In this scenario, the best response by the paramilitary forces would be option 2: surround the village and offer to negotiate peacefully to avoid civilian casualties by offering a surrender policy.

Option 1, which suggests opening fire on the village, is not a suitable response as it would not only put the lives of innocent civilians at risk but also go against the principles of protecting human rights.

Option 3 suggests utilizing air power to target the Naxalites from the air. While this may be a feasible option in some situations, it can also lead to collateral damage and harm innocent civilians in the village.

Option 4 suggests sending in `special policy officers` to attack the Naxalites. However, this could escalate the situation and potentially lead to more violence and casualties.

Option 2, on the other hand, advocates for a peaceful approach. By surrounding the village, the paramilitary forces can contain the Naxalites and minimize their ability to cause harm. Offering a surrender policy shows willingness to negotiate and can potentially lead to a peaceful resolution without further loss of life. It prioritizes the safety of civilians and aims to minimize casualties.