Gun and mortar fire echoed across the capital of Bangladesh yesterday as the police and army fought a group of border guards who mutinied, took hostages and seized a shopping mall.

The Government said that nearly 50 people were killed before the rebels from the Bangladesh Rifles (BDR) began to lay down their arms and release about another 50 women and children they had held hostage.

Kamrul Islam, the Deputy Law Minister, entered the besieged barracks to negotiate the mutineers’ surrender. “We talked to the BDR troops and they said some 50 officers have been killed,” he said, adding that he could not confirm the deaths because he had not seen the bodies. “We heard that the casualties were kept at a hospital inside the compound.”

It was unclear whether the two-month-old Government had met the rebels’ demands for better pay and working conditions — a common complaint among state employees.

The fighting in central Dhaka raised fears initially of another military coup in a country that has witnessed several such takeovers since winning independence from Pakistan in 1971. Panic spread across the city and traffic came to a halt while a military helicopter hovered over the BDR complex and several explosions were heard.

“There has been a huge exchange of gunfire at the headquarters. We have heard mortar fire,” Nabojit Khisa, the chief of police, said.

The mutineers soon made it clear, however, that rather than staging a coup they wanted a better pay package, including the right to take part in UN peacekeeping missions. “We have always been neglected and continuing apathy towards our genuine demands has pushed our backs to the wall,” a guard told the ATN television network.

The guards said that they had become angry when their officers failed to raise their complaints with Sheikh Hasina, the newly elected Prime Minister, when she visited their headquarters the day before.

ETV, another local television channel, said that the guards left their barracks chanting slogans and seized a conference hall where officers were meeting. Some also occupied a shopping centre, the channel said, and several bystanders were hit by bullets.

A rickshaw driver was shot outside the barracks and died at the state-run Dhaka Medical College Hospital, according to doctors.

Several television channels said that the Bangladesh Rifles commander was wounded or possibly killed. Police said that they had found the bodies of two senior officers dumped in a drain behind the barracks. They were identified as Colonel Mujibul Haq and Colonel Enayet.

The Prime Minister was keen to bring a quick and peaceful end to the stand-off, which threatened to grow into mass protests over high food prices and rampant corruption. After several hours of fighting she met 15 of the renegade troops at her home and offered them a general amnesty in return for their surrender.

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