Is the story background the Kashmir conflict or the North eastern conflict? Since both these conflicts are so different, It has caused lots of confusion.

The conflict in this movie is not about Kashmir, Its about the conflict in the North East (Assam Region). They speak Assamese and several mention of the North east. However, they do go to Ladakh (This may have caused some confusion along with the allegory to Sufism).

If this was about Kashmir, then its a terrible depiction since the Kashmir conflict is primarily due to Pakistan and Its terrorists operating in Kashmir Not home grown resistance (There is that part too...but they are very small). And Pakistan loves to portray the Kashmir problem as an indigenous groups uprising. This is more like the home grown resistance from the Indian state of Assam and that area.

In India where there are so many terrorist bombs going off in different places so frequently, people in India have little patience for being sympathetic to the alleged "victims".

In India, everyone is a minority. A Tamil person has his/her own grievances, so does a person from Benga and Punjab and hundred other "Victims". So when you have a nation that is so diversified and yet pluralistic and democratic, where different ethnic groups have their representatives in the Parliament, if any minority has an issues, they need to use that legitimate process to address their grievances. So the rest of the minorities (The rest of India) are not going to be too kind to the "we are the ONLY minority and we are the only one with a Problem and hence we want to secede" groups.

for me, this movie was a total WTF! No wonder this movie failed miserably in India.

But if you watch this movie like its happening in some far far away land and not based on any real world conflicts, then you may have a movie here.