§ Order for Second Reading read.
§ THE UNDER SECRETARY OF STATE FOR INDIA (Sir JOHN GORST) (Chatham)
, in moving that the Bill be now read a second time, said, the Bill was not a Bill to allow the Secretary of State for India to enter into any new obligations; it was for the purpose of enabling him to raise money in a manner that would be economical to the Government of India. The Bill consisted of two parts—one enabling the Secretary of State to raise a sum of money for the purchase of the Oude and Rohilkund Railway, and the other enabling him to borrow a sum of money in the English market in connection with the guarantee of lines in India by the State. The Oude and Rohilkund Railway was made under contract in 1867, and the capital of that Railway was guaranteed by the State for 999 years, at the rate of 5 per cent on a capital amounting to £4,000,000. But there was a clause in the original agreement giving the Secretary of State power at the expiration of 20 years to exercise the option of purchase, and, as at the present time the Indian Government could borrow money at less than 3½ percent, it would be obviously for the interest of the Revenue of India that this option should now be exercised— 320 because it must be exercised now or not for another ten years—and, accordingly, notice had been given to the Railway Company that the line would be purchased. The terms of the contract were that it should be purchased at a sum equal to the average market value of the capital stock during the three years immediately preceding the 2nd day of August, 1887. That had been calculated and found to amount to £125 18s.0¼d. per cent. The effect of this purchase would be that the Revenues of India would be relieved to the extent of R.x. 33,295 a-year. That being the simple purpose of the first part of the Bill, there would be no opposition on the part of any Member of the House to allowing the Revenues of India to be benefited to that extent. The other portion of the Bill was not to enable the Secretary of State to make further guarantees, but to enable him to fulfil the guarantees already given to Railway Companies in a manner less onerous to the Indian Revenues. There were many Companies now in existence in India who were constructing new railways, and whose capital was guaranteed at from 3½ to 4 per cent by the Secretary of State for India. It had been suggested that, inasmuch as these Companies, even with the Secretary of State's guarantee, could frequently not borrow much under 4 percent, and, whereas the Secretary of State could borrow money in the open market at 3¼ per cent, it would be better, instead of guaranteeing the interest, for the Secretary of State to borrow money and then lend it to the Companies. That had been the view which the late Mr. Lionel Cohen had pressed on the Government in the House, and it was the principle of two previous Bills, which, unfortunately, owing to the pressure of Public Business, did not become law; and now, under the more auspicious circumstances of the present Session, an attempt was being repeated to pass this measure, which would have the effect of saving the Revenues of India. There was no intention of using the powers of the Bill for the purpose of guaranteeing any fresh Company. The House would observe also that the Secretary of State was to lay before Parliament an account of the monies raised, and there would therefore be a check as to their application. He trusted, under the circumstances, the House would agree to the 321 Motion for the second reading of the Bill.
Motion made, and Question proposed, "That the Bill be now read a second time."—(Sir John Gorst.)
§ SIR GEORGE CAMPBELL (Kirkcaldy, &c.)
said, he had no opposition to offer to the first part of the Bill, at any rate at this stage, for the purchase of the Oude and Rohilkund Railway. It would be for the Committee to consider whether the terms were satisfactory to the taxpayers of India. He avowed that it was desirable to obtain control over the railways of India, and although this was an instance in which we were paying the large premium of 26 per cent on the capital expended, he had no intention, as he had stated, of opposing the proposal then. The Notice of opposition he had placed on the Paper referred to the second part of the measure—namely, that which gave the Secretary of State power to raise any sum not exceeding £10,000,000 for constructing, extending, and equipping railways in India, and with regard to this he confessed that, after the declaration of the hon. Gentleman the Under Secretary of State for India (Sir John Gorst) that no fresh Companies would be guaranteed, his objections were to a great degree removed. His feeling was very strong against the system of guaranteeing, and it seemed to him very strange that we should constantly be buying these railways at enormous premiums, and at the same time guaranteeing others. We had bought the East India, Eastern Bengal, and Scinde and Delhi Railways, and now we were buying the Oude and Rohilkund Railway at a heavy premium, which would have to fall upon the revenues of India. With regard to the argument that they were likely to save by the system now proposed of lending money to the Railway Companies, it certainly seemed to him somewhat extraordinary. He believed the hon. Gentleman had stated that the guaranteed Companies were able to borrow money at 3½ per cent, whereas the Government could borrow at 3¼ per cent—the difference being about ¼per cent. Yet to those who made the railways we guaranteed 4 per cent plus a share of the profits. It seemed to him that if 3½ per cent was an extravagant rate, it must have been more 322 extravagant to give the Companies a guarantee of something more than 4 per cent. The recently guaranteed railways were now at a high premium, the Nagpore line being at 10, and the Indian Peninsula line at 13 premium. The consequence of the present system was that constant pressure was put upon the Government for the guaranteeing of the Railway Companies, into the pockets of the promoters of which the State put 10 or 13 per cent. He was bound to express his belief that these guarantees had been given simply under pressure of the syndicates in the London market. That pressure the Government had for years resisted, but they were attacked in every way by the newspapers which charged them with obstructing the development of the resources of India. Those articles were promoted by syndicates, and when the matter came to be analyzed it was found that they were written because the Government had refused to give guarantees which would enable them to go into the market to make the premiums at which the stock stood. He was glad the Secretary of State was now very much opposed to these guarantees being given. The hon. Gentleman the Under Secretary of State for India told the House that there would be a saving of the difference between 3½ and 3¼ per cent by lending to the Companies; but he very much doubted whether there would be such a saving. The Government ought to beware lest the result of their arrangements should be to make the railways dearer to purchase hereafter. He thought it necessary, therefore, under the circumstances, to make his protest against the idea that this money might be used at all for the purpose of guaranteeing fresh railways. With regard to the old railways, he admitted that it was desirable to raise money in the cheapest way; but it seemed to him most impolitic and unwise, situated as the Government were in India, with a great Public Works Department, to allow the railways to pass out of their hands into the hands of syndicates, in cases where those people were not willing to make them at their own risk and with their own money.
§ MR. CHILDERS (Edinburgh, S.)
said, he wished to ask the hon. Gentleman the Under Secretary of State for India a question of some importance. 323 During the Session of 1874 a most important Committee, presided over at one time by the noble Lord the First Lord of the Admiralty (Lord George Hamilton) and at another Ly the right hon. Gentleman the present Secretary of State for War (Mr. E. Stanhope), sat on the subject of Indian Railways, and the result of their inquiries was that they strongly deprecated any further guarantees of Indian Railways. He would like to know if the hon. Gentleman the Under Secretary of State could assure the House that the policy then recommended would be strictly observed?
§ SIR JOHN GORST
said, the policy recommended by the Select Committees of 1879 and 1884 had been observed as far as possible; and he was authorized to state that there was no present intention of guaranteeing any more railways in India.
§ MR. ARTHUR O'CONNOR (Donegal, E.)
said, the hon. Gentleman the Under Secretary for India would have allowed the House to suppose that the full effect of the Bill was to relieve the revenues of India of a charge which was at present onerous. That might or might not prove to be the case. But the Bill, after all, meant the addition of over £20,000,000 sterling to the fixed debt of India. Considering that India was now suffering from depreciation of the rupee, and had liabilities in respect of it, he thought there was a strong reason against this proposal. But, in addition, it was proposed to buy up the railways, because the Indian Government was liable to pay 5 per cent. That liability might or might not be very heavy at present; it depended entirely on the earnings of the railways and the proportion between gross and net revenue. Now, the hon. Gentleman the Under Secretary had not given the House any information as to the gross expenses or the gross or not income. If the railway paid nothing at all, the 5 per cent would be paid by the Government in its entirety. There was great danger with regard to the Oude and Rohilkund Railway that there would be the same experience with regard to it as in the case of every other railway in India—namely, that it will be found that the working expenses would bear a higher proportion to the revenue than would be at all healthy. Now, if the Government 324 bought the line, and found that they had to pay not only 5 per cent, but the amount of the guarantee for which they were liable; if they had to pay the whole of the working expenses, and had in return but a small revenue, then the loss would be not only the present £10,000,000, but an annual deficit of 5 per cent guaranteed. These points were so important that he thought the hon. Gentleman the Under Secretary of State for India ought to have laid upon the Table of the House such information in connection with them as he possessed.
§ DR. CLARK (Caithness)
said, he was very sorry that the hon. Member for Kirkcaldy (Sir George Campbell) did not move that the Bill be read that day six months. He was strongly opposed to the principle of the Bill, because at a time when the railway was beginning to pay and become a source of revenue to the Indian Government they were going to pay £125 for every £100 worth of stock. The drain for Home charges in India was at the present time so great that the country was being practically ruined, and the result was that the Government were compelled to raise the Salt Tax, which would be disastrous in its effects not only on the people of India, who could not buy enough salt for their own consumption, but upon the cattle, which would become diseased. With regard to the £10,000,000 asked for, he did not think that this sum ought to be added to the debt of India, because its effect would be to increase the Indian charges. For these reasons he should move that the Bill be read that day six months.
§ It being Twelve of the clock the Debate stood adjourned.
§ Debate to be resumed To-morrow.