Oct. 20 (Bloomberg) -- Peruvian President Alejandro Toledo declared a 90-day state of emergency in a southern Andean region after riots by coca leaf farmers left two dead.

Police fired on a crowd of about 800 protesters who stormed the state-run, 110-megawatt San Gaban hydroelectric power plant in Puno state Tuesday, according to an e-mailed Interior Ministry statement. Two farmers were killed and 10 injured in the riot, the communique said.

Energy & Mines Minister Jaime Quijandria told reporters the protest caused $1 million in damages to the plant, which supplies energy to the city of Puno, with a population of 100,000, and Minsur SA's San Rafael tin mine, the world's second-largest. He said the plant continues to operate.

Deputy Interior Minister Richard Diaz told local cable TV station Canal N the government sent 85 police troops with another 120 to retake the power plant, located 1,300 km (800 miles) southeast of Lima.

``This has opened up Pandora's chest,'' Diaz said. He said police had destroyed 10 cocaine laboratories in the area, where he said some 2,500 families have planted 3,500 hectares (8,600 acres) with coca leaf in response to rising prices.

The farmers are protesting government efforts to eradicate coca leaf plantations that authorities say supply cocaine traffickers. As part of ongoing protests, coca farmers briefly kidnapped 20 European tourists in an Inca temple in the Andean city of Cuzco in September.

Roger Rumrill, a consultant on coca production to governments and international organizations, accused the government of exaggerating the figures and said officials failed to reach agreements with coca farmers before destroying their fields.

'Furious'

``The farmers are furious, while the government just plays the role of a fireman,'' Rumrill said in a telephone interview. ``It only turns up to try and put out the fire.''

The head of state counternarcotics agency Nils Ericsson said at a news conference that drug traffickers were behind the protests.

``The government will not dialogue while any act of force or violence continues,'' Prime Minister Carlos Ferrero said in a televised news conference late Tuesday.

Adolfo Huamantica, mayor of the district of San Gaban, denied the accusation, and threatened to take more radical protest measures, in an interview with radio station CPN.