HC Deb 25 May 1882 vol 269 cc1596-9
SIR GEORGE CAMPBELL

asked the Secretary of State for India, Whether he has granted to the promoters of the Southern Maratta Railway Company a concession which amounts to a return to the system of absolute guarantee of a fixed interest on the capital for the whole period of concession till that capital is repaid; whether, while he has been able to borrow at three and a half per cent. the terms granted to this Company are four per cent. guaranteed for the first five years, and thereafter three and a half per cent. plus one-fourth of the net profits, with power to the Company to demand repayment of capital at the end of five years if the railway proves unprofitable; whether he is aware that these advantageous terms having been granted, the major portion of the shares are appropriated by the promoters without being offered to the public, while the remainder are offered to the public on very short notice, for one day of six hours only; and, whether the arrangements made have been made with the concurrence of the Government of India?

THE MARQUESS OF HARTINGTON

To answer the Questions clearly it is necessary to make a short statement regarding the causes which have led to the concession made to the promoters of the Southern Maratta Railway. By the recent Treaty with Portugal, the Government of India is bound to construct a Railway from the Portuguese Frontier to its own system of Railways to connect it with the Portuguese line which is being made. It was doubtful whether such a line could be made as a productive work; and the Government of India strongly urged that it should be made as part of a system embracing lines needed for the protection of the Southern Maratta country from famine. Hence the work could not be constructed under the usual rules, according to which money may be borrowed for works likely to be remunerative, while it would absorb the whole provision for protective works for nearly five years. In order, therefore, to fulfil the political and administrative obligations of the Government, it was determined to take advantage of an offer made that a Company should be formed to raise the money and to construct and work the line. The rate of interest promised to the Company was limited to 3½ per cent. being the rate at which the Government might probably raise a loan; and, in order to give the Company every inducement to be economical in first construction and in working, they were allowed one-fourth of the net receipts. It was, however, found that this was insufficient to attract investors, unless some security were given of a return of 4 per cent in the early years of the line; and, therefore, an assurance has been given that the Company shall receive, at least, 4 per cent. including their share of net receipts during the first five years. The Company may demand repayment of their capital on giving a year's notice. The Secretary of State declined to give a concession to the Company until he had reasonable assurance that the money would be subscribed; and hence one-half of the shares were taken up without being offered to the public. The general concurrence of the Government of India was obtained before the negotiations were completed, although all the details could not be communicated to them in anticipation. As compared with the system under which State Railways are usually made, the effect of the arrangement is that the money is raised by private capitalists instead of by the direct agency of the Government, and that the line will be constructed and worked without adding to the Government establishments, in return for which advantages the Government undertakes for the first five years to make up the Company's share of net receipts to ½ per cent. and to resign one-fourth of the net receipts to the Company. Should the Company claim their money back, it may become necessary to apply to Parliament for power to raise a loan for the purpose; but, in order to leave free the discretion of Parliament, power has been taken to repay the Company in India in rupees. The principal points of difference between the arrangement now made and the old guarantee system are that the Government is the sole owner of the line, so that all conflict of proprietary rights is avoided; that the Company have no inducement to spend more capital from the fact that the interest thereon is guaranteed, but, on the contrary, every incentive to economy as affording them a larger amount of net receipts; and that the Government can, after the first 25 years, at specified periods, pay off the Company by giving back the precise amount received, without any bonus for the improvement of the property. The concession, therefore, differs in several important respects from those made to the old guaranteed Companies; but it must be understood that the Government of India has come under no pledge to adopt even this limited system of guarantee as a general principle. The case was an exceptional one, partly in consequence of the liabilities incurred under the Treaty with Portugal, partly in consequence of the strong opinion of the Government of India of the necessity for protection against famine in these districts. It has been considered on its own merits, and will not necessarily form any precedent in other cases.

GENERAL SIR GEORGE BALFOUR

asked if the capital of the Company was limited or unlimited; and, in the event of its being insufficient, what measures would be taken to complete the line?

THE MARQUESS OF HARTINGTON

said, he was afraid it was impossible for him to go into the full details of the case. He had stated that the Company had not provided sufficient capital, and it became necessary for the Government to take care that the capital was sufficient.