CHAPTER XVII
INTERNAL TRADE; CANALS AND RAILROADS (1813-1835)
THE internal trade of India still languished under the obnoxious transit duties which had been handed down from the preceding century. It will be remembered that the East India Company first obtained their footing in the country by an exemption of their export and import trade from those transit duties, to which the internal trade of the country was subjected. And it will also be remembered that when the servants of the Company claimed this exemption for their own private trade, Nawab Mir Kasim in a fit of noble generosity abolished all transit duties in Bengal, and that generosity cost him his throne. When at last the East India Company became the undisputed masters of Bengal in 1765, the time came for them to follow the example set by Mir Kasim, and to relieve the internal trade of India from those duties which repressed it. But the duties brought a revenue, however small, and the East India Company were slow to part with any portion of their revenues.
The transit duties became more oppressive under the British Rule than they had been under the Nawabs. For the Company’s power was more far-reaching, absolute, and undisputed, and each low-paid officer, at each Chowki or toll-house, had the means of exercising greater oppression. The evil grew without cessation for sixty years, and as late as 1825, Holt Mackenzie, then Territorial Secretary, condemned it in the strongest terms.
“Some articles have to run the gauntlet through ten custom-houses, passing at each several subordinate Chowkis, before they reach the Presidency, and little or none of the great staple commodities of the country escape from being subjected to repeated detentions.
“Even supposing that there were no exactions and no delay, still the system would seriously hinder the commercial intercourse of the country, since no interchange of goods can take place between districts separated by a line of Chowkis, unless the difference of price shall cover not only the export of transportation and the other charges of merchandise, but also the duty of 5 or 7½ per cent. levied by Government. Thus also the natural inequalities of prices aggravated, and, contrary to every principle, justly applicable to a consumption tax, the burden falls on those places where the consumer would, independently of duty, have most to pay.
“But when to the Government demand are added those of the custom-house officers, it appears to be certain that much trade that would be carried on by persons of small capital must be absolutely prevented. The rich merchant can afford to pay the utmost demand likely to be made upon him, because a considerable douceur will not fall heavy on a large investment, and because his rank and wealth secures him from any outrageous extortion. But to the petty trader a moderate fee would consume the probable profit of his adventure, and he has little or no security for moderation. . .
“Hitherto the attention of the authorities at home, and of the mercantile body generally in England, would appear to have been directed chiefly to the object of finding a market for the manufactures of the United Kingdom. They have consequently looked more to the import than to the export trade of India. The duties prescribed by Regulation ix. of 1810 have accordingly taken off a great number of articles sent from England hither; while of the exports, only indigo, cotton, wool, and hemp have been made free, and this more with a view, I apprehend, to English than to Indian objects. . . .
“The result of a pretty careful consideration of the articles which constitute the trade of Calcutta, and a consideration of the rate of duty which each could bear, have led to the conclusion that the country might be relieved from the mischief of our Inland Customs without any very considerable sacrifice, at least if the salt duties levied on our western frontier are, as would seem necessary for the protection of the Bengal monopoly, maintained. . . .
“Were Inland Duties abolished, without any change in the export and import duties, the immediate sacrifice of revenue would be about 33 lakhs (£330,000), and even though the duty on Western salts were maintained, there would still be a loss of 22 lakhs (£220,000). The whole of this, I fear, cannot be immediately replaced by the imposition of new duties on imports and exports by sea, but a considerable part may certainly be so, and inasmuch as the proposed arrangement will operate, as I hope, to extend trade, and will enable us to reduce establishments, the balance cannot be reckoned as a net loss.“¹
But Holt Mackenzie spoke to deaf ears. The East India Company would not willingly sacrifice even a revenue of £220,000, or any portion of it, for the prosperity of the internal trade of India. Professing the utmost anxiety for the material welfare of the people of India, they were unwilling to sacrifice a shilling to promote that welfare. If the abolition of the Inland Duties had depended on the East India Company, the duties would never have been abolished under their administration.
Fortunately their hands were forced by their own servants. The greatest and best of the Company’s Governor-Generals, Lord William Bentinck, went out to India in 1828, and that ruler employed Sir Charles Trevelyan to make an inquiry, and submit a report on Transit Duties. Trevelyan’s famous report exposed mercilessly the evils of the system. It showed that the evils had grown under British Rule as compared with the state of things under the Nawabs of Bengal; that traders all over the country were subjected to delay and exactions; that manufactures were killed and internal trade paralysed by the extortions of Customs’ Officers who were paid so low that it was possible for them to live only by extortion; that travellers were harassed and the honour of women passing through lines of customs’ houses was not safe; and that this huge system of oppression was maintained in the country for the sake of an insignificant revenue.$^{1}$ Lord William Bentinck published Trevelyan’s report, and thus sounded the death-knell to the Inland Duties.
Lord Ellenborough in England took up this report, and in his own forcible language pointed out to the East India Company in 1835 the evils of the system.
“While the cotton manufactures of England are imported into India on payment of a duty of 2$\frac{1}{2}$ per cent., the cotton manufactures of India are subjected to a duty on the raw material of 5 per cent, to a further duty on yarn of 7$\frac{1}{2}$ per cent., to an additional duty upon the manufactured article of 2$\frac{1}{2}$ per cent., and finally to another duty of 2$\frac{1}{2}$ per cent. if the cloth should be dyed after the Rowana [pass] has been taken out for it as white cloth. Thus altogether the cotton goods of India [consumed in India] pay 17½ per cent….
“The raw hide pays 5 per cent. On being manufactured into leather it pays 5 per cent. more; and when the leather is made into boots and shoes, a further duty is imposed of 5 per cent. Thus, in all, there is a duty of 15 per cent. [on Indian leather goods used in India]….
“In what manner do we continue to treat our own sugar? On being imported into a town it pays 5 per cent. in customs, and 5 per cent. in town duty, and when manufactured it pays on exportation from the same town 5 per cent. more, in all 15 per cent. [on Indian sugar used in India].
“No less than 235 separate articles are subjected to Inland Duties. The tariff includes almost everything of personal or domestic use, and its operation, combined with the system of search, is of the most vexatious and offensive character, without materially benefiting the revenue. The power of search, if really exercised by every Custom-house officer, would put a stop to internal trade by the delay it would necessarily occasion. It is not exercised except for the purpose of extortion….
“The effect upon the national morals is yet more serious than the effect upon national wealth. Every merchant, every manufacturer, and every traveller is, as it were, compelled, for the security of his property or the protection of his personal comfort, and not unfrequently for that of the feelings of the females of his family, to enter into unlawful collusion with the officers of Government. It is a system which demoralises our own people, and which appears to excite the aversion of all the foreign traders of Asia….
“We may at once, by our own authority, give entire liberty to the internal communications of sixty millions of people. Industrious, possessing a fertile country, traversed in its whole extent by a navigable river, inaccessible to foreign war, and protected in their property by an impartial administration of the laws, the inhabitants of Bengal would thus obtain, by the enlightened policy of their Government, more extensive means of public prosperity than are enjoyed by any other nation in the world.“¹
But Lord Ellenborough too spoke to deaf ears. The Court of Directors replied that “the Indian Government is well aware of the opinion entertained by the home authorities of the injurious effects which attend the levying of this impost, and their desire to see it abolished whenever it can be considered safe to do so. The Court think it would be premature and inexpedient to go farther than this by giving peremptory instructions on such a subject to the Local Government.“² In other words, the East India Company followed the practice, which unfortunately is not uncommon, of screening themselves and their disinclination to undertake reforms behind the imposing figure of the Local Government.
By an irony of fate that screen failed them for once. The publication of Trevelyan’s report had stirred public opinion in India, and Mr. Rosse in the Upper Provinces took upon himself to abolish the Inland Customs Houses within his jurisdiction. And the successor of Lord William Bentinck followed this up by abolishing all the Customs Houses in Bengal on the 1st March 1836, and the town duties on the 1st May 1836. The Court of Directors, forced to approve of these measures, nevertheless expressed to the Governor-General their regret “that you were precipitated into its adoption without having been enabled to form any available plan for compensating the loss of revenue.“¹
We have now arrived at the date when Queen Victoria ascended the throne of the British Empire. But it is necessary to proceed with the narrative of the Inland Duties a few years further, in order to bring it to an end. Lord Auckland had arrived in India in 1836, and was the first Governor-General under the Queen. Unhappily, an act of astounding folly, ending in a grave calamity, marked the Indian administration at the very commencement of the new reign. Disregarding the policy of peace, retrenchment, and reform initiated by Lord William Bentinck, Lord Auckland launched himself into the first Afghan War of 1838. It ended in making enemies of a friendly and warlike race, in the disastrous retreat of 1842, in the destruction of 4000 troops and 12,000 followers, and in the sacrifice of Indian revenues in a war outside the frontiers of India.
Lord Ellenborough, who had pressed on the East India Company the abolition of the Inland Duties in 1835, went out as Governor-General to India in 1842. He abolished the Inland Duties in Sindh in 1843, in the territory of Jalun in 1844, and in the Province of Madras by Act VI of 1844.
Nine years after, when the Charter of the East India Company came up again for renewal, Lord Ellenborough was one of the Select Committee of the House of Lords and Sir Charles Trevelyan was one of the witnesses. And referring to the abolition of the Inland Duties, Lord Ellenborough asked:
“Was it not owing to Lord William Bentinck sending you to make inquiries upon the subject, which was followed by your report, and by the Act of the Government abolishing those duties?”
Sir Charles replied: “If my report had remained unpublished and had merely undergone the usual course of official discussion, years might have passed before the Transit and Town Duties would have been abolished. But instead of that the report was published, and everybody at once felt that the system was condemned.“¹
It is necessary to state, for the information of modern readers, that at the period of which we are speaking in this chapter India did not yet possess a uniform currency. The silver coin in Calcutta was the Sicca Rupee, the value of which was about 6⅔ per cent. above that of the Madras Rupee. The Gold Mohur was a legal tender for Rs. 16, but as the value of gold had risen it sold for Rs. 18, and ceased to be a current coin. Horsley Palmer, governor of the Bank of England, stated in his evidence in 1832: “Gold neither does nor will circulate to any extent as current coin in India, where silver forms the actual currency and is a legal tender. . . . I should be directly opposed to an opinion of the propriety of introducing gold into India as the current coin of the realm.“²
Steam communication between England and India through the Red Sea had commenced, but was still enormously expensive. The Hugh Lindsay steamer reached Suez from Bombay in thirty-three days, a distance which is now performed in one-fourth the time.
The introduction of steam navigation in the rivers of Bengal and of an experimental voyage between Calcutta and Allahabad was also discussed. As early as 1828, H. T. Prinsep, then Secretary, submitted an interesting note on the subject. There was no river in the world, he said, except those of China, on which there was so large a navigation as on the Ganges. Thirty thousand boatmen found their livelihood on that river as far back as 1780, and the number had since increased. “Everybody has been struck by the constant succession of boats moving up and down, the river never appearing for a moment altogether clear; and as this is nearly the same at all seasons and in all places, it leaves an impression of the extent to which this magnificent stream ministers to the wants of commerce and of the traveller such as defies the attempt at computation.“¹ The present railway system of India ministers to the wants of commerce much more effectually; but it is constructed by foreign capital and pays interest to foreign shareholders; and millions of boatmen and boat-builders, cartmen and bullock owners, have lost their living.
The question of the applicability of canals, and railroads for conveyances drawn by animals, also came up for consideration. It was estimated that the cost of construction of a canal, and of a single railroad, would be the same, about £900 the mile; that the former would pay £190 and the latter £175 the mile.
“A canal would require works which are not required in irrigating channels, but not works of a very different nature. But a railroad for conveyances drawn by animals is one of the simplest works that can be executed, and would present much fewer obstacles than the various works now used in irrigation. The railroads would also be preferable to canals as requiring no water, which is so valuable in the Carnatic. . . . But the main question seems to be whether the same money and skill expended on works of irrigation, whether those now in use or new ones, would not, upon the whole, improve the country more than if expended in improving the means of internal communication. . . . It may be proper here to mention that all the above calculations and remarks respecting railroads refer only to those intended for animal power, for the use of locomotive engines alters the nature of the work materially and increases the expense prodigiously, because in the latter case neither such great inclinations nor such sharp turns can be allowed as in the former. Thus the Manchester and Liverpool railroad cost £25,000 per mile, while the average of double railways throughout England [for animal power] is about £5000 per mile…. It seems very advisable to send out a small quantity of rails and waggon wheels to be ready for any of the works that are constantly executing in the Tank Department. About a thousand yards of double rails, such as are used for temporary purposes in England, and wheels for forty railway waggons might be sent out for about £250.”
We have made the above extract because it is always interesting to trace the commencement of a controversy which has assumed vast proportions in recent years. The discussion about the comparative merits of canals and railways was carried on through succeeding decades, and, as might be expected, preference was given to railways which facilitated British trade with India, and not to canals which would have benefited Indian agriculture. So great was the influence of British traders on the Indian administration that the Indian Government guaranteed a rate of interest out of the Indian revenues to companies constructing railroads in India; and £225,000,000 were spent on railways, resulting not in a profit, but in a loss of £40,000,000 to the Indian taxpayer up to 1900. And so little were the interests of Indian agriculture appreciated that only £25,000,000 were spent on irrigation works up to 1900.
Footnotes
[1] “Accustomed as I have been,” wrote Macaulay, in referring to Trevelyan’s Report, “to public affairs, I never read an abler state paper, and I do not believe that there is, I will not say in India, but in England, another man of twenty-seven who could have written it."—G. O. Trevelyan’s Life and Letters of Lord Macaulay.
¹ H. T. Prinsep’s Note, dated 31st July 1828.
¹ Evidence before the Commons’ Committee, 1832, vol. ii. Part ii. Appendix xxiv.