to be sold to the government on stipulated
The two most controversial features of the arrangement were the
ownership of railways by private companies and the guarantee by the
government of a minimum return on their capital, especially the latter.
Second Phase (1869–82)
In the second phase, both the Home and Indian Governments accepted the
policy of state construction. In his Minute of 1869, John Lawrence strongly
recommended state construction and ownership of railways. Progress
however was by no means rapid. Thus between 1869–91 the mileage added
through government agency totalled 3,297 only. But the state proved as good
an agent as the companies in construction and administration, sometimes
The first of the old guaranteed railways to be purchased was the East
Indian Railway in 1879. So far as new lines were concerned, their
commitment as well as financing was under-written by the state for several
years after 1869. By the end of 1879, 6,128 miles of railways had been
constructed by various companies as against 2,175 by the state.
Third Phase (1882–1924)
As the existing companies were refusing to raise the requisite additional
capital for constructing urgently needed new lines, the central government
had to figure out alternative sources. It undertook construction of branch and
feeder lines, seemingly unremunerative, with the provincial governments
holding out guarantees against loss. A modified guarantee system’ thus
operated during the years 1882–1924. Both government as well as non-
government agencies were to undertake construction; the government was to
concentrate only on strategic lines or those demanded for purposes of famine
relief or other urgent needs.
Besides, the Indian states, district boards and other local authorities were
actively encouraged to finance, construct and operate railway lines to serve
their areas, either directly or through some other agency.
By March 1923 the total mileage of railways in India stood at 37,618 of
which more than 66 per cent was owned by the government, its subordinate
agencies and the Indian states,