(Adds U.S. envoy's comment, details, edits)

By Anis Ahmed

DHAKA, Jan 8 (Reuters) - Bangladesh's army chief was summoned to the presidential palace on Monday to discuss restoring order after renewed clashes between police and political activists two weeks before parliamentary elections.

At least 50 people were injured and 40 detained on the second day of a transport blockade, called by former prime minister Sheikh Hasina's multi-party alliance, which is boycotting the Jan. 22 vote.

Police used batons and teargas to disperse Hasina's stone-throwing supporters after they set ablaze several vehicles across the capital Dhaka and its outskirts, witnesses said.

As the violence spread, caretaker President Iajuddin Ahmed called army chief Lieutenant-General Moiuddin U. Khan to the presidential palace to discuss the disorder.

Army troops patrolling the streets of Dhaka have so far avoided direct confrontation with the activists.

About 70 people including police were injured on Sunday, the first day of the three-day blockade.

Hasina's alliance called the transport shutdown in protest at what it sees as the interim government's inability to hold a free and fair vote. It says Iajuddin favours Hasina's rival, Begum Khaleda Zia, in the polls.

The alliance, which has threatened to block access to the presidential palace on Tuesday, wants Iajuddin to resign but he has refused.

Police on Monday night ordered a ban on the palace blockade and said offenders would be dealt with severely.

At least 45 people have been killed and hundreds injured in clashes between political rivals since Khaleda ended her five-year tenure as prime minister in late October and handed power to the interim authority.

Hasina and her allies want election officials "biased towards Khaleda" to be removed, a new election schedule and an overhaul of the list of registered voters.

FRUSTRATING SITUATION

On Monday, buses and lorries did not operate, deliveries from ports were suspended and most businesses and educational institutions closed. Rail and ferry services were disrupted.

Australian Foreign Minister Alexander Downer on Monday expressed his "concern as Bangladesh parties were unable to agree on an appropriate electoral process".

"Broad participation in free and fair elections is the bedrock of democratic society ... I encourage all parties to avoid violence and to seek ways through negotiation and dialogue...," he said in a statement.

U.S. and European diplomats have also expressed concern that Bangladesh, a predominantly Muslim country of 140 million people, is heading into a period of political instability.

The Jan. 22 election has also been boycotted by the Jatiya Party of former army ruler Hossain Mohammad Ershad and the Liberal Democratic Party (LDP) led by former President A.Q.M. Badruddoza Chowdhury.

Chowdhury's son and an LDP leader Mahi B. Chowdhury said unidentified attackers hurled two home-made bombs into his house in the capital on Monday night. He said the bombs caused some damage to the house but no one was hurt.

U.S. Ambassador Patricia A. Butenis told reporters after meeting Ershad on Monday that a one-sided election, without participation of all major parties, would not be acceptable to the international community.

"The (political) situation in Bangladesh is frustrating," Butenis said. (Additional reporting by Nizam Ahmed and Masud Karim)

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