Land acquisition for special economic zones is stuck because of a year-old directive by the Empowered Group of Ministers that bars state governments from carrying out compulsory acquisition of land for the zones.

The EGoM in April 2007 had said that state governments cannot acquire land for SEZs, in the backdrop of protests in places like Nandigram in West Bengal, and Maharashtra.

"Many zones, which are procuring land, are not able to have a contiguous area, because some owners are unwilling to sell land to the developers," said a Delhi-based SEZ expert.

Some developers claim that as many as 90 per cent of the SEZs, which have got in-principle approval, are stuck. There are 135 zones with in-principle approvals that are yet to have the proposed land area under possession. In fact, the Kerala government had written to the Centre to let it acquire land for SEZs. The matter is pending with the EGoM.

Reliance [Get Quote] Industry's proposed 5,000-hectare zone in Jhajjar, Haryana, is also facing a similar problem with many farmers demanding higher price for their plots.

"Land owners do not want to sell their plots to developers, even at market prices. Even if the state governments are given permission to acquire up to 25 per cent of the land for a zone to serve contiguity purposes, it will be of great help.

The developers are ready to pay market rates to the land owners for the land acquired by the state governments," said Navin M Raheja, chief managing director, Raheja Developers, which has a notified 255-acre zone in Gurgaon.

But its plan to upgrade the zone to a 5,000-acre SEZ is not materialising, as land owners are demanding more money. "We have bought land, but there are other pockets which we are not able to procure.

The land owners of those pockets are demanding high prices, which, if we pay, will make the SEZ unlivable. Meanwhile, the investments are stuck. The state governments should help us acquire the remaining pockets and we are willing to pay market price to the land owners," Raheja said.

Government officials said the issue is not in the priority list of the commerce ministry as of now. "There are more than 460 SEZs, which have got land, and nearly 220 of them have been notified. Issues related to these zones are a priority," said an official.

Significantly, the Land Acquisition Act Amendment Bill, which is yet to be approved by Parliament, allows compulsory acquisition of up to 30 per cent of the land by state governments for public purposes, provided a private developer has the remaining 70 per cent under possession.

Experts believe that problem on completing land acquisition by developers is bound to happen if the state governments do not intervene. "Once an SEZ project is announced in an area, land prices tend to shoot up.

Owners of land realise that they can get better prices from projects like SEZs. In India, land ownership is fragmented, and it is difficult to find large tracts of land with a single owner. In this context, completing procurement of land is a bigger headache for bigger SEZs. But not all the SEZs with in-principle approval are facing this problem," said Vikram Doshi, executive director, KPMG.

"Why should farmers who do not want to sell their land to SEZs be displaced? The zones should be planned in such a way that farmers can continue farming their pieces of land. But the state governments should ensure that such pieces of land are not used for purposes other than farming.

Otherwise, every other land owner will hold on to his land and use it for commercial purposes, creating competition for the zones. That is not right," said Rajiv Talwar, executive director, DLF.