Bhutanese refugees on Wednesday staged a demonstration in front of the Indian embassy in Kathmandu demanding right of passage to their homeland through Indian territory and to protest Tuesday's firing incident on the Indo-Nepal border.

Chanting slogans against the Indian government, the refugees attempted to burn the effigy of Prime Minister Manmohan Singh near the embassy but were stopped by some three dozen riot policemen deployed in the area.

The protesters, who were stopped at 50 metre distance from the embassy gate, condemned Tuesday's firing on refugees on the Mechi-bridge near the Indian border.

They said a 20-year-old student was killed during the firing by SSB when refugees were moving towards Bhutan as part of their long march starting from refugee camps in Jhapa district in eastern Nepal.

At least 40 Sashastra Seema Bal personnel were injured in stone pelting by a mob of Bhutanese refugees from Nepal who tried to cross into India at Panitanki in Darjeeling district to reach their homeland.

"We condemn the killing of the youth by Indian security personnel and their acts of suppressing the peaceful demonstrators," said Bhutanese Journalist T P Mishra, who led the demonstration.         

"We want that peaceful demonstrations should be allowed and we don't want to see killings of people any more," said Ganga Neupane, a Bhutanese activist.

When asked whether she support the US government's offer for resettlement for the refugees, the activist said: "The offer is one of the options to find solution to the refugees' problem, but we thing it is more justifiable to respect their demand for repatriation."

"Indian government give us way to return to our homeland," the over dozen refugees shouted.

Meanwhile, talks were held at Panitanki in India between Indian officials and Bhutanese refugee leaders to ease tension in the border area, according to refugee sources.

The refugees have also agreed to postpone their long march for 15 days to ease tension.

The Indian side is also learnt to have agreed to release those refugees who were detained during Tuesday's demonstration, they said.

A team led by Chief District Administrator of Jhapa district Jaya Mukunda Khanal comprising Nepalese officials, Bhutanese refugee leaders and local political leaders reached Panitanki to hold talk with the Indian officials.

The Indian team was led by District Magistrate of Darjeeling Jaydesh Pandey. The talks were aimed at easing tension and normalising situation in the border area.

Nepalese local administration has, meanwhile, lifted curfew in Jhapa's Beldangi camp where a clash between the two groups of refugees left two dead in the past few days.

The situation has now returned to normal in the camps, a refugee told PTI over phone.

The US government has offered at least 60,000 Bhutanese refugees resettlement in the country and the process of selecting the refugees has already started at the camps, which has invited a mixed reaction from camp inmates.