File 200/1928 Pt 9 'Persia: Anglo-Persian Relations: Treaty Negotiations' [‎15r] (34/1076)

P,Y. 464/34.
Telegram from Government of India, Finance Department, to Secretary of State
for India, dated 25th March 1934.
722. We have recently, not only as a result of strong public agitation which is
developing in Bombay, but also because of growing losses to our customs revenue,
been compelled urgently to review whole question of diversion of trade to Kathiawar
ports. There are two main issues: first, the threat to financial position of Bombay
port; secondly, loss to our revenue.
2. As to first, position has recently become more serious owing to diversion of
export trade. If this once becomes established, competitive position of Kathiawar
ports would become much more surely founded, while railways might incur really
serious losses. i P t
In order to meet immediate danger, railways have reduced freight to Bombay at
sacrifice of about 11 lakhs One lakh is equal to one hundred thousand rupees , while the Bombay Government have abolished town transit
duty on cotton at loss to themselves and Corporation of 18 lakhs One lakh is equal to one hundred thousand rupees . At the request of
the Governor of Bombay, we ourselves are making public statement that financial
position of the ports is direct concern to us, that we shall do everything in our power
to secure conditions of fair competition for Bombay Port and maintenance of its
position in such conditions, and that we propose to hold early enquiry as to what
steps may be necessary.
3. As to both points, competition and loss of revenue, the main danger point in
the last two years, has passed from Bedi Bundar to Bhavnagar.
Trade developments of the latter have been most disquieting, the occasion for a
marked upward movement having been the introduction by us of an import duty on
raw cotton in September 1931. Before that date practically no cotton entered via
Bhavnagar, but, since then, almost the whole trade to Ahmedabad has been diverted,
with annual loss of about 13 lakhs One lakh is equal to one hundred thousand rupees of revenue on cotton imports alone. We calculate
that total amount of duty sacrified to Bhavnagar on goods consumed in British India
rose from 1 lakh One lakh is equal to one hundred thousand rupees in 1927-28 to 45 lakhs One lakh is equal to one hundred thousand rupees in 1932-33, and it is still increasing.
4. Bhavnagar offers exceptional facilities to importers, such as free lighterage,
free insurance, free storage and financial advances at loiv lates. Aloreovei, both at
Bhavnagar and other Kathiawar ports, the recent large increase of our import duties
has greatly enlarged possibility of offer of substantial advantages to impoiters not
necessarily by malpractices, but by easier appraisement.
5. We cannot expect public opinion in British India, excited as it will be by
protests from Bombay, to tolerate a continuance, much less a furthei aggiavation, of
this position. Even if in present Legislature we can carry taxation pioposals
necessary to maintain equilibrium which is to a growing extent being disturbed by
these losses, we cannot expect a responsible Ministry in the future to acquiesce in
such a necessity merely for the sake of observing a treaty made 70 years ago in
totallv different conditions which, if it now has to be liteially observed, they vill
regard as an inexcusable error on the part of agents of His Majesty s Government at
that time. . ,
They will say either that in the altered circumstances the treaty ought to be
revised or that, if His Majesty’s Government feels itself precluded by considerations
of honour from taking this course, then His Majesty’s Government ought to bear the
financial burden of such quixotic conduct. Whatever the rights of the case may be
^0 feel sure you will recognise that this situation must lead to a most senous
political problem. Moreover, with the very large expenditure now going on at
Bhavnagar, it is difficult to see what limit can be set to future diversion of trade, so
that we may be also approaching a financial problem of first-class magnitude which
may even threaten the whole basis of Federal finance. Bhaynagar administration
reports show that, for four years ending November 1932, while port receipts have
only amounted to a total of over 1 lakh One lakh is equal to one hundred thousand rupees , expenditure on the port from revenue has
been 55 lakhs One lakh is equal to one hundred thousand rupees , while we understand they have now a project for spending 40 lakhs One lakh is equal to one hundred thousand rupees on
dredging a permanent deep-water basin which will enable large vessels to come
right in.
6. Our unavoidable conclusions are, first, that the situation now developing is an
intolerable one and that some means of escape must be found. Secondly that it
anything is to be done it should be done immediately, because the lurther that
developments at Bhavnagar go, the more difficult will a settlement become.
2690 50 3.34