The Nepal government today bowed to one of the main demands of Maoist rebels who have been holding the capital Kathmandu to ransom for the last three days.

The government promised to investigate and make public what has happened to a number of left-wing activists who have disappeared during the country's eight-year civil war.

The government's concession came as the rebel blockade of all routes in and out of the capital started to bite in Kathmandu.

With no food or petrol arriving, prices are soaring in the mountainous city, home to 1.5 million people and popular with Westerners as a base for hiking in the Himalayas.

Today the Maoists turned the screw by using violence for the first time in the three-day siege.

Rebels exploded a bomb which badly damaged a land registry office and then fired on police and troops outside, seriously injuring one policeman. Later the rebels blew up an empty police station at the edge of the city.

Mohammed Mohsin, Nepal's information minister, said the government would inquire what had happened to the missing rebels and trade union activists, whose aim is to overthrow the Nepali monarchy.

"We will make public the results of our investigation within 30 days," Mr Mohsin said. He appealed for Kathmandu's citizens to go about their lives as normal.

Rajendra Bahadur Thapa, an army spokesmen, urged the public not to fear driving on Kathmandu's roads. "We want to tell vehicle owners to be free from this slavery mentality of terror created by rebel threats," he said.

But Catherine Philp, The Times South Asia correspondent, speaking from Kathmandu, said that ordinary Nepalese did not trust the army's assurances. Only one lorry, loaded with apples, made it into the city today.

"Roads that are usually choked with horn-honking, end-to-end lorries lie empty and silent as drivers and merchants stay at home, unwilling to test the rebel threat to attack any supply vehicles on the road," she said.

"The lorry that reached the checkpoint today only did so because its Indian driver was unaware of the blockade and was told by an army desperate to break the siege that it was safe to progress."

Fresh vegetables have doubled in price overnight, according to Pralhad Sharma, a spokesman for the Nepal Consumer Society. "Most housewives and local people, especially low income ones, are very worried prices will soar further. They're very angry about the blockade," he said.

The civil war has claimed nearly 10,000 lives in the Nepalese countryside since 1996, but until recently Kathmandu has been relatively unaffected.

Earlier this week Maoists bombed a top hotel in Kathmandu which had refused to agree to their demands. Soon after, 24 international companies pulled out of Nepal.

The rebels want to force the government to undo the order naming them as an illegal, terrorist organisation, and then to launch peace talks, said an activist in contact with the leadership.

Mr Mohsin responded: "The government is fully prepared to hold new peace talks, but the Maoists are not serious about the peace and security of the country."

A government source said later that unbanning the rebel organisation was a bargaining counter that the government wanted to reserve for use in peace talks.

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