India is reviewing its plan to establish special economic zones after growing protests from farmers who say they are being displaced from their lands. Anjana Pasricha takes a look at the controversy from New Delhi.

Farmers demonstrate against West Bengal state government's move to use agricultural land for industrialization, in Calcutta (File)

The government announced its intention to establish special economic zones early last year.

These industrial parks were envisaged as havens for domestic and foreign investors. They would offer tax breaks and world-class infrastructure in a country where everything from power to roads is in short supply.

Hundreds of businesses immediately rushed to take advantage. Twenty-four zones have already been established, 63 more have been approved, and many others are in the planning stages.

But after 11 months, the policy is mired in controversy. Critics complain that the zones are taking away agricultural land and displacing farmers, often without paying them adequate compensation or helping them to find a new way to make a living.

Observers say the controversy highlights the dichotomy in India, where manufacturing and service industries are powering ahead, while 70 percent of the population still lives in the countryside and depends on the land for its livelihood.

The intensifying opposition both from farmers and politicians has forced a rethink on the government's part.

Industry and Commerce Minister Kamal Nath announced recently that the government will not approve any new projects until it gathers more information on the impact of the existing zones.

Nath says farmers must receive justice and correct compensation whenever the government takes over their land. He says the government is examining the issues surrounding land and resettling or compensating farmers.

The issue came into sharp focus earlier this month after five people were killed in violent protests against a 5,800-hectare economic zone being established in West Bengal state. Hundreds of enraged farmers and activists say the farmers have neither been properly compensated for their land, nor offered any help in finding a new means of livelihood.

Farmers in the western state of Maharashtra, have also vowed not to give up their land.

Farmers are not the only ones who are worried about the economic zones. The Finance Ministry has expressed fears that many businesses will move to tax-free zones, resulting in substantial revenue losses for the government.

But officials argue that the factories in industrial zones will provide much-needed jobs in rural areas where millions remain unemployed or underemployed, despite the booming national economy.

The Commerce Ministry estimates that the economic zones will attract $13.5 billion in investment and create nearly a million jobs by 2009.

It is not a new concept. India is borrowing the idea from China, where a small number of such zones have been used to attract investment.