The Indian government has lifted a temporary ban on establishment of special economic zones, but says farmers will not be forced to give up their land for the enclaves. As Anjana Pasricha reports from New Delhi, the economic zones had run into trouble after massive protests by farmers angry at having their land taken.

The government says that industries wanting to establish special economic zones can go ahead with their plans. But it has set new rules.

Kamal Nath

"In respect of pending applications, these may be processed, subject to the condition that state governments would not undertake any compulsory acquisition of land for such SEZ's," he said.

The government also slashed the maximum size of the zones by half to 5,000 hectares.

The new rules were announced weeks after violent clashes between police and farmers who had vowed not to give up their land earmarked for a petrochemical hub in West Bengal state. Fourteen people died in the protests.

The ruling Congress Party became uneasy after farmers in other parts of the country also expressed reservations about parting with their land for the zones. Many said they would be robbed of a livelihood and others complained they were not being given a fair price for their land.

The government drafted its SEZ policy last year to boost industrialization by providing domestic and foreign investors with tax-free havens. Supporters of the idea say factories in the zones would take India's economic boom and jobs to the countryside, where poverty is still widespread.

Critics describe them as a disaster, saying farmland should not be used for industry in a country where two-thirds of the population lives off agriculture.

D.H. Pai Panindiker heads an economic research center, the RPG Goenka Foundation. He says the new government standards will make it more difficult to develop special economic zones, because it is not easy to acquire large tracts of land without the government's involvement.

"The project itself will become unviable, because farmers will quote a very high price and once a part of the land is acquired, to get the remaining adjacent land will become a big problem. The same problem was seen in the case of highways, acquisition of land became a major problem, and it was the governments which had to acquire the land," said Panindiker.

Sixty-three special economic zones have been approved, more than 80 are expected to be cleared soon, and many others are in the planning stages. The government estimates these zones will generate more than one million jobs by 2009.