outlay. Irrigation works were converted into a source of revenue by the Government; railways led to a permanent loss to the Government year after year. Irrigation secured crops, increased the produce, and averted famines in years of drought; railways helped the conveyance of food to afflicted tracts in famine years, but did not add to the produce of the land.

It might naturally be expected that, under these circumstances, the Government of an agricultural country like India would be more partial to irrigation works than to railways. But Englishmen in their own country were more familiar with railroads than with canals; and they made the mistake of judging the needs of India accordingly. British manufacturers, too, thought that railways would more quickly open up the interior of India to their commodities than canals; and the administration both of the East India Company and of the Crown was subjected to a continuous Parliamentary pressure to extend and multiply railway lines in India, even at a loss to the revenues of the country. There was no counter pressure from the people of India, who had no votes and no representatives in the Executive Government; and irrigation works were thus treated with comparative neglect, while railways were multiplied beyond the urgent needs or the resources of the country.

Two private associations called the East Indian Railway Company and the Great Indian Peninsula Railway Company, were formed in 1845; but the projectors found it impossible to raise the necessary funds for their schemes without the assistance of Government. After much discussion the Directors of the East India Company consented to grant assistance in the shape of guaranteeing interest on the railway capital. The terms of the agree ment were that, if the nett receipts from the railways were less than 5 per cent. on the capital expended, the Government of India would make good the difference from the revenues of India. If, on the other hand, the

nett receipts from the railways were more than 5 per cent., one half of the excess would go to the railway companies, and the other to the Government of India. To take an example, if the railway traffic yielded 4 per cent. on the capital expended, the Government of India would pay per cent. to make up the guaranteed rate of interest. If, on the other hand, the traffic yielded 7 per cent. on the outlay, the shareholders of the railway company would keep 6 per cent., and would pay the Government of India I per cent. The management remained with the railway company.1

It was also stipulated that the railway companies could surrender the works on giving six months' notice, and the Government would have to repay the whole amount expended by them. And the Government was empowered, after the expiration of twenty-five and fifty years respectively, to purchase the lines at the market value of the shares. Lastly, at the expiration of ninetynine years, the land and works lapsed to the Government, who would have to purchase the engines and carriages at a valuation.2

East Indian Railway.-In 1854, only 371 miles of this line were open for traffic; and in February 1855 the length opened was 121 miles, from Calcutta to Raniganj. Lord Dalhousie then drew up a scheme of a general system of trunk railways for India; and another contract was entered into, by which the same railway company agreed to extend the line to Delhi, and accepted 4 per cent. as the guaranteed interest on their capital spent on this extension. But the Indian Mutiny occurred before any extension was opened for traffic, and the administration of the East India Company terminated after the mutiny.

Great Indian Peninsula Railway. The line from

1 Juland Danver's Report to the Secretary of State for India, dated March 12, 1860, paragraph 4.

2 Ibid., 1860, paragraph 4.

Bombay to Kalyan, 37 miles, was completed in 1854. In November of that year, the same railway company agreed to construct extensions at a minimum interest of 4 per cent. on the outlay, but this rate was increased to 5 per cent. whenever shares were issued; 54 additional miles were done before the mutiny of 1857.

Madras Railway.-The first section of this line, from Madras to Arcot, 65 miles, was opened to the public in July 1856. No further extension was constructed within the period of the East India Company's administration. And no other lines except the three named above were opened for traffic before November 1858, when the Indian Empire passed under the direct administration of the Crown.

All the three lines described above were losing concerns, and the sums which the Government of India had to pay to the railway companies from year to year, to make up the guaranteed interest, are shown below.1

Amounts Paid by Government on Account of Guaranteed Interest.

1 Juland Danvers, 1860, paragraphs 32, 48, and 60.

2 The sums paid to the East Indian Railway Company were for financial years, 1849-50, 1850-51, &c., and not for calendar years, 1849, 1850, &c., as shown above.

The loss to the people of India increased, as the railway lines were extended, from year to year. But so long as the interest was guaranteed, the railway companies made their earnings, and new companies were started to open lines in every part of India. The Sindh Railway Company, including the Punjab in their operations, the Bombay, Baroda and Central Indian Railway Company, the Eastern Bengal Railway Company, the Great South of India Railway Company, and the Calcutta and SouthEastern Railway Company, were all formed before the extinction of the East Indian Company's administration, but the lines undertaken by them were not opened.

This delay irritated British manufacturers and merchants; and in 1858 a Committee of the House of Commons was appointed " to inquire into the causes that have led to the delay." The Committee, after due inquiry, reported that the delay was owing to Government supervision of the works, to the distance of India from home, to insurrection and mutiny, and to the natural difficulties of the country. And the Committee added :—

"First, that the Government has acted wisely in committing to private enterprise the execution of these great public works;

Secondly, that a guaranteed interest on the requisite capital was indispensable to induce the public to invest their money in undertakings of this magnitude and novelty;

"And thirdly, that in order to protect Indian 'revenue from undue expenditure, Government control over the railway operations is requisite, and even valuable to the interests of the shareholders themselves."

It is possible to conceive that if the people of India had been represented on this Committee, or even if many Indian witnesses had been examined by them, the Committee would have formed a different opinion. They might have come to the finding that, in order to protect Indian revenue from undue expenditure, railway lines on

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the guarantee system should not be undertaken in India except on the ground of absolute political necessity; that all other lines should be left entirely to private enterprise; and that canals were more suited to the needs of India, both as a means of cheap transit to the people and as a protection against droughts and famines.