KATHMANDU, Aug 19: Maoist rebels kept vehicles off roads leading to Nepal's capital for a second day on Thursday as their unprecedented blockade of the city triggered fuel rationing and pushed food prices up.

The guerrillas' call for an indefinite blockade - and an implied threat to attack vehicles that violate it - has disrupted the supply of food and goods to Kathmandu, a city of 1.5 million people ringed by hills.

The Maoists have not physically stopped movement of vehicles in and out of Kathmandu since the blockade began on Wednesday. The army is guarding the roads and there has been no violence.

But still residents fear they could launch deadly hit-and-run attacks and that has kept all but a handful of vehicles that have army escorts off the roads. Even the few armed convoys cannot meet the city's demands of cooking oil, rice, sugar and vegetables, grocers said.

"I have rice stocks for 10 days. But the prices of vegetables have gone up and gas cylinders are being rationed," said Manju Shrestha, who owns a large grocery store. The city showed few signs of panic buying, but fuel wholesalers were rationing supplies.

"I was given only 3,000 litres of petrol by wholesalers yesterday against my quota of 4,000 litres," said Basanta Shrestha, owner of a petrol pump in downtown Kathmandu. "If this continues, there will be a scarcity of petrol soon."

State-owned Nepal Oil Corp, the country's fuel monopoly which sources supplies from neighbouring India, had stocks of petroleum and cooking gas to last two weeks, a spokesman said.

In Khanikhola village, 40kms to the south of Kathmandu on a road leading to the southern plains and further on into India, most shops and hotels closed on Thursday as business, which depends on highway traffic, dried up.

Dozens of soldiers and policemen with automatic rifles walked along the key highway, considered the lifeline of Kathmandu as it accounts for 90 percent of the supplies coming into the city.

"If I can't lift these today I'll have to throw them away," said Bhim Kumari Kunwar, a farmer, pointing to two baskets filled with tomatoes and cucumbers in her mud house. "How long can we poor farmers afford this. This blockade doesn't help anyone."

GOVT SEEKS TALKS: The rebels have frequently blockaded provincial towns, but this is the first time they have tried to shut down the capital, which so far has been spared much of the rebel violence.

In the past, the Maoists have called blockades for up to five days, though analysts said it was too early to say how long this one would last. "When the scarcity begins to hit, pressure will build on the Maoists to end the blockade," said Padma Ratna Tuladhar, a human rights activist who facilitated peace talks between the rebels and the government.

The rebels called the blockade to demand the release of detained guerrillas, a probe into the alleged killings of activists and information about thousands of missing comrades.

Deputy Prime Minister Bharat Mohan Adhikary urged the rebels, who have been fighting since 1996 to replace the Hindu monarchy with a communist republic, to begin peace talks to help end a revolt that has killed more than 10,000 people and destroyed the economy of one of the world's poorest nations.

"Neither can we finish the Maoists, nor can they capture Singha Durbar. Both must accept coexistence," Mr Adhikary said, referring to the federal government secretariat. -Reuters

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