Sahara talks inch forward, no progress on status

* No movement on territory's future, U.N. mediator says

* Morocco, Polisario to meet again in March

NEW YORK Jan 23 (Reuters) - Talks between Morocco and Western Sahara's independence movement inched forward on Sunday but there was no progress over the basic issue of the disputed territory's future status, a U.N. mediator said.

Western Sahara, a former Spanish colony in northwest Africa, was annexed by Morocco in 1975, sparking a rebellion by the Polisario Front. The United Nations brokered a cease-fire in 1991, but no political settlement has followed.

"Each party continues to reject the proposal of the other as a sole basis for future negotiations," mediator Christopher Ross said after two days of talks near New York City between Moroccan and Polisario officials -- their ninth round since 2007. Ross made a similar statement after previous rounds.

Rabat is offering self-rule to Sahara as part of Morocco, but Polisario demands a referendum with full independence as one option. Neither side has been willing to back down.

Western Sahara, a thinly populated desert tract about the size of Britain, has rich fishing grounds off its coast and reserves of phosphates, used to make fertilizer and detergent. It may also have oil and gas reserves.

Many Saharans live in refugee camps in neighboring Algeria, which supports Polisario. Western countries complain that the Sahara dispute is hindering cooperation against Islamic fundamentalist groups in North Africa.

Ross said that despite the deadlock, the two sides had discussed "innovative approaches to build a new dynamic ... on the basis of regular meetings."