East Indian Railway: 1906 History of the EIR - Chapter IX
Note: This is a sub-section of the East Indian Railway
The History of the East Indian Railway by George Huddleston. Published 1906 by Tracker, Spins and Co
CHAPTER IX. NEGOTIATIONS PRECEDING THE PURCHASE OF THE EAST INDIAN RAILWAY BY GOVERNMENT.
THE negotiations which preceded, and gradually led up to the purchase of the East Indian Railway Company by Government, have been placed on record by Mr. Crawford, in a pamphlet published in 1880, entitled "A Short Account of the Preliminary Negotiations." Towards the close of 1876, the first of the three years constituting the period of which the average price of the Company's stock in the market was to be taken as the value of the Railway, in the event of the Secretary of State electing to purchase the line, had nearly run its course, and the time had arrived, when the interests of the Company required that the consideration of its fate in the future should no longer be deferred.
The measures taken by Mr. Crawford are best told in his own words; he says: —
"As a first step I proceeded to prepare a paper, which dealing with some of the leading facts as they. lay before us, would familiarise my own mind, and the minds of my colleagues on the Board, and of any other persons under whose observation they might come, with the main features of the case and the magnitude of the interests concerned; at the same time they presented something like a definite proposition for consideration.
"My next step was to write to Lord Salisbury under date 8th March 1977, to the effect that 'as the time approached when the relations of the East Indian Railway Company with the Government of India would come under review in the terms of the contract, we found our freedom of proceeding in the management of the line, and consideration of measures for the development of the traffic, much affected by the uncertainties of our position; requesting in conclusion that His Lordship would allow me to see him on the subject. I waited on him on the 15th March 1877. He heard what I had to say, and having spoken amongst other things of difficulties in the interpretation of the contract, referred me in the end to General Strachey, the Chairman of the Railway Committee of his Council."
"Various communications having passed between General Strachey and myself, I received from him in the result, a declaration of Lord Salisbury's views in the following confidential letter dated 3rd May 1877:—
"I return the paper you left with me. Acting on your authority to do so, if I thought fit, I have shewed it to Lord Salisbury. To take up the discussion where we left it, I now wish to repeat what I before said, that the only basis on which I have any authority to treat is, that the Railway shall become the property of the State. At the same time it is suggested, that arrangements might be come to between the Government and the Company, under which the Company, either as now constituted or in some modified shape, might continue to work the Railway on a lease for a term of years.
"If no such arrangement commends itself to the Company it will only remain for the Government to act under the terms of the existing contract, when the date for exercising the power of purchase arrives. The exact form that should be given to a working arrangement must be subject of negotiation. The essential condition, which I cannot give up, is, that the prospective share in the profits of the Railway, which a working company shall receive, must be limited to an amount which will fairly represent the remuneration to which they would be entitled for managing the business. I am at present disposed to estimate this as follows:—
"The capital represented by the whole concern being taken at 30 millions, the Government might be expected to share on 25 millions, and would leave 5 millions as the sum on which the Company would share in the division of the profits.
"The five millions in question might be contributed, either as a new subscription of debenture capital, or might be transferred from the amount which the Government will have to pay the Company, as purchase-money, on the termination of the existing contract.
"If such a basis were accepted for discussion, it would, I think, not be difficult to come to an understanding, as to the principles on which the existing shareholders should be paid, on the transfer of the Railway to the Government, so as to give them the full value contemplated by the contract. It would probably simplify matters if this were disposed of quite apart from the arrangement for the future, at least provisionally.
"The question that would then arise would be whether the capital amount, which I have proposed to fix at five millions, should be subscribed as an addition to the existing capital, subject to the condition of being paid up as required from time to time, or whether it should be regarded as having been supplied by a corresponding amount of the sum payable to the shareholders, on the purchase of the Railway by the Government, leaving the future provision of capital to be met independently.
"The net profits to be divided between the Government and the Company would be the net income of the Railway, after deducting the annual sum paid by the Government, in fulfilment of the terms of the old contract and interest on the sum advanced by the Government, as guaranteed, entered with the simple interest accrued thereon, together with all interest on Debentures, not included in the payment under the old contract.
"I think that this includes all the more essential points on which to form an opinion, whether we are likely to come to an understanding as to a working arrangement for the future or the contrary.
"In any case, as Governments are proverbially slow in their action, it has already become time for us to bring our machinery into operation in connection with this question, and if you hear that this has been done, you will not be surprised, though at the same time you are not to assume that there is an intention of closing the door to an arrangement with you, on a basis such as we can accept."
This undoubtedly was a most important communication. It indicated that the Government fully intended to purchase the East Indian Railway, though they did not intend to take it over absolutely, if the Company proved willing to enter into an arrangement for working the line that would meet their views.
Mr. Crawford very carefully considered this letter, and having discussed the terms with his colleagues wrote to General Strachey on the 2nd June, 1877, as follows:—
" I have carefully considered the proposals contained in your letter of the 3rd May. It may suffice for present purposes if I say that they appear to me to contain the basis of a practical working arrangement in the future."
Mr. Crawford in his pamphlet proceeds to say that the whole subject was then, or soon afterwards, submitted for the judgment of the Government of India, and further action on the part of the Board became unnecessary, until, it being made known later on in the autumn that General Strachey was about to go to India, the Board applied for and obtained the sanction of the Government to their Consulting Engineer, Mr. Rendel, proceeding to Calcutta also, in order to facilitate, by his presence on the spot, the settlement of many matters affecting the Railway that were likely to come under discussion.
The reply of the Government of India to the reference of Lord Salisbury having been received, Mr. Crawford was invited by Sir Louis Malet, the Under Secretary of State, on the 16th July, 1878, to call at the India Office, and on doing so found that he had been entrusted by Lord Cranbrook (who had taken the place of Lord Salisbury as Secretary of State) with the negotiations.
Frequent communications followed, in the course of which the whole matter was fully discussed, and ultimately Mr. Crawford met in the room of Sir Louis Mallet at the India Office, Sir John Strachey, the Finance Minister in India, Colonel Williams, the Under Secretary in the Department of Public Works at Calcutta, Mr. Cassells of the Council, Mr. Danvers, the Government Director of Guaranteed Railways, and Mr. Waterfield, the Financial Secretary. This meeting led to still further discussion, and finally an official letter was addressed to Mr. Crawford, as Chairman of the Board, which determined the arrangements subsequently agreed to.
It is unnecessary to trace further the history of these transactions, recorded as they are in the published proceedings of the Company and in the passage of the Bill through Parliament. Nor is it necessary to refer to the measures taken by the Board to carry the provisions of the " Purchase Act " into effect. Enough has been said to chew the course taken up by preliminary negotiations; what followed is too well known to be detailed here.
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