2 it should be wrapped up in round-about methods.n

Over and above, the inducement of rebate was not a success.

C.H.T. Crosthwate, the Member-in-charge of Public Works in the Secretary

1 J. Westland's Note, 16 February 1895- Para 6, op. cit. 2 Ibid., Para 9*

Private enterprise as understood in England did not exist in India, so far as railways were concerned. Elgin had rightly stated that genuine self reliant Indian Railways were few and far between. The schemes laid before the Government as private enterprise were normally the "promoter schemes, where the real interest was to float the company and little else.” Elgin's Memorandum on Railway Policy, 9 October 1895* P«l* op« cit.

154

of State's Council, opined, nI believe the offer of a rebate even 1

with higher interest will rarely be taken." "Experience has shown that no response will be made" stated Gen. R. Strachey, "on any appreciable scale of magnitude, to invitations to capitalists to undertake railways in India at their own risk, such as have been

2

ineffectually made by the Government during a long series of years." Though the construction of railway through the state was

considered to be the best and the cheapest, but this method suffered on account of the want of continuity. During famine and war, the Government resources had to be diverted. If railway development was to continue, it was essential that money should be regularly forth­ coming. In this context, only the private companies could be

useful. "The debt of India is really increased?1, argued Crosthwaite, "just as much by indirect borrowing as by direct loans. But the effect on the credit of the Government may not be the same. By raising money through a company the loan is marked off distinctly as raised for railway construction and is separated from the general unproductive debt of the country. For this advantage, such as it

3

is, a heavier rate of interest will have to be paid." Hence the

1 C.H.T. Crosthwaitefs Memorandum on the Railway Policy, 24 December 1894T, P*l, P*W. 1880/955 vol. 447-

2 Minute by Gen. R. Strachey, Inc. S.S. to India Govt., Despatch No. 69 (Ry)i 6 September 1894, R.D.I., vol. 14.

3 C.H.T. Crosthwaite*s Memorandum on Railway Policy, 24 December 18951 op. cit.

155

need for a guarantee.

In the days of ”fluctuations of exchange11 the investors needed safe and firm returns and this, it was argued could be provided only through a plain system of guarantee.

In its final analysis and assessment, it would, perhaps be best to understand that the whole thinking in Government and outside

1

was obsessed with the guarantee system. One fact ought to be recognised that the adoption of the guarantee system almost bred a habit with the investors to look for a guarantee, so it did even with the policy makers in subsequent years. Thomas Robertson Report onlhe Indian Railway of 1903 upheld the principle and stated

2

that nunguaranteed enterprise*have always been unpopular.M Mackay Report of 1908, stressed still more for the encouragement of

3

private enterprise. Even the Acworth Committee of 1921 was equally 4

favourable to private enterprise.

In formulating the policy, Elgin was primarily influenced by

1 There was hardly any opposition from the official quarters towards the change, except from Charles Pritchard. R. Hardie,

in his Minute of 23 July 1894 had merely warned the Secretary of State that his policy of offering more liberal terms ^ in form of rebates_7 to private enterprise, as conveyed in his despatch

(Ry) No. 61 of 2 August 1894 were more onerous to the Government and that he preferred plain guarantee to the indirect one.

P.W. 1071/94, vol. 412.

2 Report on the Administration and Working of Indian Railways, 1903, Pari• Papers, vo 1. xlvii, ^ Cd.1713_ Para 117. See also Paras

129-132.

3 Report of the Committee on Indian Railway Finance and Administration, 1908, Pari. Papers, vol. 7 5 ^ Cd. 4111_], Para 8.

4 Railway Committee Report, 1921, Pari. Papers, vol. x ^™Cd.l512_/, chap. vii / Summary of the Report^^, pp. 8 6-8 9.

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the falling exchange and the chequered history of the private enter­ prise. He was convinced that the only solution to the impediment lay through offering lfplain guarantee”. Though he was conscious not to increase sterling liabilities, yet he was not prepared to curtail it on the argument of adverse exchange. ”1 cannot help thinking that the indirect advantages of the railway extension go

1

far to counter-balance even the loss on remittance.” Elgin was of the firm belief that without railway expansion, the financial condition of India could not improve and for this he was prepared to pay the price. In doing so he had acknowledged the value of accepting the plain facts.

He had also recognised that the Railway policy and railway expansion without the system of proper control, planned programme

and efficient organisation could never succeed in India. Administration of Elgin set out to establish such a machinery as well.

There were various reasons which necessitated systematic planning. One was, if private enterprise was given some facili­ ties, it needed to be controlled as well, particularly when

2

there was hardly any ”genuine self reliant Indian Railways”. The Government did not want to repeat the old mistake in which profits

1 Elgin to Hamilton, 19 February 1896, E.P., vol. 14. 2 Letter to the Editor, The Times, 10 September 1895*

went to private company and losses to the Government. The Government was interested in giving full scope to private enterprise, but in aiorganised order. nX see no way in which*1, admitted Elgin, **the railways of India cannot be wholly divorced from state control, the prejudice thus created can be avoided, except by the Government taking up the perfectly rational position that it does not throw the whole of India open to the company promoter, but will give free scope to private enterprise, the more genuine the better, by placing before the public the real requirements of the country.n*

For the systematic growth of railways, it was essential to regulate the railway programme and maintain coordination between public works departments in London and India. The inconsistency of approach of the two was actually exploited by the promoters. Whenever they wanted to circumvent the Indian Government they went to the

India Office and something was done against the wishes of the Indian Government. The grant of 3i per cent sterling guarantee to Assam- Bengal Railways in 1892 by the Secretary of State in total disregard to the advice of the Indian Government was one such case. Another case of this type occurred as late as October 1895* when Hamilton announced to the very surprise of many, the sanction of 3a cent

*

1 Elgin's Memorandum on Railway Policy, 9 October, p.2, op. cit. 2 Crosthwaite to Elgin, 4 April 1895* E.P., vol. 30.

guarantee to the promoters of Bhagalpur-Bansi-branch line, without consulting the Indian Government, particularly when a systematic

1

pattern of a policy was being evolved, "All I have to say is that, unless we do something of the kind, it is futile to ask us to

pursue a consistent policy, because every forecast that we make is at any moment liable to be upset by the introduction of new and

2

possibly incompatible item." Elgin's main desire was to shut out

3

all avenues which a speculative promoter tended to exploit. He believed that uniformity of policy and approach was pre-requisite to a sound policy. The control of the programme was, therefore, "far more important part of the new policy than any particular rate of

4