AFAICT, cabal2nix currently needs to be run from the directory that you want the derivation to live in. E.g.,

cabal2nix my-package >nix/my-package.nix

will have the wrong src (it’ll be ./my-package instead of ../my-package), but

cd nix
cabal2nix ../my-package >my-package.nix

will have the correct src, because it just uses the file URI.

Also, providing an absolute path for the URI will have a src that requires --impure.

If the destination file is specified as an argument rather than a redirect, cabal2nix can resolve both paths and deduce the relative path from the destination to the source URI, which solves both of these problems.

In my case, I‘m running this from a script, and both paths are relative to where the script is run from. Also, the script accepts the same sources as cabal2nix (e.g., “cabal://”), so there is extra work already done by cabal2nix itself to determine if the source even is a path that will make it into the derivation.