The bill, which facilitated purchase of tribal land for government projects, had been passed by the Chhattisgarh Assembly last month, and sent to the Governor for his assent.
A delegation of the opposition Congress had met the Governor yesterday and requested him not give the assent, saying the bill was against the tribal communities' interests.
The state cabinet, at a meeting chaired by chief minister Raman Singh today, decided to withdraw the contentious bill in consideration of the sentiments expressed by leaders of tribal communities, official sources said.
The Congress had alleged that through this bill, the state government was trying to do away with restrictions on the purchase of tribal lands.
Apart from the Congress and the Sarva Adivasi Samaj leaders, some BJP leaders too had criticised the bill.
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