Yechury asks Nath to study Chinese SEZ model

Communist Party of India (M) Politburo member Sitaram Yechury has urged Commerce Minister Kamal Nath to study the Chinese model of Special Economic Zones (SEZs) more carefully, including on issues like acquiring cultivable land, compensation to affected farmers and labour laws, before emulating them in India.

Referring to Nath's remarks that the government is trying to emulate China to emerge as hubs of industrial activity, Yechury, heading a CPI(M) delegation to China, asked the minister to study the exact developments taking place now in Chinese SEZs.

Yechury, who concluded a visit to the Tianjin Economic Development Area (TEDA), being developed as a new economic growth centre in northern China on the model of Shanghai, also compared the compensation packages and tax concessions which the Chinese government is offering with those in India.

"The compensation package of TEDA is comprehensive and compact," he said and noted that benefits of the Chinese system includes monitory compensation in lieu of acquisition of land along with provision of housing for the oustees.

The CPI (M) delegation held discussions with local officials on aspects of TEDA, such as acquisition of land, compensation, status of employment, and benefits like social security to the people attached to the TEDA.

Yechury noted that Chinese SEZs are only utilising barren land unsuitable for cultivation.

Relative percentage of cultivable land in China is less than that in India. This has led China to designate contiguous areas which consist mostly of the barren land, with only small pieces of cultivable land being earmarked for the Economic Development Areas, he pointed out.

"Not only that employment opportunities available with the setting up of TEDA absorbs people with relevant skills, it is also a must in the TEDA's compensation package. As TEDA is owned and developed by the government, the people of this area also have a stake in the profits and other such benefits which are accruing to TEDA," Yechury said.

The method adopted in China on giving employment to members of ousted families and that in India are in complete contrast, Yechury said.

On labour laws of the Chinese special economic zone, he said there existed a contract system for a three-year period. The employer should abide by laws of the land which govern the employee-employer relations. The company has to provide various social security provisions such as provident fund, ESI, pension and health insurance to the employee.

After the termination of the contract period, it is up to both the parties to renew or not to renew the contract. In the case of non-renewal of a contract, Yechury said, the TEDA would undertake the responsibility to impart to the employees professional skills which will help them get employment in other units in TEDA.

According to him, there has been no case of termination of contract so far. Instead of terminating the contracts, the manufacturing units are in need of workers. In India, on the contrary, the employer wants to be exempted from his social security obligations in the name of flexibility in labour laws, Yechury noted.

On issue of tax breaks, the CPI (M) leader said China offered negligible tax benefits compared to that of India. "Contrary to the Indian government's claims, tax concessions in China are negligible in contrast to those offered by our commerce ministry."

Yechury said the whole tax concession period in China was limited for two years only. Moreover, in the first year of the establishment of a manufacturing unit, a company could avail the benefit of full tax concession, but in the second year it gets only 50 per cent concession in various taxes.

From the third year onwards, a company is treated as a regular company established under the laws of China and has to meet its tax obligations fully, he said.

"This is completely in contrast to the tax concessions proposed in the SEZ Act in India," he said.

The notion of "state within the state" was another important aspect noted by the CPI-M delegation, he said. In China's first SEZ in Shenzen, established in 1986, there are laws to restrict the entry and exit of ordinary Chinese citizens.

Now there are a total of 54 Economic Development Areas (EDAs) in China, and such kind of restrictions are not being thought necessary after the experiences gained in the last 20 years, TEDA officials said.

Yechury said no EDA is allowed to harm Chinese sovereignty. The delegation noted that the SEZs being proposed now in India, on the contrary, will be treated as a state within the state because no state organ except Development Commissioners can intervene in their day-to-day activities.