The Nepalese capital, Kathmandu, has been hit by bomb blasts on the third day of a blockade called by Maoist rebels. Nepal's government agreed to investigate the whereabouts of missing activists, a key rebel demand, but the rebels also want the government to free jailed guerrillas and investigate killings of Maoists.

Officials say suspected Maoist rebels shot and wounded a policeman guarding a government tax collection center, then planted a bomb that exploded minutes after panicked people had fled.

Another explosion ripped through an empty police checkpoint on the outskirts of Kathmandu.

Violence hit the city three days after the rebels imposed a blockade on the capital, saying any vehicle defying their blockade would be targeted.

The threat has effectively cut Kathmandu off from the rest of the country, despite government appeals that the rebels should be ignored. Government officials are accusing the Maoist guerrillas of "psychological terror."

The rebels have not set up roadblocks, and army trucks are patrolling the highway.

Lok Raj Baral, executive chairman at the Center for Contemporary Studies in Kathmandu, says travelers are staying off the roads, because they fear reprisals by the rebels.

"The government is trying, the army is patrolling on the road, main highways etc., but still it is very difficult for bus, and managers, also, because they have to face things, and there will be lot of damages," he said.

Food prices in the city are on the rise, and fuel is being rationed.

Nepalese businessmen are asking the government to begin an immediate dialogue with the rebels. The appeal follows the shutdown of 12 businesses, including a luxury hotel in Kathmandu and a Coca-Cola bottling plant on orders from rebel-affiliated trade unions.

The president of the Nepalese Chamber of Commerce and Industry, Binod Bahadur Shrestha, says business leaders want lasting peace.

"Our first demand is, the cease-fire to be done immediately," Binod Bahadur Shrestha. "The next is, they [rebels] should stop this closure, they should stop all this blockade immediately."

The rebels began their struggle to replace Nepal's constitutional monarchy with a communist republic in 1996. The conflict has claimed more than 9,000 lives, and damaged the country's fragile economy.