(b.) It was regarded as a temporary measure only; and Sir J. Jordan in his telegram of the 11th June contemplated proposing to the Chinese Government that chests. unsold in 1912 should be "added to next year's fixed import."
(e.) The total effect, so far as the sale programme of 1912 was concerned, could only be a withdrawal of 670 chests from sale, as the Government of India were firmly bound by their notifications to give three montlis' notice of any change in the progr.unme.
8. When the question of suspending the opium sales came forward again at the end of 1912 the situation had been changed in one vital respect. In a telegram to Sir J. Jordan on the 17th June, 1912, Sir Edward Grey had stated his view of the Chinese action in the following words: "The provincial authorities are doing every- thing to hamper the trade in Indian opium and nothing to prevent the cultivation of the poppy." But in the interval the Central Chinese Government had gained strength, and had given evidence of a serious intention to enforce the strict suppression of opium cultivation. A Presidential Order of the 14th June, 1912, stated: "It has reached my ea:8 that since the outbreak of the revolution last year the restrictions had been relaxed throughout the provinces"; and went on to say that, "in the event of surreptitious sowing of opium, stringent instructions will be issued to plough it up wherever found." A Bill for the total prohibition of planting and smoking of opium had also been In a telegram of the 20th December, 1912, discussed in the Chinese National Council.
Sir J. Jordan said: "Drastic measures are being adopted nearly everywhere to suppress the cultivation, trade, and consumption of opium, and there is no evidence of any discrimination in favour of the native drug." The prospect of inducing the Ceutral and Provincial Governments to respect the rights of traders in respect of the import of foreign opiura under the Agreement of 1911 was also shown by Sir J. Jordan's reports to be very remote.
5
the utmost limit of their responsibility for the existence of the present stocks (which exceed 10,000 chests), even if their decision in June 1912 were held-wrongly, as it is submitted to have been unjustifiable.
(c.) The allegation that the Government of India have received 6,000,000%, more than they anticipated is incorrect, and the conclusion drawn from it that they can fairly be called on to make a refund up to that amount is unwarranted. The circumstances were as follows:---
In 1910 the Government of India pointed out in a despatch to the Secretary of State that the progressive reduction of the opium revenue could not be expected to proceed with regularity, in view of probable fluctuations in the conditions of the trade. In order to discount these abnormal conditions, and to prevent a temporary excess of revenue from being treated as available for current expenditure, they set up a standard of" what, in the absence of disturbing factors, would have been the annual decrease of opium revenue up to 1918," and provided that any excess over this standard should be regarded as a "windfall," and applied, as regards two-thirds, to reduction of temporary debt, and as regards one-third, to non-recurring charges, such as education sanitation.
These standards were as follows. The statement contains the windfalls" of the first three years, amounting to about 6,000,000Z., and shows roughly how this is partly counterbalanced by the absence of any revenue from China opium in the later years:-
K
Opium Receipts.
Year.
Total.
Standard.
Actual Excess Receipt.
1910-11
Lakhs.
700
1911-12
615
Lakhs. + 441} + 268
=
£ 2,944,800 = 1,767,000
£
6,164,300
1912-13
540
+219
→ 1,463,000
1918-14
470 six months' estimate is less by
226
1914-15
415 budget estimate is less by
153
1915-16
360
80
total deficiency
J
1916-17
1917-18
315 taking 280 as standard, less by 280
494 lakhs
35
-8,298,000
Net excess
9. The position had been further altered by the Government of India's decision, at the Secretary of State's suggestion, to reserve power to impose & prohibitive "upset" price at the sales of Bengal opium. This power was reserved when the notification regarding the sales to be held during the year 1913 was issued. When, therefore, it was decided early in 1913 to discontinue the sales, the Government of India were able, although three months' notice of discontinuance was still necessary, to render purchases during that period practically out of the question by imposing a very high "upset price.
10. At the end of December 1912 the Government of India proposed the following.
measures:-
(a.) To give three months' notice of indefinite suspension of the sales of certified opium, whether at Calcutta or Bombay.
(b.) During the currency of the notice to impose a prohibitive "upset" price. (c) To buy for excise purposes the 13,820 chests of Malwa opium in respect of which they had given a promise of export in 1913.
(d.) To reduce the sales of uncertificated opium in 1913 to 9,000 chests as a temporary measure.
These proposals were sanctioned, and no more certificated opium wes sold after the beginning of the year 1913.
11. This completes the tale of the Government of India's action in the matter. The following remarks may be offered in connection with the views expressed by Sir J. Jordan in recent despatches regarding the liability of the Government of India, owing to its past action, for the present situation:—
(a.) The action of the Government of India towards the Government of China has been based on a generous interpretation of the spirit of the agreement, which was founded on the principle of pari passu reduction. So far as the merchants are concerned, the Governinent of India were, and are, under no obligation to protect them from the consequences of their operations under the agreement, though, as a matter of fact, the Government's action in discontinuing the sales has been of great assistance, not only to China, but also to the merchants, who have been enabled up to now to dispose of the larger part of their opium at extremely satisfactory prices.
b. No action that the Government of India could have taken in 1912, short of a repudiation of the formal undertaking as to three months' notice, could have reduced the amount of opium sent to China by more than 3,480 chests; and this is therefore
2,871,300
or
It is not a fair assumption that because the Government of India fixed the standards of expectation at the above figures they have no claim to keep any revenue in excess of these standards. The standards were devised as a method of guarding against fluctuations.
But the above figures show that even if the assumption were admissible, the real excess of revenue over the standards, received by the Government of India, will be under 3,000,000Z., not 6,000,000/
F. C. DRAKE.
February 9, 1914.
Postscript.
In view of the statement in Sir John Jordan's despatch of the 12th January, that the current value of the unsold chests in the hands of the merchants at Shanghai and Hong Kong is about 6,000,000l., it may be relevant to show how the amount received by the Government of India compares with this valuation. This can only be done approximately, in the absence of detailed knowledge of the composition of the stocks, and only a rough truth can be claimed for the following calculation. In so far as it errs, it will be by overstating the amounts received by the Government of India.
From the data furnished by Sir John Jordan in the above quoted despatch and in bis telegram of the 7th February, it seems right to assume that by the end of February the unsold stocks may amount to a little over 10,000. The figure that may be taken, for convenience of comparison, is 10,113 chests, the present value of which would be, on Sir John Jordan's basis of calculation, about 5,170,000l. These chiests may be
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