Nepali security forces shot dead a protester during demonstrations that have caused shortages of fuel and essential supplies and cast a shadow over upcoming elections, police said on Wednesday.

Police opened fire late on Tuesday after anti-government protesters began throwing stones in Siraha, a town in the southern Terai plains bordering India that are home to half Nepal's population.

"First we tried to control the mob by bursting tear gas shells and then fired shots in the air," said Prem Chettri, a police officer at the scene in Siraha. "But they were undeterred and tried to attack the police, forcing us to open fire."

The protesters are demanding greater autonomy for the Terai and its ethnic Madheshi people, who have closer linguistic and cultural links with northern India than with Nepal's hill people.

It is the second death since Madheshi groups called an indefinite strike and began blockading roads last week to demand greater power and government job allocations.

Nepal imports all its fuel and many essential goods from India, and the blockade has choked supplies between the border and the capital Kathmandu.

Long queues have formed outside the few petrol stations remaining open in the capital and food prices have risen.

The unrest has also raised doubts over the government's plans to hold a national election in April.

Dozens of protesters were also wounded in the violence and in other clashes with police elsewhere in the Terai. Roads are largely empty of traffic, while schools and shops remain closed.

The government and the protest leaders met on Tuesday but did not reach an agreement to end the trouble, both sides said.