Lords Sitting of 6 May 1915

PRESCOT GAS BILL. [H.L.]
Committee to meet on Tuesday next.
AMMANFORD URBAN DISTRICT COUNCIL BILL.
Read 2a, and committed: The Committee to be proposed by the Committee of Selection.
BRISTOL TRAMWAYS BILL. [H.L.]
Read 3a, and passed, and sent to the Commons.
METHODIST CHURCH IN IRELAND BILL.
Brought from the Commons; read 1a, and referred to the Examiners.

INDIAN WHEAT.
THE MARQUESS OF LANSDOWNE*THE MARQUESS OF LANSDOWNE rose to ask the Secretary of State for India for information as to the circumstances in which the Government of India has forbidden the export of wheat from that country.
The noble Marquess said: My Lords, I feel sure that the noble Marquess will not think me unreasonable for addressing to him the Question which I have put on the Paper. It relates to a matter which has attracted a certain amount of attention in this country and a great deal of attention in India. To the best of my belief no Ministerial statement upon the subject has vet been made, no Papers have been presented, and I do not think I overstate my case when I say that the public has received hitherto very little information as to the facts. I did, indeed, notice that an important discussion took place upon the matter just a month ago at Calcutta, in the Bengal Chamber of Commerce, on which occasion Mr. Clark, the Member for Commerce and Industry, was present; but I observed that Mr. Clark announced that there were many important details which had even then not yet been finally decided.
We are at any rate in no doubt as to what has been done by the Government of India in this matter. They have absolutely forbidden the export of wheat from India on private account up to March 1, 1916. They are making arrangements under which,
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through the agency of the great exporting firms, they are to buy, on Government account, so much Indian wheat as is likely to be required to meet the needs of this country, and they are to buy this wheat at prices fixed by the Government, prices which, I understand, are to be varied as the season progresses—that is to say, the price to be paid now will be higher than the price to be paid later in the summer. The wheat thus purchased on behalf of His Majesty's Government is, I understand, to be by them distributed in this country through the ordinary commercial agencies in the open market. The purchasers and the distributors are, I gather, to receive a commission from the Government in remuneration for their pains.
I am not going to take up the time of the House by dwelling upon the novelty of this proceeding. Obviously it is one which involves a serious disturbance in the financial affairs of India, and it is one which also involves, as I shall show presently, some serious economic complications. With regard to the financial part of the question, it is commonly reported that His Majesty's Government are likely to want something like 2,000,000 tons of Indian wheat, and I am told that this would be equivalent to an expenditure approaching £30,000,000—a very large amount to be provided for in excess of ordinary transactions. But it is obvious that von cannot close the external market to the Indian producer of wheat without very seriously affecting the pocket of the Indian cultivator, and it is upon that part of the case that I wish to say a word presently.
The situation with regard to wheat in India is, I am told, something of this kind. The crop of the current season is likely to be a very large one. It is estimated, I believe, at something like 10,250,000 tons. I am told that that is a low estimate. At any rate of this we may be sure, that the crop is going to be a larger one than the crop of any of the three preceding years. Judging from past experience a wheat crop of the bulk to which I have just referred ought to be sufficient to meet the requirements of this country, leaving a balance for Indian consumption sufficient for the wants of the people of India. Taking the average of the last three years, we have taken from India a little less than 1,500,000 tons of wheat in the course of the year, and during

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those same three years there has been available for Indian consumption something like 8,000,000 tons of wheat. It is clear that within the limit which I have just given as the total output of wheat for the current season there would in ordinary circumstances be room to meet both the home and the Indian requirements.
I shall be told—and the rejoinder is a very pertinent one—that these are not ordinary times, and that the conditions of the wheat market this year are, and are likely to remain, quite abnormal. That is quite true, and there is no doubt that owing to the exceptional demands resulting from the war wheat has been forced up in India to a wholly abnormal price. I think I am right in saving that whereas two years ago you could buy for a rupee 23lbs. of wheat, the same rupee would now only buy 12½lbs. That, of course, is a very serious question both for the consumers of wheat in India and for those who require wheat in this country. The noble Marquess and I both know that in India there is a great readiness to take advantage of exceptional stringency of that kind in order to promote reckless speculation and to create a "corner" in any market, and certainly not least in the market for wheat. I say this because I hope the noble Marquess will understand that I do not for an instant suggest that the Government of India are not obliged to have recourse to some exceptional measures to meet the circumstances which I have just attempted to describe; and certainly in these days I do not suppose that any of us would be deterred by what I might call economic prudery from approving or tolerating resort to such interference as that which has actually taken place with supply and demand in India.
But the operation upon which the Government of India have embarked is certainly an extremely delicate one, and one which ought to be undertaken with great care and circumspection. I do not think the noble Marquess will for an instant dispute that. At this moment my information is to the effect that the Government in India are buying wheat at the price of 31 s. 5d. per quarter. Any of your Lordships who look at the quotations for wheat in to-day's paper will see that it is marked at something between 65 s. and 67 s. per quarter in London. It is on the face of the figures obvious that the Government of India stand to make a very large profit, indeed out
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of these transactions in wheat. I have seen various figures mentioned. I have seen the figure of £5,000,000 suggested, and I have seen even higher figures. If it is true that as a result of these operations the Government of India are going to make a large sum of money people will certainly ask, At whose expense is this profit going to be made? I cannot doubt that the obvious answer that will be given will be that it is going to be made at the expense of the Indian cultivators who produce the wheat. We have, of course, to think of others besides the producers of wheat. We have to think of the consumers both in this country and in India. But I venture to put in a word for the Indian producer of wheat.
The ryots who grow wheat have in some parts of India lately had a very bad time. There were parts of the country, notably in the United Provinces, where last year there was a period of scarcity, and the ryots undoubtedly have looked forward to making good their losses out of the bumper crop and the higher prices which they expected during the present season. I need not dwell upon the importance of that point because, as we all know, a great many of these people are deeply in debt to moneylenders, and probably for many of these ryots the only chance of extrication from their difficulties lay in the profits from the season to which they were looking forward, and they no doubt feel the grievance the more acutely because they hold the soil at rents which are fixed for them by the Government and which, during the period for which they are fixed, cannot be varied. It seems to me a serious matter that at a time when there is beyond all question a good deal of unrest in India a grievance of this kind should be allowed to exist if any means can be found of dealing with it.
I am told—and here again, owing to the absence of official information, one has to fall back upon current rumours—that the intention of the Government of India is to give to Indian agriculturists, as a setoff for the loss which they may sustain by this interference with their profits, certain concessions for the general development of agriculture throughout India. That may be an excellent thing. But what I should like to suggest to the noble Marquess is that any general boon for assisting agriculture throughout India will not appeal as much as it might to the cultivators who grow wheat and who consequently have

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been hit by this new measure. Therefore I venture to express my hope that, if anything of this kind is done, an endeavour will be made to make the particular concession one which will affect and appeal directly to the wheat-growing cultivators of India.
I will not enlarge upon the financial complications which are likely to arise out of the adoption of these measures. The subject is an extremely intricate one, and I am glad to see it stated in the newspapers that His Majesty's Government are consulting the representatives of the exchange banks as to the steps which might be taken to ease the situation. The noble Marquess will, perhaps, be able to tell us something upon that point, and in particular whether it is likely that they will continue to use the exchange banks in connection with these operations, or whether some new arrangement is likely to be made for the purpose. That is really all I desire to say. I repeat that I am quite prepared to admit that the circumstances call for the adoption of exceptional measures; and all that I desire to press upon the noble Marquess is that, in the adoption of these measures, special regard should be had to the financial difficulties likely to arise, and more particularly to the claims of the roots who grow wheat in India to something which may have the effect of mitigating the hardship which I have described.
THE LORD PRIVY SEAL AND SECRETARY OF STATE FOR INDIA (THE MARQUESS OF CREWE): My Lords, it would be altogether impossible for me to offer any objection to the step which the noble Marquess opposite has taken in raising this subject. As he stated, although there have been continual allusions in the public Press to the step taken by the Government of India and a certain number of authorised statements, yet the subject as a whole has not been brought before the notice of the public generally. It, of course, bristles with technicalities and is surrounded by many complications, and I do not wish to burden what I have to say by an excessive attention to detail. The noble Marquess himself dealt with the salient points of the question and avoided that kind of argument which is more suited to a Parliamentary Paper, or some such method of stating a case, than to a speech in your Lordships' House.
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Speaking generally, what happened was this. It was in last November that the attention of the Government of India was called to the seriousness of the position with regard to wheat in India and the price at which wheat was being offered for sale. The position from a statistical point of view was a somewhat strange one. There had been quite a good wheat harvest in India, and the prospects of the coining crop, the crop which is now coming into the market, were exceptionally promising. But for two or three years previously the yield of wheat had been small, and so soon as it was clear that there was going to be a world shortage of wheat it became the obvious course for India to sow as large a breadth of wheat as possible, with the result that something like 4,000,000 acres in excess of the previous year were put under this crop. That, as the noble Marquess will see, of itself has swallowed up a considerable portion of the stocks for the purpose of seed. I cannot name the precise figure, but it is obviously a very large amount when the extra area is as extensive as 4,000,000 acres. The general result was I that by the late autumn of last year the stock of wheat in the country had run lower than it normally does at that season. Obviously the effect of that was that very small purchases for export were quite certain to run prices up to an almost alarming extent. The market was in a most sensitive condition, and it responded to a quite small tax upon itself. The result of that was that the price of wheat in India advanced to a point at which it became scarcely worth while to export. There was the barest margin of profit, although the price, as we all know, had by that time reached a considerable figure in Europe; and that, as the noble Marquess said, meant that after a quite good year and after an exceptionally good monsoon, with the prospect of a good crop coming on, wheat in India was at a price which it only reaches under conditions of severe famine and of a scarcity which only obtains in what would be definitely described as famine years.
The noble Marquess spoke of the effect which the proceeding might produce on the root, the cultivator of wheat. I will later on say a word upon the matter as it concerns him. But the Government of India had, of course, also to think of the consumers of wheat, of the great town populations who use an enormous quantity

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of wheat, and to whom, on the low scale of pay which is all they are able to earn, a serious rise in the price of wheat makes a most grave difference. It is obvious, of course, that Indian opinion, observing that the consuming populations were suffering in this way in a year of plenty, was not likely to regard the prospect with equanimity. And we cannot be surprised if a great deal of Indian opinion, bearing in mind the war in Europe and the prospect of these high prices for the necessaries of life being kept up owing to export and the high prices of wheat throughout the world, should have become inspired by feelings of deep anxiety; that actual unrest should have followed; and that there should have been a prospect of a genuinely serious state of things in the way of local disturbances in those areas where wheat is mainly consumed. We were told by the Government of India, the Viceroy and those who advise him, that they had the clearest evidence that unless some strong step was taken the consequences to public order might be of a very grave character; and the facts being as I have stated, I do not think that it is possible for anybody to be surprised that that was the case.
The first thing the Government of India did was to fix a limit to export from December 1 to the end of March. It was hoped that this would have an effect in quieting public opinion and in keeping the market steady. The limit named was the limit which, in an average year, speaking roughly, would have been shipped from India during that particular period, and it was argued that it could be pointed out to India that the wheat supply of the country was not being lessened beyond a reasonable amount while at the same time a certain moderate quantity was being exported for the needs of Europe. For a short time the hopes of the Government of India were realised. The price fell, and public opinion was to some extent reassured. But unfortunately that did not last long; and it did not last long because the time limit during which the restriction operated was very short, and it was clearly possible for dealers and speculators to anticipate what would happen when the period came to an end and to begin to buy "futures" and thereby affect the price from the point of view of the consumer in an adverse direction. This was what happened. Prices did begin to rise again. A certain number of the holders
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of wheat got frightened and kept their wheat off the market, and the possibility of public disturbance again loomed not very remote.
There were various courses that the Government of India might have taken to meet this difficulty. One course would have been to impose an export duty upon wheat, but as everybody knows who has studied political economy even superficially there is no economic operation of which it is more difficult to foretell the exact consequences or to define the precise incidence than that of the imposition of an export duty. That is altogether apart from what in this matter, of course, is an important point—the effect of the imposition of such an export duty upon the equation of indebtedness as between two countries and therefore upon ex-change. Without labouring that point, I may say that we decided that the imposition of an export duty would in all probability not meet the case so well as the course which we actually took. That course has been generally described with perfect accuracy by the noble Marquess. The total prohibition of the export of wheat was announced, so far as private account was concerned, from April onwards; but an arrangement—of which I will speak in a moment, and which the noble Marquess has also described—for purchase on account of Government was instituted.
It was in the first instance the desire of the Government of India that there should be a total prohibition of export altogether until the new crop came into the market, with the same hope of steadying the price; but certain drawbacks would have attached to that course if it had been taken. It would have been critically remarked here that., while India was engaged in gathering in the great wheat harvest which is now coming to hand, she was altogether prohibiting export to this country. Many people, knowing what the condition of the wheat market is here, would have considered that an unduly selfish proceeding on the part of the Government of India. Further than that, there was a certain danger that if export was prohibited altogether for a period and then suddenly permitted there might be a great rush to the export market, with the result that prices would be driven up again to the high and, from our point of view, disastrous level which they had

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begun to reach last autumn. Therefore it was decided to take the step of which the noble Marquess has spoken gravely, but not, as I would agree, over critically—namely, that of buying this vast quantity of wheat on Government account. That lasts till the end of March, 1916. The amounts which it is hoped that India may be able to export during the different sections of time that fall within that long period are such as we trust that India will be able to spare after providing for her own needs.
The noble Marquess mentioned the figure of 2,000,000 tons which we should be glad to have in this country. We should certainly be glad to have 2,000,000 tons, and I think that my noble friend Lord Lucas, who is much concerned in these matters, would say that if it were forthcoming lime and those who are acting with him would be prepared to take, I was going to say as much as they could get, at any rate knowing what the price of wheat is likely to be in this country and the world price during the whole year we should be glad if that amount could be exceeded. But for the reasons which I stated in the beginning of my observations—reasons with which, I think, the noble Marquess would not quarrel—it is clearly not possible, ruling India in the conditions we do and filling the duty towards India which the British Government has to fill, to take up the position that we ought to denude India of a staple crop which forms the food of a considerable section of the population to an extent which would cause distress or even grave inconvenience there. We hope that the exportable margin from India will be sufficient to prevent anything like a panic rise in the price of wheat during the current year in this country, and that after that surplus is exported the price in India, although it is not likely to be low for India, will at any rate be a reasonable one for internal consumption.
I need hardly assure the House that in the evolution of this great transaction—involving, as the noble Marquess has pointed out, many millions of money—the greatest care was taken both in India and here, not merely to give the utmost consideration that we could to all the different aspects of the problem, but to take into counsel various persons whose experience and opinions might be of value. I trust that the plans which have been
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adopted are of a nature which will lead to the results which we hope for and which I have described—that of an adequate export which does not involve the running up of prices in India to excess. Wheat is now coining forward very well, and as the noble Marquess pointed out it is possible to buy it in India at a price which, after paying freight, insurance, and the other charges, should leave a margin of profit. This, of course, was not by any means a certainty from the beginning. At present a profit is being made; but it is possible to conceive conditions—although I do not think they are probable—under which the world price of wheat might be reduced to an extent which would leave the margin of profit exceedingly small, or even cause it to disappear altogether.
One of the calculations that we had to face in organising this business was the contingency of a possible loss. I should hope that that is not likely to occur; but we had, of course, to consider all the possibilities of the case. But assuming that some profit is made—possibly a considerable profit—the noble Marquess asked how it could he arranged that those cultivators in India who are growers of wheat should obtain their fair share of it to compensate them for the great profits which conceivably they might have made had no Government interference whatever taken place. I think there is this caution to be uttered in considering their claim, that wheat in India passes in many cases through a number of different hands, and it cannot, I think, be definitely asserted that the lion's share of a large profit of that kind in ordinary times would have gone so much to the cultivator as to one or two middlemen. But even after making that deduction we should all, I think, be disposed to agree that, if possible, the cultivator should not be penalised by this Government action. Obviously you cannot, however, compensate the individual. That, I think, would be generally conceded. It is agreed that if profit is made it should become the property of the Government of India. The Treasury here have agreed to that allocation, which I am sure is a fair one; and the Government of India without, so far as I know, having attempted to draw up any distinct scheme for the allocation of such profits—being possibly afraid of counting the chickens before they are hatched—will I am confident do everything to ensure that, so

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far as possible, these profits are designed not merely for the benefit of agriculture generally but, so far as may be, for the benefit of the particular class of persons who may be held to be damnified by our legislative and administrative action. It is quite true, as the noble Marquess has said, that a wheat cultivator up in the Punjab would not be seriously comforted for having missed a considerable profit by knowing that some coffee-planters in Mysore or some jute-growers in Bengal were gaining great advantages. It is possible that if great profit is made the Government of India will desire to devote part of it to general agricultural objects, but the point which the noble Marquess has raised is one which I am sure they will bear in mind.
The only other point which the noble Marquess mentioned was in relation to the finance of the method by which these purchases are to be paid for in India, and what precise transactions are to take place at this end. I am sorry not to be able to give a complete answer to the noble Marquess, because there are certain points outstanding that are not decided between the various parties who may claim to be interested. There are some arguments for making the finance of these transactions, so far as possible, a Government matter; and other arguments, which also have great weight, for interfering as little as possible with the normal course of trade. But if the noble Marquess will forgive me I will not attempt to enter into those suggestions or to weigh their respective merits at this moment, because the matter is to some extent sub judice.
I am grateful to the noble Marquess for the tone in which he discussed the whole question, and I trust that in what I have said I have been able to give the House a general idea of the scope of these past transactions, and also, as I trust, to justify the step, which is not one which we should have naturally desired to take. As noble Lords opposite would be entirely conscious, we rather pride ourselves than not on leaving trade to take its normal course without interference from the central Government; but these are times of crisis, and it has been most definitely concluded by us that it was necessary to take a step of this kind in order to avoid what might have been a serious disaster, not merely economic but also political.
There was one other small point that the noble Marquess mentioned—that of the
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price at which wheat was being sold. He quoted a figure the equivalent of 31 s. 5d. a quarter. I think it will be found that that is the up-country price, not the Karachi price, and that thus there would be some addition to it. Speaking only from memory, my recollection is that you have to add to a price of that kind something from 18 s. to 25 s. before the wheat can come up for sale at the Baltic in London.
THE EARL OF CROMER: My Lords, the noble Marquess's last remark partly answers the question I was going to ask. But I should like to know whether he can give us any information in figures as to the price of wheat before and after the prohibition. I ask the question for this reason, that a policy of this sort has to be largely judged by its results; and although it is economically difficult—I think almost impossible—to defend the policy, yet at the same time I can quite understand that for political reasons it may be desirable. The political reasons in this case I conceive to be to lower the price to the consumer and thus obviate the risk of serious riots and disturbances. It would be interesting to know whether that result has been achieved. I should like, therefore, to ask whether the noble Marquess can state what has been the actual effect upon prices so far.
THE MARQUESS OF CREWE: I have a figure here, which I think partially answers my noble friend's question. There is a price of 5 rupees 12 annas a maund f.o.b. at Bombay, and the entry goes on to say "at present rates of freight from Bombay or Karachi." That would work out to about 59 s. a quarter.
THE EARL OF CROMER: What I desire to have is a comparison between the prices before and after the prohibition. That is the point.
THE MARQUESS OF CREWE: I think the price was about 6 rupees a maund before. Now the price at which they are able to buy it—that is to say, the price which has been fixed for purchase—works out to about 59 s. when it comes here. From that the noble Earl can calculate the amount of profit which India is likely to make.
THE EARL OF CROMER: I fear I cannot in my head convert rupees into shillings. What I want to know is how many rupees the price was a maund before prohibition and how many after.
THE MARQUESS OF CREWE: My impression is that before the prohibition the price was somewhere about 4s. a quarter higher. At the present price they are able to obtain that proportion of wheat which they desire to export during the current month.
THE MARQUESS OF LANSDOWNE: My Lords, I should be wanting in courtesy if I did not thank the noble Marquess for the full statement he has made to the House. I am sure that much satisfaction will be given by his announcement that if these operations do result in considerable profit to the Government of India part of that
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profit will be earmarked for the benefit of the growers of wheat in that country.

BUSINESS OF THE HOUSE.
THE MARQUESS OF CREWE: My Lords, I beg to move that, except for Judicial business, the House do adjourn until Tuesday next, May 11.
Moved accordingly, and, on Question, Motion agreed to.
House adjourned at twenty-five minutes past Five o'clock, till To-morrow, half-past Ten o'clock.