The western state of Goa was picked by a government advisory committee as the best site for India's first free port.

The committee, headed by industrialist Raunaq Singh, was set up in 1990 during the administration of Prime Minister Chandra Shekhar.However, the current government has said nothing so far about establishing a free port. It did allow the committee to complete its work.

The committee's mission was to study the desirability and feasibility of setting up a free port in the country, to recommend a site and to suggest the policies needed for such a port, which in general would create a deregulated port zone.

The idea of a free port was first discussed during Rajiv Gandhi's administration in 1985. The Andaman and Nicobar islands in the Bay of Bengal were then considered as possible sites, but the proposal was never pursued.

Mr. Singh told reporters over the weekend his committee believes the free port should cover about 75,200 square miles.

It should be managed by a statutory, free-port authority serving as a single window for all management, administration and control functions, the committee's report said.

There would be several autonomous boards under the statutory authority to develop and manage industries and infrastructure, and a monetary authority to manage and control financial matters.

The committee said the free port must aim at a positive export and import strategy rather than a mere import substitution.

It also will require complete deregulation of foreign capital ratios and foreign currency remittances, and exemption from restrictions on capital goods imports.

A free port also should offer offshore banking, pollution-free industries, liberal trade and services in areas like shipping, ship repair and bunkering, foreign exchange and stock markets, duty-free shopping, recreation and tourism, the committee said.

The committee estimated the cost of developing such a port would be between $2 billion and $2.5 billion, with funds from several sources including non- resident Indians.

In the committee's view, about $4 billion would be attracted to the country within three to four years.

Mr. Singh said the Goa free port can be set up in two years. Looking further ahead, the committee suggested the southern city of Tuticorin could be developed as a second free port.

Some analysts feel India still has a long way to go before it can think of setting up a free port.

Dietrich Kebschull, coordinator of the Indo-German export promotion project here, said it is "not yet realistic" for India to think of replacing Hong Kong as a regional shipping center.

India is still backward in containerization and needs to cut red tape, streamline customs procedures and improve facilities, he said.

D.H. Pai Panandiker, secretary general of the Federation of Indian Chambers of Commerce and Industry, feels a free port could provide a very effective outlet for Indian exports.

But he agreed infrastructure development and increased use of containerization must come first.