Instead, he convoked a national dialogue of lawmakers, labor and business leaders for Monday to hash out a completely new law.

Evo Morales, a firebrand indigenous opposition leader, said his Movement Toward Socialism party (MAS) would not show up.

"Mesa has convoked the club of neoliberals," Morales told Reuters. "He may as well invite (ousted former president) Gonzalo Sanchez de Lozada and the transnationals."

Morales will be busy on Monday leading a 125-mile (200-km) protest march from the Andean highlands to the capital La Paz to demand a 50-percent royalty on oil and gas production. Some protesters are calling for full nationalization.

The looming unrest sent protest-weary Bolivians scurrying to stock up on food in case of shortages.

"I don't want to go hungry like in October 2003 when there was a big blockade, so now I decided to buy rice, flour, eggs and some other goods," said Maria Concepcion in a market in El Alto, the poor indigenous town that overlooks La Paz.

Mesa's predecessor, Sanchez de Lozada, was toppled in a bloody October 2003 revolt triggered partly by plans to export natural gas through a port in Chile, a historic enemy.

Huge street protests over gas in March nearly forced Mesa out of office.

A former TV news anchor with scant support in Congress, Mesa had originally supported a 32-percent tax that would be deductible from other corporate taxes, so his outright rejection of the bill puzzled many Bolivians.

"I don't know if Mesa is playing his last card," political analyst Jorge Lazarte said.

Disgruntled oil companies had threatened legal action against the government if it passed the bill.

Under Bolivian law, Congress could still approve the law as it now stands within 10 days of formally receiving the president's veto.

All of Bolivia's oil and natural gas production is in the hands of 12 foreign companies, including Brazil's Petrobras, Spain's Repsol, Britain's BP and France's Total.