He also said that the Centre, in collaboration with state governments, made efforts to deal with insurgent groups operating in the region through various ways in the last two years.
"Most militant groups have come to realise that violence will not pay, state will never allow the violence to pay. The state will never allow any violent group to overthrow, overpower the state and talks are the only way to find solutions to their problems," he said addressing the 7th Northeast Business Summit here.
Chidambaram said it was heartening that most of the militant groups were in the mood to talk and most part of Northeast were free from conflict.
The Home Minister, however, said there was still some areas of concern that include extortion and occasional kidnapping for extortion.
"Extortion keeps the militant groups going. That is their source of funds....I have been saying this with responsibility that these extortion rackets must be stopped," he said at the Summit organised by Ministry of DoNER and ICC.
Chidambaram said the Central government was offering support to all state governments in the region to ensure that extortion does not take place and kidnapping for extortion does not take place.
"During the last year, these incidents have come down dramatically and I am confident that in 2012, the situation will be better," he said.
The Home Minister said the state governments must give the message to rest of the country that most of the Northeast was not a conflict zone.
He said most of the Northeast was today conflict-free and there was no violence in most parts of Northeast as 2011 witnessed a new low in the level of violence where in all states together there were only 627 incidents in which 70 civilians and 32 security personnel were killed.
Chidambaram said peace agreements have been signed by the government with Gorkha Janmukti Morcha in West Bengal, UPDS in Assam and again it was on the verge of concluding another agreement with at least two groups in Assam.
"ULFA, both factions of NSCN --IM and K -- as well as NDFB are in talks mood. The talks are at different degrees. Formal talks are underway with NSCN-IM. Talks have began with ULFA and I am confident that shortly talks will begin with NDFB. Many other smaller groups are in talks mood," he said.
The Home Minister said more than 270 ethnic groups living in the Northeast present a picture of diversity and also a picture of conflict.
"There is a grain of truth (to it). But much has been changed in the Northeast. By any measure, Meghalaya, Mizoram, Sikkim, Arunachal Pradesh and most parts of Assam are conflict free. Conflict is today confined to Manipur, to some extent in Nagaland, and it might be paradoxical to note that the level of violence (in Nagaland) is extremely low, and some parts of Assam," he said in presence of Assam Chief Minister Tarun Gogoi and Meghalaya Chief Minister Mukul Sangma.