NEW DELHI, March 23: Indian Prime Minister Manmohan Singh said on Friday that his government would not reverse plans to create “special economic zones” for industrialisation despite deadly riots.“SEZ as an instrument of economic policy has come to stay,” said the prime minister, according to the Press Trust of India.

The SEZs, modelled on a similar Chinese programme, allow companies to set up large tax-free enclaves to spur industrialisation and the development of infrastructure.

But the controversial scheme, launched in 2005, has met with massive protests from those living on land earmarked for such zones in India, where two-thirds of the billion-plus population live off agriculture.

“In the process of implementation, we have been exposed to certain problems which cannot be dismissed,” Dr Singh told reporters.

Fourteen people were killed 10 days ago when police in eastern India fired on villagers protesting against the sale of their land for a proposed petrochemicals project involving an Indonesian group.

The bloody demonstration was followed by a state-wide strike in which dozens were injured, and there were renewed protests in neighbouring states that are attempting to set up the zones.

“There have been inadequacies in compensation and in ensuring that the interests of all stakeholders who suffer in this process are taken into account,” the prime minister said.

Singh said the government was looking at the issue of proper compensation for those displaced, which might lead to delays in the setting up of the zones.

There are 14 SEZs in India and proposals for hundreds more.

“These are decisions which are irreversible,” the prime minister said.

“Therefore, it's very important that before we move, if there are any gaps in the performance, gaps in the design and gaps in the implementation, we should halt a little bit even though it takes time.”Korean steel giant POSCO, which in 2005 decided to invest $12 billion in a steel plant in the eastern state of Orissa, India's largest foreign direct investment, said it understood the difficulties in acquiring land.

“The project has not taken off so far mostly due to land acquisition,” said Shashanka Pattnaik, spokesman for POSCO India, in a statement.

“Land acquisition is not an easy process. We understand that there are many related issues and we are examining the matter very seriously.”

He denied a media report that said the company had told Indian officials if there was no progress in the next two or three months, it could reconsider its investment plans.

“We are not thinking of that option at all,” Pattnaik said in Orissa.

Singh said the cost of going slowly in acquiring land would be much less than the social cost India could incur if the policy was “bulldozed (through), regardless of human, social and economic concerns.”—AFP