(Adds government to negotiate)

By Charles Mangwiro

MAPUTO, Feb 5 (Reuters) - Police opened fire on a crowd protesting transport price hikes in Mozambique's capital on Tuesday, killing one person, a police official said.

Thousands of people joined the protests in the capital of the southern African country. They burned tyres and threw stones at police vehicles. Police fired rubber bullets as they attempted to clear the streets.

"We are aware that one person was killed," said police spokesman Arnaldo Chefo. "We will investigate in what circumstances police resorted to live ammunition instead of rubber bullets or teargas."

The government said it would meet transport operators to try to negotiate an end to the stand-off, but explained it had little control over transport fares that have shot up alongside the global price of crude.

"The increase is fair and also the complaints by commuters are fair," Transport and Communications Minister Antonio Munguambe told a news conference. "That is what we want to go back to the negotiation table and discuss with the operators"

In a warning to protesters, deputy interior minister Jose Mandram said security forces could shoot to kill if the demonstrations got out of hand.

Fares have been driven higher by rising fuel prices. This year the local price of petrol has climbed 46 per cent and diesel almost 90 per cent. Kerosene prices rose 61 percent.

Mozambique's largest trade union federation, OTM, said in a press release that workers spends 35 percent of their wages on transport. A recent U.N. development report said nearly 40 percent of Mozambique's people live on less than $1 a day.

"If this worker has children who also need to use minibuses to go to school, one can easily estimate the impact that these increases have on the quality of his life," it said.

The union federation has called for an extraordinary meeting of officials from labour unions, the government and other associations to discuss rising fuel prices.

Mozambicans frequently use overcrowded and battered buses because state-owned owned transport companies have a shortage of vehicles.

(Reporting by Charles Mangwiro; Editing by Michael Georgy and Matthew Tostevin)

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