File 200/1928 Pt 9 'Persia: Anglo-Persian Relations: Treaty Negotiations' [‎15v] (35/1076)

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7. The means a£ escape, however, raise considerable difficulties. There are five
possddeques mal p rac tices and breach of treaty we could, of course,^
(b)
(r \ \y e m io-ht claim right to escape from the treaty on the ground that the
( ' conditions have entirely changed from those contemplated when .t was made
and that vital interests of British India are affected w hich^ make literal
observance impossible and therefore renders the treaty voidable.^
(d) We might reduce loss by substituting other forms of indirect taxation for
customs import duties. .
(e) We might negotiate a compromise with Jinavnagar.
S \s regards (a) we intend now to make special efforts to collect evidence from
merchants and others, but collection will be difficult, and although there is strong
.-round for thinking that special terms amounting to unfair competition have been
civen it will be difficult to establish technical breach. Our Legal Advisers have held
that special facilities mentioned in paragraph 4 do not constitute technical breach of
obligation to charge the same port dues owing to the narrow significance of that
■expression, while generally, Bhavnagar, owing to the amount which they stand to
lose, have apparently been more careful than other States to obseive the lettei of the
treaty.
9. As regards (b), we would ask you to give urgent consideration to this, though
we recognise the difficulty of challenging an interpretation which has been accepted
by both parties for 23 years.
10. As regards (c), there seems to be strong ground for claiming that there is a
strong moral justification for changing an arrangement which is producing such
intolerably unexpected and absurd results. In 18(36 India was a free trade country;
customs duties represented probably less than L per cent, on the total imports,
whereas now average incidence is over 30 per cent. Bhavnagar is not only getting
an income paid by the taxpayers of British India, which is absurd in relation to her
population of 500,000, but is using that income to develop a port for which there is
no economic need except for purely local trade, and which is destroying the position
of Bombay, on which many crores of Government credit have been pledged. As noted
above, even if His Majesty’s Government wish to continue literal observance of treaty
they would have absolute certainty that a future responsible Indian Government will
refuse to do so.
As agaiust these considerations it may be said, first, that change in conditions is
of our own creation and, secondly, that for ns to repudiate a treaty merely because
it works out inconveniently would have most unfortunate reactions on Indian States
as regards their own treaties. Against this, however, one might argue that if, in the
case of any State treaty made long ago the results were now working with such
glaring injustice, the Government of India would be forced to recognise equitable
ground for revision. In any case, we must ask you to give serious consideration to
this possible line of action.
11. As regards (d), there is at least one definite and immediate possibility, for we
might abolish the import duty on cotton and impose instead a consumption duty on
foreign cotton to be collected at mills. 1 his is administratively practicable and duty
could probably be collected without loss, except on small proportion, of not more
than o per cent., of the imported cotton which is consumed in Indian States.
I here is, however, another difficulty about this, for we have undertaken, in
Anglo-1 ersian laiiff Autonomy treaty of 192h, not to levy internal duties on Persian
goods which aie not levied on similar goods of local origin. There is, in fact,
a small import of Persian cotton. I his, however, is of negligible importance and has
never exceeded 3,000 bales annually. It seems to us most improbable that Persian
government would notice this insignificant technical breach and, as far as we are
concerned we think it justifiable to take this risk. We strongly advocate taking tine
course by legislation tins session. Such action would have an admirable effect on
Bombay opinion would be valuable in bringing Bhavnagar to sense of realities, and
would give us about 13 lakhs One lakh is equal to one hundred thousand rupees extra revenue.
As His Majesty’s Government are parties to the Persian Treaty they must
of course, be consulted, and we ask yon to take up the matter urgently with them*
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