[PDF] Railways in Colonial India: An Economic Achievement?

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RailwaysinColonialIndia: AnEco nomicAchievement?

DanBogartand Latika Chaudhary

August2011

1Introduction

Railwayswerethemostimpor tantinfrastru cturedevelop mentinIn diafrom1850to1947.

Theywerei nter-connect edwithallaspectsofIndiansociety.Intermsofthe economy,railwaysplayedamajorro leinintegratingmark etsa ndincreasingtrade.Domesticand

internationaleconomictrendsshapedthepa ceofrailwayconstructio na ndthedemandfor theimport anttra ffi cflo wstothepor ts.In termsofpo litics,railwayssh apedth efinances

ofth ecolonialgovern mentandnativest ates.Atthesametime,Indianpol iticalin stitutionsinfluencedrailwayownershipan dpolicy,whichinturninfl uencedrailwayperformanc e.As

thetw entiethcenturyprogressed,railways becameaforce forindependenceanddemocracy . Inthis chapterwefo cusonthedevelopmentandor ganizationofth enetwork, thet rends inrai lwayperformance,thee ff

ectsofownersh ipand regulatorypolicies,andt heimpacto frailwaysontheIndianecono my.Abroa derhistorica landsocialsciencea nalysisofIndian

railwaysisbeyondthescop eof thechapter.Forsuchan approa ch,wedirectthereaderto Kerr(2007) .Wemakeseveralgenera lpoint sbelow.First ,theGovernmentofIndia hada stronginfluenceon railway sfromthe beginning,buttheGovernmen t'sroleincreased over

time.Ra ilwayswerepartiallynationalizedbetw een1880 and1908asthe GovernmentofIndiaassumedamajorityowners hi pstakeintheformerguaran teedrailwaycompanies.Comp lete

nationalizationoccurredbetween1924a nd1947as thecolonialgovernmen tassumedfull controloverop erations.Second,theperformanceofIndianrailwa yscanbeclassifiedin to

twoperio ds:pre-1920andpost-1920 .Therewasatrendtohighero utput,pro ductivity,andprofitsbetween1850 and1919,butafter1920 therewasalev elingoff.Fa resandfreight

chargesexhibitsimilar patterns,decliningfr om1850to1919andthenr isingsomewhatuntil

1940.Third,divi dendguarantees wereakeyfeatureoftheearl yeraofprivateownership.Wear guethatguarante esweakenedi ncentivestolowercosts,butthey alsoencouragedrapid

railwaydevelopment.We alsoreviewtherelationshipbetweenGo vernme ntofIndiaown - ershipandoperating e ffi ciency.Perhapssurpris inglythereisevidence thatstateownership1 reducedoperationalco sts.Thefinalthemeconcernstheeffectofrail wayson marketintegra- tionandnatio nalincome .Thereisclearevidencetha trailwaysincreasedma rketintegra tion andraised incomes,butthemag nitudeofthee ff ectandth eprecisem echanism sarestill indoub t.Thereisalargerqu estionaswel l,coul dra ilwayshavedonemor etoaidIndian economicdevelopmen t?

2DevelopmentoftheNetwork

Beforethear rivalofrailw ays,theIndiantransportat ionnetw orkwaspoor.Roadswerefew andpoorly constructedwithman ybeinginaccessibleinthemonsoons. Watertran sportation waslimi tedtothecoastandtheI ndusan dGangarive rsystems,bothi mportantc ommercial arteriesconnectingthe northtothewesternandeastern coastsrespectivel y.Outsideofthe greatriversyst emsortheGrandTr unkRoadconnectingCalc uttat oPeshawar ,transport costswere generallyhigh.Asaresult, marketsfor mostbulkygo odsw eresmall andregional. Onlyhighvalu etoweightlu xurygoods,lik eprint edcottontextiles,coul dreachnationalor internationalmarkets(Hurd1983). Theinit ialadvocatesfordevel opingrailwaysinIndiawereth emercanti leinterestsinLon- donandMan chester(Th orner1955).Theexpectationwa srailwayswouldlowert ransport costsandallo wEnglish merchantseasieraccess torawcottonfromIndia. Simultaneously railwayswouldopenI ndianmarketstoBritishman ufacturedproducts suchascottontex- tiles.Neitherther ailwaypromotersnorth eEastIndia Companyenvisionedmuch ofa demandforpa ssengertra ffi cat thattime.It wasashort- sightedviewbecausepa ssenger tra ffi cw ouldeventuallyb ecomeamajorsourceofrevenue.The initialdevelopmen tof the networkwasslowundert heEastIndi aCompany,but thepacedpickedu poncethe British crowntookcon trolin1858. Thefirst passengerlin emeasuring20milesopenedin1 853connecti ngtheportofBombay toThana .Subsequentcon nectionsfromtheportsofCalcutta andMadrastotheinterior openedin1854and1 856respectiv ely. Figure 1graphst otalroutemilesfrom1854to1940. Thenetw orkgrewrapidlyinthen ineteenthce ntury,especiallyinthe 1880s and1890s. Route mileageincreasedfrom9 ,308in1880to24,752in1900re presentinga naverageannual growth rateof7.5%.Th erapid paceofdevelopm entslo wedinthetwenti ethcenturyan dbythe

1920smileagegro wthaveraged1.3%peryea r.

Bythe early1900sIndiahadt hefourthlargest railnet wor kint heworld.Nonetheless, thescale ofthenetwo rkrelativetoI ndia'sp opulationwasnotasimpressiv e.Forexample, Brazil'srailnetw orkhadsixtimes asmanymilesperpersonasIndia in1910.Russia had almostthreeti mestherailmiles percapita.Within Asia,Japan hadasimilar numberofrail 2 milesper capitaasIndiain 1910,but by1940 Japa n'snetw orkexpandedmorerapidly.India wasfarahe adofChinai ntheearly1900s inlarg epartbecaus eChines eraildeve lopment wasextrao rdinarilyslow. 1 Maps1to3il lus tratet hes preadofthenetworkfrom1870to1 930.LordD alhousie envisionedtheinitialrouteastr unklines connectingtheportsofB ombay,Calcuttaa nd MadrastoDelhiint heinte riorfollowingex isting commerci alroutes.Severaldi ff erentlines traversedthealluvialplainsalongth eGang aRiver.Whilethefour majorports werewell connectedtothe interiorof thecountry ,therewerefewer interior-to-in teriorconnections. Moreover,lessdevelopedpa rtsofthecou ntry,likeinthesoutheast,ha dveryfewlinesev en aslat eas1930. TheGove rnmentofIndia(henceforthGOIfo rshort )largelydeterm inedrouteplacement, evenwhenpriva tecompan iesconstructedtheline s.Inafamousminute,ViceroyL ord Dalhousieemphasized"th eselectionofthegreattrunkline sofrailwayinI ndiamustbe1st theextent ofpoliticalandcom mercia ladvantagesthatitiscalcula tedtoa ff ord"(Khosla

1988,p.19).Heth enlaid outprojecte droute sconnecting CalcuttatoDel hitotheNo rth

WestFrontier ,BombaytocitiesintheUnited Provinces,andMadras toBomb ay.Despite thedual aimsexpressedbyDa lhousie,itappea rscommercia lviabilitydomina tedmilitary concernsatleast untilth e1870s.F orexample,accordingtoHoraceBell, aconsulting engineerfortheEastIndian ,"Theimpo rtanceoft herailway systeminIndiaformili tary purposeswasnaturally recognizedattheoutset,a ndgreatstresswas laidonthisinLord Dalhousie'sminuteof1853.B utuntiltheo utbreakofthe AfghanWar,attheendof1 878,no comprehensiveviewshadbeentakenoftheinte rconnection ofourfron tiercommunic ations, noranypr ogramlaid downforrailwayconstru ctionforpure lyormain lymilitar yobjects" (Bell1894,p.46) .Thatchangedint he1880 swhentheGOIm ergedthre erailwaysin thenorth anddecidedtoman agetheir operations.Theserailwa yswer ecollectivelyrefer red toasmi litar ylinesino ffi cialreports. Militaryandstrategicconc ernsalsoinfluencedwhic h citiesreceivedrai lwaystationsandtheplace mentofstationswithinc ities(Derbyshire2007). Followingthefaminesof1877 ,theGOIa dvocatedanagendaofpr otecti veworksincludin g certainfaminespecificl inessuchastheSout hernMahrattasystemins outhIndiaandBe ngal NagpurincentralIn dia.The railnetworkgrewmostr apidlyinthe1880sa nd1890 sfollowing therecomm endationsoftheFamineCommission. Theinit ialtrunklineswerecon structedonthest andardgaugeof5 feet6inches, which waswiderth anthestandar dgaugeof4fe et8inches employedinmuchoftheUnit edStates andBritai n.WhenIndianrailwayswere construct ed,theengineering communityinBritain favoredthebroadgaugebecauseitw asbeliev edtolo wer thecostofoperatinghigh-volume 1 Cross-countrydataonrailnetworkdevel opmentisfrom Bogart (2009)andMi tchell(1997). 3 railways(Puffert2010). Opinionschangedby the1870sandengineersbeg anadvocatingthe metrega uge(3feet3¾inches),whichwascheapert obuild.TheGO Ifavoredt hemetre gaugeforfeederl ines connecting tothemaintru nklines.Newmetregaugesystems were alsoconstru ctedsuchastheRajputanaMalwasystem inthenorthwe st.By 1900,them etre gaugelines comprised41%ofthenet workcomparedto56%onth eInd ianst andardgauge. Inyet anotherbreakofgauge ,manyofthe smallbranc hlinesconnect ingtothemain network inthet wentieth centurywereconstructedonnarrowg auges(i.e.,less than3feet). Theinit ialgaugechoiceandsub sequentbreakofg augegeneratedheat eddebates among thedi ff erentconstituen tgroups.Whileitwasrecognizedtha tabreakofgaugewasun- desirableinman yrespects, thecheaperconstructionco stsofthemetreg aug ewonout. Thelong -termeconomicimplicationso fthemixedgaugenetwork,e speciallythecostsof inter-connection,arebelievedtoha vebeensignifica nt,butmoreresearchisneeded before a definitivestatementca nbemade.

3OrganizationoftheNetwork

Thecons tructionandmanagementoftheIndianrai lnetwork involvedprivateBritishcom- panies,privateIndian companies,theGOIandI ndiannativestates .Theorganizationcan bebrok endownintofourdi ff erentphases.Int hefirstphaseupto1869, privat eBritish companiesconstructed andmanagedthe trunklinesunder apublicguaran tee.Inthe second phase,theGOIe nteredthe fieldconstructingandma nagingstaterailwa ysinthe 187 0s. Thethir dphase,beginni ngintheearly1880s ,involvedhybridpublic-priv atepar tnerships betweentheGOIasmajori tyownerof thelinesa ndpriv atecompaniesinchargeofc on- structionandop eration.Finallyin thefourthphase,theGOIb eganta kingo verrailw ay operationsbeginningin1924. Tenpri vatecompaniesincorpor atedinBritainconstructedan dmanagedtheearlytrunk lines(seema pof Indiain1 870).By1 869thereweretwo mergers,lea vingeightmajor railwaycompanies,nam elythe(1)EastIndian,(2)GreatIn dianPeninsula,(3) Eastern Bengal,(4)Bombay,Bar odaandCen tralIndia,(5)Sind,Pun jabandDelhi,(6)Madr as, (7)SouthIndia n,and(8)O udhandRohilkhand. 2

Thesecompanie sconstructedthemajor

trunkroutes connectingthepo rtstoeacho therand totheinterioronthebro adga uge. 3 2 TheGrea tSouthernofIndi aandCarnaticrailwayswerem erged in1873.TheCalc uttaandS outh- Easternrailway wasformedin1859,butthecompanysur renderedthelines totheGOIin1 868because of continuoslosses.Thislinewas eventuallymergedwithEa sternBen galwhenthelat terwasta kenoverby theGOIin1884. 3 Theonl yexceptionis theSouthIndian,whichstartedo utona standardg augebutwassubse quently convertedtoametregaugeline. 4 Privaterailwayswere organizedasjointstockco mpaniessetu pviaconcessioncontracts enteredintowiththeSec retaryofStat eforIndi aseatedin London.Thecontractswere enforcedand administeredby theGOIunder thedirectionoftheGov ernor-GeneralinIndia. Morethan90 percentofth ecompa nyshareholderswereBr itisha ndalmosta llthecapital wasraised throughequityrath erthandebt.Theshareho lderswererepresent edbyaboardof directorsinLondon,whichincl udedt heheadsofBritishcompa nieswithinte restsinIndia, retiredmemb ersoftheBritishmilitarya ndothermembers of theBritishfinancial elite. Railwaycompanieswereor ganizedasmulti-departmen talorganizations. An'agent'resident inIndi awasthegeneralm anageran dactedasa liaisontotheboardofd irectors.Theagent hiredsub-contr actorstocarryouttheconstruction(Kerr1995). Theear lycontractsshar edcommonfeatures.TheGOIdete rminedtherouteand gauge. Theyalsoh adtheauthori tytosupe rvisecons tructionandsubsequentopera tions. TheGOI gavecompaniesfr eelandanda5percentguaran teeonth ecapitalatafix edexchange rate of

1s.10dto therupee. Thecont ractswer evalidfor99years.W hilet hecompanycouldhand

overtherai lwaystothe GOIatanytimeduringth e99yea rs,theGO Icouldonl ypurcha se thecompa nyat25or50yea rs. Thegua ranteeisthemostimportantan dinfam ousfeatur eofthecontr acts.Itworked asfoll ows.Netearnings(i.e., grossear ningsminusworkingexpens es)werepaidintothe treasuryandrebated tothecompany .Ifnetearning sa sapro portionofcapitaloutlayyielded lessthan theguaranteedreturn of5 percentinanyyear,th eGov ernmentcomp ensatedthe companythedi ff erenceupto5percen t.Such guara nte epaymentsweretreatedasd ebt. Whenann ualnetearningsexceededthegua ranteed level,thecompanywa srequired torepay anypastguar anteepay mentsbytransferring halfoftheirsurplusprofitsover5 percentto theGovern ment.Afterallpastguaranteepaymen tswerepaido ff ,th ecompany receivedthe entiresurplusprofits(Bell1894). TheIndi anexperiencewithgua ranteeswasmixed.TheGOIhadtoma kesubstan tial payoutsduringtheconst ructionphase.Const ructionco stsontheearlylinesexceededex- pectationsandcostalmost20,0 00poundsp ermilecompar edtotheinitialest imateof12,000 pounds.Theearlylineswe reals ounprofitablefor severaldecades (i.e.,earned lessthan5 percent)becausetra ffi cde velopedslowlyandrevenueswer emodest.Forexa mple,in18 60 netea rningsaveragedlessthan 0.9percentofcapitaloutla yg raduallyincreasingto 3percent by18 69.Hence,theGOI wasforcedtohonorth e5percentg uaranteet oshare holdersand interestpaymentstotaled almost30millionpoundsby 1869(Hurd1983).TheGOIa lsoin- curredlosseson accoun tofthe fixedexchangeratestipulatedinthecon tracts.Inthe 1860s and70s,th erupeewaswo rthnomore than1s.8dwhileth econtrac trateforguarant ee paymentswas1s.1 0dtotherupee. 5 Asregula tors,theGOIfacedseveralconstra ints.As perthecon tracts,aGOIrepresen- tative,appointed bytheSecretaryofState,satoncompa nyboards and inprinciplehadthe authoritytovetoanydecision .TheGo vernmentalso appointed aconsultingengineerto approveallconstructionandop erationalw ork.Whilestrongintheory,GOI representat ives oftenfounditdi ffi culttoimplem entth eirpreferredpolicies.Accor dingtoThorner,"t he railwaycompanies'mendidnotw anttowaitfo rtheiro perations .Inpractice,they went ahead,didthings,an dlaterto ldtheGovernmentwhatthe yhaddone "(2001,p.84).Fe w GOIo ffi cialshadanyprac ticalkno wledgeabou tconstructingandoperatingr ailways.In contrast,thecompanieshadmo reexperi encedandtechnicallysophist icatedwor kers.The subordinateauthorityoftheGOItoth eSecretaryofStatealsolimit edthe irability toe ff ec- tivelyregulate.Pri vatecompaniesappealedtothe SecretaryofStatewh enevertheyopposed apo licychangeinitiat edbytheGOIandtheS ecretarywouldoftensidewitht hepriv ate companies.In the1860s,for example,theGOI pressedfora mergeramongthe private rail- waysinsouthe rnIndi a.TheMadrasrailwaycompany refusedandwassucc essful ingetting theSecretary todefeatthemerg er(San yal1930 ,p.6 3). 4 The'de alof1869'provid esanot herimportantex ampleofthetensionsbetwe entheGOI andtheS ecretaryofState. Withoutconsultingt heGOI, theSecretaryrenegoti atedcontracts withthree ofthefourbigpri vater ailways.Co mpanydebtson accounto fpastguarantee paymentswereclearedinexc hangefor5 0percento fsurplus netprofitsabovetheguara ntee fromthatpoin tforward.The EastIndianRailwa yrefusedthedeal,butthet heGrea t IndianPeninsula,t heBombay,Baroda,andCentralIndi a,andtheMa drasrailwaysaccepted theo ff er.TheSecr etarya lsowaivedtheGOI'srighttopu rchasethera ilwaysatthe25 th anniversary.Unsurprisingly,the GOIopposedtherenegotiationbecauseitforgaveinterest debtsjusta spriva tecompani eswerebeginningto earnprofitsabove5percent.But,the SecretaryofStaterenegotiat edthec ontractswithout theGOI'sinput. Theina bilityofprivatecompaniesto genera te5percentreturnsush eredinawaveof publicprovisio ninthesecondphaseof railwa ydevelo pmentbetw een1869a nd1882. Worried aboutpaying interestguaranteesintothe indefinitefuture,o ffi cialopini oninIndiaturned againstprivateprovis ionandinfavorofpubli cprovision.SirJohnLawrence, Governor- Generalfrom1864to1869 ,madethefol lowingstateme ntabo utprivateprovis ionin1869 andsetthe stageforp ublicpro vision:"TheGover nmentofI ndiahasforseveraly earsbeen strivingtoinducecapital iststo undertakeconstruc tionofrailwaysinIndiaattheirownri sk, andonthe irresp onsibilitywitha minimumofGovernmentinterference.Buttheatt empt 4 Anotherexamplerelates toaproposalbyth eGovernmentin1885to create a'cle aringhouse'tosettle inter-railwaydisputesandsecureunificati onandsimplificationofrat esandwork ing.Italsofailedbe cause ofopp ositionfromprivatecompan ies(Sanyal1930, p.181). 6 hasentirelyfa iled,andithasbecome obviousthat nocapitalca nbe obtainedforsuc h undertakingsotherwisethanunderaguara nteeofinterest,fullyequ altothatwhich the Governmentwouldhavetopayifitb orrowedonitsowna ccount."

LordLawrence' sviewbecameo

ffi cialpolicyin the1870s.TheGOIcon struct edand operatedrailwaylinesusin gborrowedcapital.Non ewcontractswer esignedwithpriva te companiesotherthanafewmino rextensions.Priv atecompanie sown edandoper atedtrunk lines,whilethestate ownedandoper atedauxil iarylinesmanyo fwhichbrokefr omthe standardgaugeto thesmallerm etregaugeb ecauseoftheir low erconstructioncosts. TheGOIr ailwayco nstructionphasewassh ortlived.Theeconomicdepressionofthe

1870scoupledwith thewarinAfghanistani ncreasedt heGOI'sb orrowingco ststur ningthe

tideagainst stateprovision.Moreove r,severefamine sin1877furtherunderminedtheca use ofstat erailways.Thesub sequentFamineCommissionreco mmend edarapidextension ofrai lways,whichthestatewasunabl etoachievebe causeofth eannualconstra intson governmentborrowing.Advocateso fprivateprovisioncapitaliz edontheGovernment's economicwoesandwontheir battlein1879 whentheSec retaryof Statecalledfora nend tothee raofstate ownedando perate drailways. Inthet hirdphase between1880and 1924,theGovernm entassumedgreaterowne rship overrailways .Amongtheformerguaranteedc ompanies,theEas tIndianwa sthefirstwhose concessioncontract reachedits25 th anniversaryin1879.Asthedateappr oached,i twas unclearwhethertheGOIw ouldexerciseitsta keoveropt ion.Afte rnegotiationsbe tween thebo ardofdirectors,theGOI,and theSecretary,itw asannounced thatthe GOIwould purchasefour-fifthsofthe sharesintheEastIndianandarecon stitut edprivate company controllingtheremai ningone-fifthof theshareswouldmanagerailwayop erationsundera newconces sioncontractforaminimumof25ye arsstartingin1880.Thepro fitswould besp litbetweentheGOI andthereconstitut edcompany inproport iontothei rrespectiv e capitalshares.Thepurch asepricewasbasedonth emeanm arketvalueofthecompany' s stockintheprecedingthree years(Bell 1894,p. 66-72)and paymentsweremadeintheform ofann uities. TheGove rnmentusedasimilarprocedureto purchaseall the originalprivaterailw ay companies(eight railwaysintotal).A majoritywerebought onth e25 th yearoftheo rigina l contractin1884,1886, 1889,and1891 .Fo rtheremainder, theGOIexe rcised thepurchase optiononthe50 th year(GreatI ndianPeninsulain19 00,Bombay,Barodaa ndCentralIndia in1906 ,andMadrasin190 8).Therewa sadelayforthel astthr eerailwaysbecause ofthe renegotiateddealof1869.Infivecases,t heGOIentere dintoa greementswithdir ector sof theforme rcompaniestooperat etherailwaysaftertakeover. Thecon tracttermsweresimila r tothe revisedco ncessioncontractofth eEastIndian.InthreecasestheGov ernmentchoseto 7 operatetherailwaysdi rectlywit houtcompanyassistance.A ftertakeoverstheGovernme nt chosetooperate theEast ernBengal,Sind,Punjab andDelhi, andOudhandRohilkh and railways,buttheprecisereas onsforman agingoper ationsweredi ff erentineachcase . 5 The colonialPublicWorksDepar tmentmanagedth eGOIownedlines.S urpluseswerepaidinto thetreasury andcapitalw asprovidedthroug hannualappropria tionsfromtheGOIbudg et. Guaranteeswerecompletely eliminatedontheserailways. Guaranteesw ereretainedon thecompa nyoperatedlines,butwerelow eredto3or4percentcompa redtothe origina l guaranteesof5percent. Beginninginthe1880s,anynew railwa ylinewaso rganizedasGOIowned andprivat ely operated,similartothe fiveoriginalreconstitu tedcompani estakenoverby theGovernmen t inthe1 880 's,1890'sand1900's.But,there wasmorevariationinthecon tractualtermsof thesenewcompan ies.Forex ample,theBengalCentralreceived freeland anda5percent guaranteefor5years,whileRoh ilkhanda ndKu maonreceiveda4per centguarante eduring theconstructio nphaseandanann ualsubsidyofR s.40,000 for10years afterconstruction. 6 Underthesesche mes,theGOIgener allyownedamajorityofthec apitalwhi lethecomp anies wereentruste dwithconstructionandsubsequ entopera tions.Inexchange,thecompanies sharednetprofitswit htheGOIin proportiontotheir respectiv ecapital shares.The com- paniesraisedthene cessarycapital,whi chwasguar anteedatloweramountsandoft enfor shorterperio ds. Therewereseve ralrailwaym ergersshortlyafterthe oldguaranteedrailway sweretaken over.Forexample ,theSind ,PunjabandDelhirailwaywa smergedwit hthestateowned IndusValleyandPu njabNorthernlines tocreatet heNorthwestern railwaysystemmanaged bytheG OI.Inman ycases,these merger sbroughtlar gerailwaylinestog etherwithsmaller lines.TheGreatIndia nPeni nsularailwaymer gedwiththeIndianMid landrailwayin1901, buttheInd ianMidland railwayhadlesstha nathirdofthetra ffi cof theGr eatIndian Peninsula.Insomecases,theGO Iwoulda skthelarges ystemsmanagingthet runkrout es toalso managetheo perationsofthebrancho rfeeder linesintheirnetworkforashareof theprofits. Whilethesewere nottechnicallymergers,thea ccoun tsoftheprinciple railway systemwould oftenincludeinformationonall thesecondarylines worked byth eprinciple systemregardlessof ownership. Bythe 1900stheGOIenjoy edgreat erauthorit yt oimposemanagerialoroperat ional changeswithoutinterven tionbytheSecretar y.TheGovernmentalsohadgreaterexperi ence 5 Forexampl e,afterthetakeoverofthe Sind,PunjabandD elhi,the GOImergeditwithtwoGOIrai lways anddecide todirectlymanageo perati onsbecauseofthestrategi cmilitarylocation oftheline.Inthecase ofOud handRohilkhand, theGOIdecid edtomanageoperationsbecausetherailway hadbeenp erforming poorlyunderpriva temanagement. 6 SeeSweene y(2009)formoredetail sontheBengalCentra l. 8 withrailw aymanagementbecauseo fitsdirectinvolvementwithrailw ayconstructionand operationsincethe1870s.TheG OIorganizedregu larrailw ayconferences,intr oduci ngacode ofgener alrulesforthe workingofalll ines includingagr eementsfortheinterchangeofr oll ing stock,auniformclassificationofgoo ds,and accountingstandards. Aspecial committeemet regularlytoadoptstanda rds,arrang eexperiments,andpublish research(Bell1894 ,p.114). Inanot herdevelopment,railw ayswereseparatedfromPublicWorksandpl acedunderthe directauthorityofa newlyconstitutedRailwayBoar din19 05. Theboarddeter minedfuture railwaypolicyincludi ngextensionsofthe network,constructionofnews tatedownedlines andmanagin goperationsonexisting lines.Animportantgoalofthi sre-organizat ionwas"the improvementofrailwaymanagementswi threga rdbothtoeconomyandpu blicconvenience" (MoralandMaterial Progress1 906,p.132). Railwaysservedmanystrate gicfunctionsdurin gtheFirstWo rldWar.Themostimpor- tantwastocar rywarsupp lies. Mostmajorrepairs andrenew alswerepostponedtilltheend ofth ewar.Asaresu lt,Indianrai lwa ysar ethoughttohavebeen undercapitalizedin this period.Anotherreaso nforundercapitalizat ionwasthatthecompa nyoperate drailwayshad tosecurea pprova lfromtheGOIforincreasesincapital outlayandsuc happro valswereno t forthcoming.Therailwaybudgetwastiedt othege neralbudgetandhencec apitaloutlays forrailwa ysweresubjecttothegeneral budgetconditions. Bythe1 920sIndia nsgrewincreasi ngdissatisfiedwithBrit ishprivateop erationofGOI ownedrailways .Specifically,Indianswereun happywiththequalityofthirdclasspass enger facilities,th etreatmentofthirdclass passengers(themostimportant categoryof passeng er revenues)andtherelativ eunder-representation ofI ndiansinuppermanagemen trailwaypo- sitions.Astheoperations contra ctoftheEas tIndiancameupforrenewal,theGO Isetup vantagesofstateversuspr ivatem anagementofrai lways.TheAcworthCom mitteeReport (1921)madenumerousimportant recommendationsthat weresubsequentlyadoptedb ythe theGOI.The railwaysbud getwas separatedfromthegeneral GOIbudgetandgiven alarger measureofindependence inexchangefo rfixedannua lcon tributionstogeneralrevenues.To improvee ffi ciency,theRailwayBoa rdwasreco nstitutedwithaChiefComm issioner,Fi- nancialCommissionerand threeothermembers.TheChiefCommissi onerwasas sistedby directorsinchargeofdi ff erentoperation alcategoriessuchastra ffi can dmechani calengi- neering. Whilethe Repo rtwasunanimousinrecommendingincreases andimprovementstorailw ay finances,theCommitteedidno treachan agreementontheappropria teorganiz ationfor management.Halfthemembersrecommendeda completetransferof railw aymanagement totheG OIandtheo therhalf recommend edtransfe rringthemanage mentoftheEast Indian 9 andpossi blyGreatIndianPeninsula toIndiandomicil edprivatecompanie s.TheGOIopted forthefor merstrate gyandin1925theman agementoftheEastIndianwa stransfer redto theGOI .Overthenexttw odecades,theGOItook over opera tionsfromallthepriv ately operatedrailwaylinesast heircontractscameup. Thenationalizati onofI ndianrailways wascomp letebyIndianindependence . Unliketheearlierp eriods, laborand passengerissuescametotheforefron tinthe1920s and1930s.Anad dit ionalmemb erresponsibleforlaborissueswasappoin tedasdirector totheR ailwa yBoardin1928.Labor strikesbecamemorecommon andthe GOIpartially respondedbyo ff eringbetterdisp uteresolution,imp rovedworkingconditio ns,sickleaveand otherbenefits.Bu t,theGOIwasalsoforcedto makesignificant laborcutsdue tocal ls forretren chmentfollowingtheGreatDepression.The GOImadee ff ortstoincre aseInd ian workersamongtheu pperlevelmanagem entpositi onsandissuedord ersforcommun alrep- resentationofMuslimsandotherminor itiesi n1934.Onthepassen gerside,L ocalAdvisory Committeeswerecreatedtoincr easedialogu ebetweenthegeneralpu blican drailwayad- ministrators.Conditionsforthirdclasspas sengertravelwerepartiallyi mproved. TheGOI alsocreated aRailwayRatesAdvisor yCom mitteetoresolverated isputesbetweent raders andspecific railways.

4ThePerformanceofIndianRailways

4.1DataSo urces

Britishauthoritiescollected awealthofdataonIndianrailwa ys,evensur passingthe infor- mationcollectedforBritishra ilways.In1 859anexp erton Indianrailways,JulandDanv ers, publishedthe'R epo rttotheSecretaryofStateforIndia incouncil onrailw aysinIndia'. Itcont ainedrailwaylinedataon investment,employment, tra ffi c,earnings, andexpenses amongotheropera tionalitems.The Reportwaspublishedannuallyfrom18 59to1883and wasamaj ora chievementinterms ofdatacollection. In1884t heGov ernmentofIndiab eganpublishingthe'AdministrationReportont he RailwaysinIndia.'Itcontain edthesame railwaylinedataan dmor edetailedinformationon inputs,outputs,revenu es,andexpenses.TheAdmini strationReportwaspublished annually throughthe1920s.Itpr ovidedth emostdetailedstati stics onrailwayoperations.TheAd - ministrationReportw asreplacedbythe'Reportb ytheRailwayBo ardonIndia nRailways' andwaspu blishedan nuallyupto1947. 7

Theann ualStatisticalAbst ractssummarizemuch

ofth einformation inthesedetailedreports. 7

Thisseries continuesuptothe1 970's.

10 Historianshavebegun compilingthedatafromtheR eportsbuttheproject isstillongoing . MorrisandDudley( 1975)publ ishedthefirstaggre gateorindustry-le velseriesonIndian railwaysusingtheReports .Theylistanarray ofstatist icsontotalmiles,capital outlay, employment,passengerscarried,andgoods carried. 8

Hurd(20 07)publishedsomesimilar

seriesasMorrisandDu dleya ttherailwaysyst emlevel. Forexample,Hurd'ss eries include passengermiles(i.e.numb erof passengers carriedonemile)for17railw aysystemsfrom

1884to 1939.Wehav eext endedthe seriesonrailwaysy stemstoincludeotheroper ational

variablesincludingadetai ledaccountingofworkingexpe nse sbydepartmentandacciden ts byrail wayline(BogartandChau dhary2011a). Asisco mmonwit hanydataseries,th eReportsh avesomep roblems.Morri sandDudley (1975)arguethecap italinvestment seriesist hemostproblematic.Con structioncostsand thepurc haseofnewcapitalg oodssucha sloco motiveswereincludedinca pitaloutlay.But, capitaldidnotincludet hecostof theland,wh ichwasprovidedfreeof chargetop rivate companies.Inthe earlydecadesof railway construction,therew assome ambiguity about thetypes ofexpensescharg edagai nstcapitalversusworking expenses.Thisledtoano ffi cial minutein186 4clarifying thespecificexpensestobeenumerated ineacha ccount. Another accountingchangein1923-24created aseparatedepreciation fundto betteraccoun tfor wear-and-tearinthecapitalnumbers.Desp itesom eidiosyn crasies,thecapitalout layseries isstillrev ealingo fthebroadtrendsinca pitalcostsov ertime.W eturnnowtoadiscussion ofthep erformanc etrendsstartingwithinputslikecap italandlabor.

4.2Trendsin Inputs,Outputs, andSafety

Capitaloutlaysonall Indianrailwaysincrea sedbya factorof 32between1860and1 939 accordingtotheMorrisandDudl ey(197 5)series. Theaverageannua lgrowthrat eofcapital was4.4%o verthisperio d.Clearly,ca pitalgrewrap idly,butthereisacave at - changesin thepriceo fcapita lgoodsa renottakeninto account.Inanotherpaper, wereportestima tes ofth ecapitalstoc kforallmajorrailwa ysfrom1860to1913usinga reali nvestmen tseries. Thefigur essuggestnominalc apitaloutlayunderstat esthecapitalstockbya round15%in

1913(Bogart andChaudhary2011).Inot herwords thecapitalstockgrewbymo rethan

4.4%perye ar.

Regardlessoftheseriesem plo yedtherewas adeclineincap italinvestmentperroute milefro mthe1860s tothe1 910s.Figure2plotsrealca pitalo utlay perroutemilein1873 rupeesbetween1860a nd1939.Therelativelyh ighcapitalc ostsofthe 1860sdosuggest privatecompaniesweren otoverlyconcernedwithhighco nstructionc osts.Thats aid,a 8 Manyoftheir series excludeBurmarai lways,whichwereapa rtofcolonialIndianrai lwaysuntil1936 . 11 largenumberof technicallysophisticatedbridgeswereconstru ctedinthisp eriodthatalso increasedcostsalongwiththewi der,5foot6inch ,gauge.Therewasa generalt rendtowar ds lowercapitaloutlays inthelatenineteenthandea rlytwentiethcenturya stheGO Ibeca me thedomin antownerofthelinesandche apermetregau geline swereint roduced.Critics oftheG OIownershi pandpriv ateoperationstructureoft ensugges trailwayswereseverel y undercapitalizedinthisperio dbecausepriva tecompa niesneededGOIauthorizatio nfor capitaloutlaysthatwas notforthcoming.Follo wingtheAcwor thCommitte eReportin

1921,railwayfina nceswereseparatedfro mgeneralfiancees.Asfig ure2shows,cap italoutlays

increasedfromthe1 920s.Ita ppears thatinvestmentwasusedtoimprovethe condition ofquotesdbs_dbs45.pdfusesText_45

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