14 SOCIAL SCIENTIST
foreign enterprise without impairing their motives (profit) was the cornerstone of the public works policy of the Government of India during the major part of the 1860's. Under this dispensation, the role of the State was restricted to grants-in-aid in the form of land, repair of existing roads, construction of new roads and earthwork on which rails may be laid, besides payment of guaranteed interest. A modified version of this policy was applied to irrigation upto 1867. The Secretary of State, Cranborne4, summed up the view generally held in London and Calcutta that the government should invest in irrigation whenever it can, but if the department is unequal to doing all that is necessary then companies should do it. The experiments with private joint-stock enterprise in irrigation was partly based on exaggerated fears about the lack of interest on the part of the London money market and rigidity of the Indian labour market.6
Nevertheless, the experience of the 'sixties and the accompanying debate brought about a shift in the accent from doctrinaire commitments to pragmatic considerations. The Madras Irrigation Company, which was given a guaranteed interest of five percent, undertook the construction of a canal from river Tunga-badra. The East India Irrigation Company which operated in Orissa was without any guarantee. Unable to face the financial strain both these companies became heavily dependent on government loans thereby degenerating into mere agents for the expends ture of money raised on the credit of the State. Consequently the government had to take over these companies,
Debate on Appropriate Railroad Policy
The guaranteed railway companies were also proving to be extremely inefficient and wasteful. There was considerable variation between the estimated cost of construction and the actuals. The estimated cost per mile of single and double lines was ^ 9,000 to ^ 15,000 respectively while the corresponding actual costs were ^ 13,000 to ^ 20,000 per mile. The interest payment was computed on such an inflated capital base. Such tendencies towards overcapitalisation understated the profit and exaggerated the losses to the detriment of the tax payers. As noted earlier it had cost the exchequer as much as Rs 520 million by way of guaranteed interest upto 1860. In the words of R C Dutt, the higher guarantee, indifference of the companies and incompetence of the government officers conspired to place a heavy burden upon the Indian tax payers.^ Informed men of public affairs began to question the utility of such wasteful experiments in private enterprise.