Nepalganj, nearly 600 km from the capital, Kathmandu, has seen violent clashes between the Madhesi and Pahadiyas people.
The Madhesi are the original inhabitants of Nepal 's southern Terai plains, while the Pahadiyas migrated there from the hills 50 years ago to earn a better living.
Human rights groups said the violence erupted after the pro-Madhesi party, Nepal Sadbhavana Party-Anandi Devi (NSP-A), called a strike on Monday to protest against the government's neglect of the Madhesi community.
Residents alleged that party workers then burnt two dozen vehicles belonging to Pahadiyas people for defying the strike.
Local journalists reported that people from both sides took to the streets, some armed with guns, and shops and vehicles were vandalised.
The government imposed a curfew to control the situation, security officials said.
On Thursday morning, government and Maoist leaders travelled to the city to call for calm. A number of religious and community groups also held peaceful rallies to encourage an end to the violence.
The NSP-A said it regretted that such violence had taken place but denied any role.
Subodh Pyakhurel, a prominent human rights activist, said the situation remained vulnerable because political groups with vested interests could still disrupt Nepal’s peace process.
In November, the Maoist rebels and interim government signed a historic peace agreement to end a decade-long conflict that had killed more than 14,000 people. The agreement, which took five months to negotiate, followed a mass uprising that ended King Gyanendra’s direct rule in April.
The agreement included rules for managing the weapons and armies of both sides.
However, activists have voiced concerns about armed Maoist splinter groups ignoring the rules. Among the most feared are the Tarai Janatantrik Mukti Morcha (TJMM) and the Kirant Workers’ Party (KWP).
Human rights groups believe both have community agendas, with TJMM encouraging sentiment against the Pahadiyas in an effort to provoke the Madhesi to cleanse them from the Terai.
Pyakhurel said the government and Maoists should seriously consider inviting the groups to take part in the peace process and government. They needed to be “mainstreamed” as political parties. Both groups had abducted, killed and spread fear in the community, he said.
NN/GS/DS
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