Sulu Gov. Yusop Jikiri said Abu Sayyaf leader Ra-dulan Sahiron, who leads the Sulu faction of the group, also promised to end kidnappings on the island if the ransom is paid.
Jikiri said the demand which he rejected was made in a letter he received recently from a courier.
"The group stated that they have the trust and confidence in my administration and that the group is willing to end the spate of kidnappings if the governor would pay the P16 million for the release of the captives," Jikiri told a radio interview yesterday.
But he said he told Sahiron he "should release the hostages without any condition or face the military consequences."
The Abu Sayyaf intercepted a Singapore-registered tugboat towing a barge delivering coal from Indonesia to Cebu in the waters off Sulu in June and seized four Indonesian crewmen. One crewman, however, managed to escape.
Last Aug. 21, the bandits took six Jehovahs Witnesses Christian evangelists four women and two men captive. Their Muslim guide was freed while the men were beheaded the following day.
Jikiri said he rejected the ransom demand because he doubted the Abu Sayyaf would keep their word.
"The kidnapping will not stop if the government will give in to the demand of these bandits," he said. "That is why this cannot be tolerated anymore. I will not even give these bandits an inch to destroy the future of the province of Sulu and its constituents."
The military launched an operation to rescue the hostages but has, so far, failed to pinpoint their location.
"We are doing our best to get the victims out of their misery. But it seems the bandits are very good in hiding them," Lt. Gen. Narciso Abaya, military Southern Command chief, said.
The Abu Sayyaf styles itself as an Islamic rebel group fighting for an independent Muslim state in Mindanao but their activities are mainly kidnapping-for-ransom.
The group had been linked to the al-Qaeda terrorist network of Osama bin Laden and is considered a terrorist organization by the United States.
About 1,000 US troops spent six months in Basilan earlier this year to train the Philippine military on how to better fight the Abu Sayyaf.
The group also had been linked to the Indonesia-based militant group Jemaah Islamiyah, which reportedly has ties with al-Qaeda.
Three bomb attacks in Zamboanga City last month have been blamed on the Abu Sayyaf. Police and military officials suspect the group were trained by Jemaah Islamiyah on how to make bombs.
Last week, police filed criminal charges against five identified Abu Sayyaf members and several unidentified "John Does" in a bombing that killed an American soldier and three Filipinos a month ago in Zamboanga.
Late last month, five Abu Sayyaf members were indicted for two other Zamboanga bombings the Oct. 17 twin bombings on two adjacent department stores and an attack near a Roman Catholic Shrine three days later.
At least eight people, including a Philippine Marine, were killed and 176 others were wounded in the attacks.
The suspects were caught with bomb-making materials as well as a diagram on how to build a car bomb.