I have the honour to inform you that the Government of Australia has decided to offer to the Government of India a contribution towards its economic development programme under the Colombo Plan for Co-operative Economic Development in South and South East Asia.
You will recall that, on December 20th last, the Government of Australia announced its intention to set aside, in the period 1st July, 1951, to 30th June, 1957, an amount of �A.31.25 million to be offered as an Australian contribution towards the success of the programmes of economic development which Governments in South and South East Asia propose to put into effect.
The Government of Australia decided to express in this way its support for the cooperative programme reflected in the Colombo Plan and its sympathetic interest in the intention of Asian Governments progressively to increase production and to promote the welfare of their people through national programmes of capital development. The development programmes which were incorporated in the Colombo Plan show that, while the Governments of the area will themselves provide the greater share of the finance required, the addition of some finance from other countries is indispensable for the carrying out of development at the rate contemplated. The Government of Australia decided to make a contribution towards the total finance required, believing that economic co-operation is a means by which the friendly relations already prevailing between us will be still further strengthened.
The sum of �A.31.25 million is additional to the amount of approximately �A.2.7 million to which the Government is currently committed under the Technical Co-operation Programme now under way, and about which it is hoped to communicate further proposals for expenditure.
The Government of Australia has decided that, of the �A.31.25 million, �A.8.75 million will be made available for the first year of the Plan, namely 1st July, 1951 to 30th June, 1952. Pending decisions by some countries in the area of South and South East Asia as to whether they wish to participate in the co-operative programme, the Government has decided to offer immediately the sum of �A.6.5 million to be distributed among India, Pakistan and Ceylon.
The Government of Australia proposes that its aid to recipient countries should, so far as possible, be in the form o f Australian commodities, materials, equipment and facilities which are mutually agreed upon as available and useful to the recipient Governments, and has reached the conclusion that it could make an effective contribution in the form, and on the conditions set out below.
The Government of Australia is willing to supply, as a grant and without cost to the Government of India, available Australian commodities, materials, equipment and facilities, up to the value of �A.4.2 million during the period of 1st July, 1951 to 30th June, 1952. The Government of Australia proposes for the consideration of the Government of India, that the grant be expended on the following supplies:—
(a) any wheat (f.a.q.) which may become available for purchase from the Australian Wheat Board before the next Australian harvest;
(b) wheat (f.a.q.) from the next harvest up to a total value of �A.3.7 million, c.i.f., less the value of any wheat which it may have been practicable to supply in accordance with (a);
(c) other commodities and supplies up to an amount of �A500,000 for India's developmental projects or for other purposes mutually agreed.
In offering this aid the Government of Australia asks the Government of India for its part to confirm that:
(i) aid from the Government of Australia, whether in supplies or in any other mutually agreed form, and any local currency proceeds from the sale thereof in India, will be used by the Government of India in a manner contributing towards the achievement of the objectives of the Colombo Plan, namely economic development through investment and other programmes designed towards the improvement of the welfare of the Indian people;
(ii) the Government of India will before 30th June, 1952 inform the Government of Australia of the way in which Australian aid has been utilised and the resultant effect on the carrying out of the Government's economic development projects, as set out in the Colombo Plan; and that such information will indicate the manner in which goods supplied have been distributed and the use made by the Government of India of any proceeds of internal sale of such goods.
If the foregoing proposals are acceptable to your Government I have the honour to propose that this Letter and your confirmatory reply thereto be deemed to constitute and evidence an arrangement between our two Governments in respect of matters dealt with in this Letter, such arrangement being regarded as having come into force on 1st July, 1951.
[NAA:A4534, 44/13 part 2]