The United Democratic Madhesi Front (UDMF), an alliance of seven Madhesi-based parties took to streets in Birgunj area in southern Nepal.
Supporters of Sadbhawana Party gathered at Ghantaghar area of Birgunj and burnt Prachanda's effigy.
The front had announced a 16-day-long protest, including a bandh in Terai region to disrupt the local body election announced by the government yesterday.
"The imposed election would not bear any significance," said Ishwor Yadav, Vice Chairman of Sadhbhavana, a member of the front.
During a cabinet meeting, the government yesterday announced to conduct the local body elections on May 14.
UDMF in a statement had announced to stage torch rallies across the country today and shut down 20 districts of southern Nepal tomorrow.
Public meetings and rallies will be organised to expose the government from February 23 for two weeks, as per the protest programmes, the front said yesterday.
The front said, it would announce further protest programmes after two weeks of the initial protests.
They were seeking to amend the constitution to address their demands before the announcement of the election date.
The front had supported Prachanda during the Prime Ministerial election.
However, Prachanda's chief political advisor Chakrapani Khanal had said "the constitution amendment bill will be forwarded and endorsed before the local polls," adding that "the Front should cooperate the government's move instead of announcing agitation."
Federal Alliance is a grouping of Madhesi parties and ethnic groups that have been demanding more rights and representation for the marginalised people.
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The torch rally began from Shiva Temple in Rajbiraj, marched around the city before concluding at Neta Chok.
The participants chanted slogans against the government and warned that they would not let any elections to take place unless their demands were not met.
Rallies were also organised in Bara, Parsa, Rautahat, Kalaiaby the Madhes based parties, who also burnt effigy of Prime Minister Prachanda in some places.
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