence officials said Naga is still being held in captivity by the GNLA rebels in the Garo Hills region. The rebel outfit had demanded a ransom of Rs.20 lakh for his safe release.
"Naga is very much in Garo Hills and the rebels are negotiating the ransom with his family members," the intelligence official said, on condition of anonymity.
The GNLA had earlier slapped extortion demands ranging from Rs.5 lakh to Rs.1 crore on petrol pump owners, coal dealers and businessmen in the coal-rich districts of the Garo Hills.
The outfit, outlawed by the central government, is fighting for a separate Garoland in western Meghalaya.