India’s plans to emulate China’s economic success were in crisis yesterday after farmers’ protests forced the government of West Bengal to drop plans for a huge low-tax industrial zone.

The unprecedented climb-down came after police shot dead at least 14 farmers who were refusing to sell their land for the zone in Nandigram, 75 miles (120km) south of Calcutta.

State officials said that the Special Economic Zone (SEZ) that was to house a petro-chemical plant built by Salim, an Indonesian company, would be moved to another location, but they have yet to decide where.

Biman Bose, the chairman of the Left Front, which has ruled West Bengal for 30 years, said: “There has been a lot of bloodshed and the Left partners decided in a meeting to shift the SEZ from Nandigram.”

It was the first time Indian authorities had been forced to shelve an economic zone, about 600 of which were being planned until recently to lure foreign investors with tax perks and modern infrastructure.

The Government had hoped that the zones — modelled on those in China — would form the backbone of a manufacturing industry employing millions of farmers left behind by the country’s economic boom.

It was forced to freeze all but 63 of the proposed zones in January after a series of violent protests by farmers refusing to give up their land. The worst protests were in Nandigram, where an estimated 40,000 farmers who were to be displaced dug up roads, built barricades and refused to allow the Government access for three months. Police stormed in on Wednesday to restore order, and when villagers fought back, opened fire with tear gas, rubber bullets and live rounds, killing 14 farmers and injuring dozens. Yesterday the farmers were celebrating the climbdown as they continued to search for dozens of people they say have been missing since the clash.

Siddiqullah Choudhury, the chief of the Jamiate-Ulema Hind, a Muslim group leading the protests, said: “We have taught the Government a lesson they will never forget. You can’t play with the lives of innocent villagers.” The decision sent a worrying message to foreign investors who have earmarked billions of pounds for the 63 special zones that have been approved, 14 of which are already operating. They fear that the move will embolden farmers in other regions, who are either refusing to sell their land, seeking a higher price from the Government or demanding to bargain directly with foreign investors.

In the neighbouring state of Orissa, 500 villagers marched in protest yesterday against another economic zone where Posco, a South Korean company, plans to build a $12 billion (£6.2 billion) steel plant in India’s largest foreign investment project.

Also yesterday, a crude bomb exploded at the site of another SEZ in West Bengal where Tata, the Indian conglomerate, is building a factory to make the world’s cheapest car. Police said they had recovered six more bombs from the site in Singur, which has also been racked by farmers’ protests for several weeks.

Another concern is that the issue is increasing support for Maoist rebels, who control a “red corridor” of jungle stretching from the southern tip of India to the Nepalese border. The Maoists, who killed 55 police in a raid last week, called for a strike across four eastern states yesterday in protest at the Nandigram shootings. “The people must come to terms with the fact that governments in these states are agents of imperialist forces, and should rise to fight their antipeople agenda,” they said in a statement.

Within the Government, the crisis has reignited a debate about whether SEZs are applicable to India and whether farmland should be bought forcibly.

Kamal Nath, the federal Commerce Minister, said the Government remained “absolutely” committed to the zones, which were legalised in 2005.

Land acquisition should be “fair, equitable and inclusive of the people”, he told the CNN-IBN television channel. He gave warning that India could lose out to other countries.

“If [foreign direct investment] is coming to our special economic zones, it can also jolly well go to Thailand, Philippines and Indonesia,” he said.

Story of growing success

—India’s share of the world GDP is set to rise to 11 per cent from 6 per cent by 2025

—Its industrial production growth rate is set at 7.5 per cent, compared with America’s 4.2 per cent

—By 2050, its economy could be larger than that of the US and second only to China, according to a report for Goldman Sachs, the investment bank

—The Indian Government had approved 237 special economic zones by the end of last year

—It has now frozen all but 63, of which 14 are operating India says that its first 63 SEZs will create almost 1 million jobs and attract $13.5 billion of foreign investment by 2009

—China has six such economic zones. The biggest, Shenzhen, below, has grown from a fishing village to a city of 10 million in 20 years.

—China did not have to buy private land to form the zones because all land was owned by the State

Sources: CIA, Economy Watch, news agencies

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