different from that of opium sold for smoking or eating, buyers in England being concerned solely with the morphine content of the opium they purchase, and the con- siderations which determine its value in the Eastern markets are largely inapplicable. In these circumstances it would appear that, while data might be obtained sufficient to determine a minimum price, little or no information would be available to deter- mine a suitable price in any particular case. The probable consequence would be that the agreements with the Governments which obtain their supplies from India would tend to assume a quasi permanent character, the prices realised would become uniform, and would probably remain at the present high level.
If these anticipations should prove correct, it would seem to be to the advantage of India to conclude agreements with France, Japan, Ceylon, and Mauritius, on the lines of the arrangements recently made with the Government of the Straits Settle- ments, the price being fixed at 3,000 rupees per chest. This is a highly profitable rate, and though lower than recent prices is considerably higher than the average realised (1,937 rupees) from 1900-01 to 1916-17. The course of prices suggests that the high rates obtained at recent auction sales have been due primarily to special and ephemeral conditions, the continuance of which cannot be counted on, and with the introduction of more strict international and domestic control over the opium traffic which may be expected to follow the conclusion of peace, the demand for opium should diminish and prices fall. In view of these considerations, and of the probability that the Governments concerned will be more likely to accept an arrangement which has recently been effected with a British administration at a time when auction prices were materially lower than they now are, I incline to the opinion that it would pro- bably be desirable that agreements should, if possible, be concluded with France, Japan, Ceylon, and Mauritius at the rate of 3,000 rupees a chest. Before coming to a decision, however, I should be glad if your Excellency's Government would re-examine the question in the light of these remarks. Any agreements made in the future should provide for a fixed price, without reference to the results of the auction
sales
6. For the reasons stated in paragraph 9 of your letter, I agree that it is unneces- sary to attempt to establish control over Persian opium shipped to Bombay, for tran- shipment there.
7. I approve the instructions conveyed to the Government of Burma in your letter, dated the 19th May, 1919; but, in view of the information contained in recent reports from Tengyueh as to the cultivation of the poppy in Yunnan, the importation of opium from the Shan States under the protection of heavily armed escorts, the very large extension of the area under poppy in Suchuan, and the encouragement afforded by the local Chinese authorities to the import of contraband opium and the cultivation of the poppy, it would seem undesirable that the Government of Burma should press their measures for the suppression of this traffic to a point where danger of serious unrest or disturbance is to be anticipated. The letter from the Government of Burma of date the 27th December, 1913, explains the difficulties that would attend any attempt to suppress completely the cultivation of the poppy in the Shan States, and the serious consequences that might ensue if such a policy were insisted upon; and it is clear that any measures directed to this end will be infructuous unless and until the effective and continuous support of the Chinese officials in Yunnan can be secured. There is reason to fear that no support can be relied on in present circumstances.
I have, &c.
Enclosure 3 in No. 1.
EDWIN S. MONTAGU.
Agreement between the Government of India and the Government of the Straits Settlements regarding direct supplies of Opium from India,
THE Government of the Straits Settlements agrees to take the whole, or sub- stantially the whole, of its requirements, including the requirements of the Federated Malay States, from India,
2. The agreement is to come into force on the 1st January, 1920,
3. The agreement is to be in force for five years. The question of renewal will be the subject of further negotiations between the two Governments at a later period; such negotiations to be concluded by the end of 1923, or, by mutual consent, at a later date.
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4. The agreement may be terminated by giving two years' notice if it is found to work unfairly towards either party.
5. The price of opium supplied under this agreement shall be 3,000 rupees per chest. But if the Government of India, subsequently to the introduction of these arrangements, should arrange for direct sales to another Government on the basis of a lower price than 3,000 rupees per chest, the same reduced price shall be applied to sales to the Government of the Straits Settlements, with effect from the date on which it first becomes operative in the case of the other customer.
6. The Government of the Straits Settlements is under no obligation to take a minimum quantity of raw opium,
7. The requirements for any year shall be intimated by the Government of the Straits Settlements before the 15th November in the preceding year.
8. A fixed amount shall be supplied month by month, six months' notice being given of any increase or decrease.
9. The Government of the Straits Settlements agrees to intimate to the Govern- ment of India the causes of any large variation in the quantity taken.
10. Details arising out of the agreement to be settled between the Government of India and the Government of the Straits Settlements.
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