Railways and Irrigation

CHAPTER XI

RAILWAYS AND IRRIGATION

The Government Policy.

The railway policy of the Government of India has been a subject of controversy between Indian and British publicists as well as among the latter inter se. The Indian publicists are almost unanimous that the railways in India built and constructed with foreign capital and managed by foreign agents, have been economically ruinous to India, and the British publicists are divided into two classes: those who condemn the railway policy of the Government of India and those who point out in figures of traffic and the growth of foreign trade conclusive facts showing the success of railways there. But before we state the case for both sides we want to say once for all, that although there is no doubt in our judgment that the railway policy of the Government of India has been the source of indescribable misery to the people of India, economically and financially the railways have largely contributed to the unifying of India, and to the growth of national consciousness; they have broken down social barriers; they have facilitated travel and thereby helped social reform and in the broadening of the Indian people’s outlook. Unfortunately the price we have paid for these benefits has been too heavy for a poor people like those of India. With these preliminary remarks we will proceed first to give some outstanding facts about Indian railways and then discuss their bearing on Indian economics.

The length of railway lines open on March 31, 1915, was 35,285; the mileage under construction at the end of 1914-15 was 437. The number of passengers carried in 1914-15 was 451 millions and the tonnage of goods 81 millions.

The following tables compiled by Mr. Dora Swami, an Indian publicist, and verified by us will be found useful. (Vide Hindusthan Review, Allahabad, January, 1916.)

Comparative Table of Figures of Foreign Trade.

Comparative Table of Traffic.

Comparative Table Showing Mileage of Railways, National Wealth and National Income of Different Countries.

Per Capita Wealth and Income.

These figures tell their own tale — while in the matter of national wealth and national income, India is at the bottom of the list, in the matter of railway mileage she is fourth.

The Beginning of Railway Policy.

We have not the space to give even a brief history of the railway policy of the Government of India and of the history of railway progress in that country. The subject may well be studied in Mr. Horace Bell’s book on “Railway Policy in India” (Revington, Perceval & Co., London, 1894) as also in Thornton’s “Public Works.”

In the former “the author has designedly abstained from criticism and from the assertion of his own views,” though reading between the lines one can, in places, guess the author’s opinion. For example, on the very first page discussing the beginning of the railway policy in 1843-44, the author remarks:

“Thus apart from the comparative novelty of railways even in Europe and in face of much more serious and urgent matters, it would not have been surprising if the ’ Honourable Board’ in Leadenhall Street, had regarded the proposals as untimely or premature. This, however, does not appear to have been the view taken at any time either at home or in India, and notwithstanding that much more weighty business was in hand, the railway promoter found himself in favour and a desire shown to help rather than retard the progress of the scheme.”

The first guaranteed Indian railway was formed in 1849-50 and “during the next thirty years the sum of over £99,000,000 was raised in the English market under the security of the Indian Government’s guarantee of 5 per cent. As up to the year 1877 the net earnings of these railways were not sufficient to pay the guaranteed interest, the State had to advance the sum required out of the ordinary budget. These accumulated arrears of interest amounted in 1881 to the enormous sum of £28,425,119.”

All authorities, Indian and Anglo-Indian, are agreed that the first period of railway construction from 1849-50 to about 1873 was characterised by gross extravagance and other abuses which were fully exposed before the Finance Committees of 1871, 1872, 1873 and 1874. It was then resolved that the State should undertake construction with borrowed capital.

In 1873 an official chronicler predicted “the cessation of heavy outlay on construction.” In 1878 Sir Arthur Cotton recommended “the summary and indefinite suspension of nearly all railway schemes and works.” In 1880 the Famine Commission pleaded for larger outlay on works of irrigation as compared with railways. But all these predictions and hopes and recommendations came to nothing, because the interests of the British merchant and manufacturer demanded the extension of railways, and after all they are the men whose opinions count in England. The progress in railway construction may be judged from the fact that while up to 1880 only 9,310 miles of railway had been constructed, by 1900 the mileage had risen to about 25,000 miles. In March, 1915, it stood at 35,285. In the twenty years from 1880 to 1900 more than 15,000 miles of railway was constructed as against less than 10,000 in the preceding thirty years, and in the next fifteen years more than 10,000 miles more were added. Writing of the railway policy of the Government of India, the Honourable Mr. D. E. Wacha, the ablest Indian authority on finances, said:

“At the very outset we cannot help remarking that the breathless pace at which capital, like water, has been expended during the last few years, at the behest of the interested Chambers of Commerce, is not only inordinate but most improvident. The entire railway policy of the Government, specially in its financial aspect, demands the most searching investigation by an impartial tribunal of experts wholly independent of influence at Calcutta and Whitehall. We are confident it would reveal facts which would certainly not redound to the credit of the Government. Indeed, even on the recorded evidence taken by the East India Finance Committee of 1871–74, better known as the Fawcett Committee, there is ample material to condemn the policy of the State. Huge blunders were made entailing colossal expenditure on the tax-payer which were held to be culpable. The student of railway finance has to dive deep into those old but most important records to corroborate the statement we make here.

“The worst and most inexcusable feature of Indian railway policy is the supreme indifference and neglect of the authorities to the crying wants and wishes of the Indian public — those vast millions of the population who travel about 36 miles in a year and who now contribute the largest portion of the coaching traffic amounting to 13 crore¹ rupees per annum. The interests of the European mercantile community are deemed of paramount importance while those of the Indian population at large have been uniformly held of secondary importance, if at all. At the beck and nod of the former, with their screaming organs of opinion behind, the Government readily spend millions like water on railways without an ultimate thought of the tax-payers and the return such capital would give. It is the greatest blot on Indian railway administration that it ignores the interests of the permanent population and is eager to satisfy first the cry of the interested and migratory European merchant. No private railway enterprise would spend such enormous sums of money and no proprietary body, however rich and influential, would tolerate in any part of the civilised world, the loans after loans, ranging from 15 to 20 crores, which are annually borrowed and expended without let or hindrance, save for a kind of official control, which is no control at all . . . It is a dismal tale, the history of Indian railway finance from first to last. As a matter of fact it is recorded in black and white in one of the important appendices to the report of the Royal Commission on Indian expenditure (1896-97), generally called the Welby Commission, that from 1848 to 1895, the whole system of Indian railways cost to the State, that is the tax-payer, fully 55 crore rupees; and though since that date there have been gains, still, in the railway ledger of the Government of India there is a debit balance against railways of as many as 40 crore rupees.

“It is since 1899-1900 that Indian railways have turned the corner and earned something for the tax-payer on his colossal capital recorded in the Administration Report for 1910 at 430 crore rupees! The average gain since 1904-05 has come to 3 crore rupees per annum. There are no doubt paying railways; but there are also losing ones and these 3 crores are the net balance of gain after writing out the losses. The large gains of the earning railways are absorbed by the losing ones, as could be easily discovered on a reference to appendix 9 of the annual administration report which gives the financial operations of each system of railways.

“Meanwhile, let us mark the progress of this Railway rake during the decade. Perhaps the best way would be to exhibit the most salient features worth knowing and weighing in the following table:

Table has been formatted for readability.

" The first fact that strikes one is the increase in capital outlay. Capital was increased in 10 years from 339 to 439 crore rupees, that is by 100 crores, equivalent to 30 per cent. Next, while the gross earnings increased by 12.16 crore rupees or 36.20 per cent., the gross working charges increased by 60 per cent.! That is to say, the working charges progressed at almost double the ratio of gross earnings! But how stand the net earnings, that is, gross earnings minus gross working charges? The increase amounted to 2.72 crore rupees in 10 years equivalent to 15.30 per cent., say 1.5 per cent., per annum. Can it be said that this growth of net earnings at the rate of 1.5 per cent. per annum is commensurate with the growth of capital outlay at 3 per cent.? It should take away the breath of any railway capitalist with an economic conscience. Here practically may be seen the economic phenomenon which in agricultural industry is called the law of diminishing returns. Increased outlay does not mean proportional increase of income. Moreover, with a larger growth of capital, even that income must later on diminish! This evidently will be the financial result if capital is added to capital blindly like Ossa on Pelion from year to year. It should be remembered that these net earnings do not take into account the enormous interest which has to be annually paid on the borrowed railway capital.

When that interest and other indirect charges are deducted as any banker, merchant or man engaged in business should do, the net gain, the true net gain or dividend to the shareholder, who is in reality the taxpayer as represented by the State, was only 1.27 crore rupees in 1901 and 2.75 crore rupees in 1910. Or, to put it in another way, the percentage in the former year was only 0.38 per cent. and in the latter 0.62 per cent. on the respective colossal capital. Let the reader just imagine a paltry percentage, a little over ½ per cent., and a little under ¾ per cent.! Here may then be discerned the final financial result to the taxpayer. How miserable compared to even 2½ and 3 per cent. of railways by private enterprise elsewhere. In the case of private enterprise there are a number of joint proprietors of a railway. In the case of the State, which represents the tax-payer, there is only one proprietor. Beyond that there is no difference. But when the joint stock railway company, after providing for all charges and interest on borrowed monies, divides among its proprietors in the United Kingdom and elsewhere a dividend on its share of capital, say 2½ to 3 per cent. at the lowest, here in India, the dividend goes a little beyond half a per cent.! Thus though Indian railways show progress generally, the ultimate financial progress is indeed most disappointing. The only satisfactory feature is the growth of coaching and goods traffic. The number of passengers increased by fully 17.68 crores in 10 years, say, at the rate of 1.76 crore per annum. The growth is equal to 90 per cent. in the decade, while the percentage of increase shown in coaching receipts came to 70. Goods traffic showed an increase in receipts of 9.19 crore rupees, equivalent to 43.26 per cent. Of course, it goes without saying that with 10,691 more miles of new railways open or under construction, the number of all classes of employés should increase. The total increase was 176,577, say at the rate of 17,657 per year. The European employés increased by 35, the Eurasians by 17, and the Indians by 50 per cent. But the railway authorities have for years deliberately suppressed the salaries and wages annually earned by each class of employés.

While the railway administration reports and the government blue books repeat every year the number of Europeans and Indians employed on Indian railways they have persistently omitted to state the amount paid to the classes in salaries. According to the parliamentary return of salaries of May 17, 1892, there were, in all, 2,448 Europeans earning salaries of 1,000 rupees (333 dollars) and upwards per annum in the civil and military employ of the Government of India. Their total salaries came to R. 8,062,840. There were, however, only 895 natives who earned salaries of R. 1,000 or upwards per annum and the total of these salaries amounted to R. 1,367,350. It will be very interesting to have similar information about railway employés. In discussing the blessings conferred on India by the railway system, the Anglo-Indian imperialist is apt to point out:

(a) The huge growth of the foreign trade of the country.

(b) The number to whom the railways give employment.

(c) The help which, in years of scarcity, the railways afford in carrying the surplus produce of one province to another.

Whether (a) is a blessing or not depends on who profits by the foreign trade. We have already shown that the foreign trade is in the hands of the Europeans, and while they purchase Indian produce on their own terms, they convert it into manufactures and resell the same to India, also on their own terms, pocketing all the profits which accrue from manufacture, carriage, insurance, brokerage, etc. As to (b), the number of natives employed by the Indian railways cannot be by any means larger than what were employed in the transportation business on land and waterways before the railways. The railways have practically displaced both. As to (c), in this respect the railways have been more of a curse than a blessing. They have helped in the export of grain more than the needs of the Indian population warrant. Sir W. W. Hunter has left it on record that if every Indian were to have two full meals every day there would be left much less to export than is at present exported. The export of food stuffs has raised prices, without raising the wages of labourers to the same extent. The rise in prices has been one of the potent causes of the increase in land revenue, which in its turn compels the peasant to sell his crops at the price offered by the exporter. All this adds to the income of the railways. Writes Mr. A. K. Connell:²

" To sum up, the joint results of railways and free trade may be briefly stated in this way: India used to clothe itself, now England sends clothes, and Indian weavers have lost an enormous source of income, with the gain to the country of the difference in price between English and Indian goods. But to pay for these goods India has to export vast quantities of food and those who sell this food make larger profits than before. Therefore a certain portion of the community gain by cheaper cotton goods and higher prices for grain. But in order to attain this result they have had to pay the sums before mentioned to build the railways. Besides that, they have to support in years of scarcity a gigantic system of outdoor relief. Is it not obvious that, taking the economic changes as a whole, the country has lost an enormous source of wealth? If the import of cotton to India and the export of grain from India ceased to-morrow, the Indian people would be the gainers, though the Indian Government would be at its wit’s end. In fact, the interests of the two are not identical. The Indian Government is now doing its best to stimulate the export of wheat in order to lessen its ’loss by exchange’; but this will only result in higher food prices in India. We now see the explanation of Mr. Hunter’s assertion that two-fifths of the people of British India enjoy a prosperity unknown under native rule; other two-fifths earn a fair, but diminishing, subsistence; but the remaining fifth, or forty millions, go through life on insufficient food. And in ten years, according to Mr. Caird, there will be twenty millions more people to feed. Can it, then, be maintained that the material condition of India has been improved by the enormous outlay on railways?

“But you forget, replies the opponent of these heretical views, that in time of famine the railway brings food to starving districts. What would have become of the people of Madras, Bombay, and the North-West Province during the last famine if it had not been for the railways? My reply is: What did become of them? It is true, the railways brought grain; yet they had previously taken it away, and they brought it back at a quadrupled price, and the Government had to spend millions of pounds to enable the peasants to buy it, and even then could not prevent frightful mortality. What has been the native’s custom from time immemorial of providing against bad years? Why, the simple method of Joseph in Egypt—that of storing grain. This is what the official report on the Mysore famine tells us:

" ‘The country had suffered in former years from deficient rainfall, but actual famine had been staved off by the consumption of the surplus ragi, a coarse millet, stored in underground pits, from which it is withdrawn in times of scarcity, as the grain will keep sound and good for forty and fifty years.’ Only two of the Famine Commissioners, Messrs. Caird and Sullivan, seem to have recognised the importance of this custom. In the above-quoted very interesting appendix to the first part of the report, they write on the subject of grain storage as follows: ‘The food of the people is of the simplest kind, grain, salt, and a few condiments for a relish. The grain is easy to handle, bears storage in pits for many years, and the people themselves grind it as they require it. The pits are made in the ground, in a manner with which the natives are familiar, and cost nothing beyond the encircling ring of baked clay and labour in construction.’ It is this storage of grain, the easiest kind of Famine Insurance Fund, that the teachings of plain experience have forced the native to adopt throughout the length and breadth of India, though the amount of stores varies according to the necessities of each district.

“Since the introduction of railways there is reason to believe that the ryot, tempted by immediate gain, or forced by taxation to sell his grain, is beginning to store rupees instead of food; but, as he cannot eat his rupees or jewelry, and cannot buy fuel so as to keep the manure for the land, and has, according to the Famine Commissioners, to give in famine times a quadrupled price for his food, it is very doubtful whether he gains in the long run. Anyhow, the landless labourer, who has no produce to exchange for rupees, finds the market price in time of scarcity utterly beyond his means. Then the Government comes to the rescue with relief works, the railways make roaring profits — in fact, famine and war, both exhausting for the country, are perfect godsends to the foreign investor — and the Indian Government complacently holds up its Public Works policy to an admiring and interested English public. It wholly omits to mention that in time past nearly £30,000,000 of taxation have been squeezed out of the country to pay interest charges, and that, if that sum had been left in the agriculturist’s pockets, he might himself have been better able to face bad times, and have helped the labourer to do the same. But Sir John Strachey utterly ignores this aspect of the question; he is quite content with pointing to the relief works, and then insists on the necessity of constructing more railways to meet the next famine cycle. One would suppose that railways proceeded as a free gift out of the benevolent bosoms of British capitalists, instead of being paid for out of the hungry bellies of the Hindoo ryot. The sum of £30,000,000 represents the amount which India has had to pay out of taxation to get its railways built, and then it has paid £15,000,000 (part of which went to the railway shareholders) to keep the people alive, and after all has lost about five millions of human beings.”

This was written in 1883. Since then the evil has grown enormously out of proportion to the so called advantages. For fuller information and discussion of the subject we may refer the reader to Mr. A. K. Connell’s book, to Mr. A. J. Wilson’s “An Empire in Pawn,” to Mr. Digby’s “Prosperous British India,” to the statements made by Messrs. Naoroji, Wacha, Gokhale and others before the Royal Commissioners on Indian Expenditure in 1896, and to the evidence given before the Famine Commissioners of 1880 and 1897-98. We have no space left to discuss the policy underlying railway rates and railway fares in India. The Indian Chamber of Commerce and the British Indian Association of Calcutta both have voiced the feelings of the Indian community as to the unfairness of the discrimination that is made in favour of foreign trade, to the neglect and cost of inland trade and Indian industries.

Benefits of Capital Investment.

There remains one more point to be noticed. It is often said that the foreign capital invested in Indian railways must have benefited the country a great deal by affording ‘‘increased profitable occupation to the people of the country.’’ The statement was examined by Mr. Connell (page 31 of his book, 1883) and his reply was:

‘‘The truth about the capital expenditure is as follows: Of the Guaranteed Railways capital of £96,794,226, spent up to the end of 1880–81, £46,918,177 were withdrawn in England and £49,876,049 in India, while the charge for interest, amounting, as shown above, to about £28,000,000, was almost entirely remitted to England. Thus of the sum total of capital required for the construction of these railways only £21,000,000 were actually spent in India, and as the sum remitted by the railway companies themselves up to 1881 reached the amount of over £29,000,000, there was no balance at all remaining in the country. Indeed, there was a deficit on the whole transaction of £8,000,000. So far, then, from this investment of foreign capital leading to an ‘outlay of a larger sum than the interest sent away,’ it actually led to the outlay of a smaller sum than would have been spent in the country if no guaranteed railways had ever been built.

‘‘Of the £32,000,000 odd raised for State railways, twenty-four millions have been appropriated in India, and seven and a half millions in England, while the charge for interest, between two and three millions to be added to the capital account, has also gone to England.”

Irrigation.

The total outlay on irrigation works up to the end of the year 1914–15 was as follows:

The total area irrigated was …. 25,600,000 acres.

The net receipts on capital outlay for the three classes of irrigation works were:— 8.97; 0.59, and 4.52 per cent. respectively. Of the permanent debt £41,122,020 was on account of irrigation out of a total debt for public works (railways and irrigation) of £275,245,288 on the last day of March, 1915.³ It must be freely acknowledged that the twentieth century has seen a very wise change in the policy of the Government of India in the matter of irrigation works to bring large tracts of waste lands under cultivation. The way in which this last is being done is open to several objections but the work itself is highly commendable and beneficent.

Footnotes