Speeches & Writings
Taxation Without Legislation
The following is the full text of the speech made by Pandit Madan Mohan Malaviya at the Imperial Legislative Council on the motion on reduction of railway fares in March 1918.
Sir - I beg to move that "This Council recommend tot eh Governor-General in Council that he should be pleased to direct the Railway Board to order the withdrawal of the enhancements made during the year 1917 in the rates of the passenger fare over the Indian Railways."
It will be obvious, Sir, that my resolution confines itself to the enhancements made during the year 1917 in passenger fares. I do not refer at all to the freight tax or any other profits which have been made during the last year in addition to these which were expected. The enhancements to which my resolution rears were introduced, as I said in my speech during the first stage of the discussion on the Financial Statement, on the ground that they were necessary to discourage traveling, and I urge that it was not necessary for the attainment of that object that the rates should be enhanced as that object had been partly achieved by the curtailment of the train service, and could be further achieved by a restriction on the issue of tickes and where necessary by a return of the faces which people might have paid for tickets when they could not obtain accommodation in the trains. I do not know, Sir upon what other ground if any, the enhancements will be justified, but I submit that the reason which has so far been assigned for them certainly did not justify them. Let us now see what the result of the enhancements has been. We find from the Financial Statement that while 62 crores was estimated as the railway revenue in the budget of last year, the result proved more favourable and the revised estimate was placed at 68,25 crores; and the estimate for the next year has now been fixed at 70,50 crores. This substantial improvement occurred on almost all the principal railways and was due, it has been stated, mainly to larger receipts from the carriage of troops and military stores and from wheat and coal traffic. But the Financial Statement explains that the enhancement of rates and the withdrawal of concessions have also contributed towards the increased railway earnings of the current year. Owing to the courtesy of the Hon. Sir Robert Gillan, I hold in my hand an abstract showing passenger traffic under each class and earnings therefrom on Indian railways during the half-years ending 30th September, 1916 and 1917. According to it, as compared with the corresponding period of the previous half-year, in the half-year ending September last the third class shows a decrease of 29 million passengers or of 13.95 percent, but an increase of 59.32 lakhs equal to 6.71 percent in the earnings. Taking the whole of the passenger traffic in all the four classes, there was a decrease of 36.70 millions in the number of passengers, of which 80 percent was in the 3rd class; white tile earnings showed an increase of 61.92 lakhs, of which 95.8 percent was contributed by the 3rd class.
Now, Sir, it hardly needs saying that it is the third class passenger who contributes nearly entirely to the profits of the railways. I showed the other day that compared to the expenditure ineurred on his behalf by the railways his contributions have been more than handsome. The percentage of net earnings on capital outlay in 1915-16 and 1916-l7 was 5.99 and 6.96 per cent respectively· Considering that the normal rates of interest on loans is only 3½ or 4 per cent this average of 6.96 for all the railways was sufficiently high. But the result of the enhancements made last year has been that in the first half-year in which they were introduced 61.91 lakhs more, of which 95.8 per cent. Came from the 3rd class passenger, was taken by the railways from the pockets of the travelling public and it is important to note that though the greater portion of this sum has come to Government, as the Financial Statement shows at page 91,11 lakhs of it would go to the companies as their share of the profits earned in the first half of the current year, and of course a larger sum will go to them out of the profits of the second half of the year. This means a very substantial increase in the profits of companies owing to the enhancements effected in passenger fares. I do not see, Sir, how this can be justified; and the only right course seems to me that the enhancements ought to be discontinued in the next year. It has never been said that the enhancements were made with the object of obtaining greater revenue but a large additional revenue has as a, matter of fact resulted from them, i.e., they have inreality meant so much extra taxation which was not contemplated, This being so the matter ought in fairness to be re-examined. What was earned last year cannot be returned; but during the next year, both in view of the surplus in hand and in view of the fact that it is not necessary to discourage people from travelling to keep up these enhancements, they should be withdrawn.
Procedure Open to Objection
Sir, such is my objection to the enhancements. I have also an objection to the manner in which they were brought about. The Railway Act does not, so far as 1 can see say by whom tlie rates and fares shall be determined. Neither the Act nor the general rules made under section 47 of it containany provision as to who should fix the rates and fares for passengers. But in the contracts which have been entered into by Government with Railway companies, there is a provision for fixing the maxima and.the minima rates. For instance in the contract between the Secretary of state for India and the South Indian Railway Company, dated 21st December 1910, it is laid down that:
"The Secretary of State shall from time to time authorize maximum and minimum rates within which the Company shall be entitled to charge the public for services rendered by way of or in connection with the conveyance of passengers or goods on the undertaking and shall prescribe the several classes and descriptions of passengers and goods, to which such rates shall be respectively applicable, as well as the extent to which, within the maxima and minima so authorised, the Company may vary the said rates in respect of the distance or, weight or special conditions under which such conveyance takes place or services me rendered."
I should like to know, Sir,-I hope the Hon'ble President of the Railway Board will tell us something, of the procedure by which the variations between the maxima and minima rates are brought about. I should particularly like to know how the enhancements in question were determined. So far as the report of the Railway Board shows evidently what happened was that the Railway Board, felt that passenger traffic should be discouraged, and they held a meeting with the Agents of Railways at which "it was agreed as a general principle that fares on fast trains should be enhanced up to the existing maximum in order to-discourage, travelling with a view to avoid undue overcrowding in passenger trains consequent on the reduction in train services" and that at a subsequent meeting with the agents and traffic managers held at Delhi a general enhancement was agreed upon, and it was decided thaton all the principal broad gauge lines the third class fare should be advanced to the existing, maximum and on others, where the ordinary fares, had been only two thirds of the maximum, that it should be advanced by 25 per cent. It was also decided at the same meeting to increase the maxima of all classes to the limits mentioned, viz., from 18 and 9 to 24 and 12 pies per mile in the case of first and second class fares and from 4½ to 6 pies per mile in the case of the intermediate class fare and from 8 to 4 pies per mile in the case of third class fares respectively. I should like to know, Sir, whether, as would appear from the Report, the matter was, considered by the Railway Board only or whether the Executive Council of the Government of India also considered it and accorded their sanction to the enhancements. They evidently did not, and if this is so, it seems to me, Sir, that the procedure by which these enhancements were brought about and by which such enhancements can be brought about is open to great objection,because it seems to be in the power of the Railway Board, acting in consultation with the Agents of the Railway Companies, to impose what undoubtedly is a great deal of extra taxation on the people. I quoted the other day the opinion of Major Conway Gordon, a former Director-General of Indian State Railways to the effect that every rupee taken in excess of what the normal rate of interest on the State Debt requires constituted practically a direct extra tax on transit.
Taxation Without Consent of Executive
It cannot be right, Sir, that the Railway Board, should have the power either with or without the consent of the Executive Government, to impose a heavy extra taxation on the people, without the matter at all coming before the Legislative council and without the public who have to pay the enhanced fares baving any opportunity given them to have a say in the matter. I am strengthened in this view by the fact that as in the matter of freights also there is no provision in the Railway Act for fixing rates for goods traffic. The Government found it necessary last year to have an Act passed by this Council as a war measure. The freight (on Railway and Steam Vessel) Tax Act, No. XIII of 1917, to authorize the levy by the railways of a certain charge on goods traffic. Evidently the Government were of opinion that they could not authorize the levy of a surcharge on goods without legislation. In England there are definite provisions in the Railway and Canal Traffic Act, 1888, for a revision fo the schedule of maximum rates and charges applicable to merchandise traffic. It is provided that when a railway company proposes to revise its rates it shall submit its proposals to the Board of Trade and that the Board of Trade shall pass a provisional order on the proposals - "after hearing all parties whom the Board of trade consider to be entitled to be heard"-before them respecting the proposals. It is further provided that such a provisional order must be con- firmed by an Act of Parliament which shall be a public general Act," and the rates and charges mentioned in a Provisional Order as confIrmed by such Act, shall from and after the Act coming into operation, be the rates and charges which the railway company shall be entitled to charge and make." Thus before a Provisional Order is passed the public who are interested in it have an opportunity of having their say to whether the proposed enhancements are right and proper, and they have also such an opportunity when the matter comes up before Parliament, before any increased rates and charges can, be brought into operation. I think, Sir, that there should be some such provision in our Railway Act too. As regards the enhancements of passenger fares to which my resolution refers I am speaking without a full knowledge of what procedure was adopted in bringing them about. I hope my hon'ble friend, the President of the Railway Board, will enlighten the Council on this point. But in any event, in view of what I have said above, I would ask the Finance Member of the Government to consider whether the enhancements in question should not be withdrawn in the next year.
Reply to Official Criticism
The following is the full text of Pandit Malaviya's reply on the same resolution :-With regard, Sir, to the remarks which my hon'ble friend the Member for Commerce and Industry has made, I wish to emphasise that I do not complain of the curtailment of the train services. I recognise that in war time a curtailment of the train services is necessary. My point is that when the services were curtailed, it was not necessary to enhance the rates in order to discourage travelling with a view to prevent. overcrowding in trains. The Horrble Member himself has said that in spite of the enhancements made there has been a great deal of overcrowding, going on. That shows that the method that was adopted to remedy overcrowding could not effect that object. It was therefore unnecessary to adopt it. The means to remedy over- crowding are provided in the Railway Act and Rules According to them the number of seats which can be occupied in every compartment are, fixed. Why do you not enforce that provision? The accommodation that can be available in every train is definitely limited by law and if the Railway authorities will take the necessary trouble they would be able to see that only the proper number of persons find accommodation in every train. There has been a sore complaint going on for a long time against the overcrowding that is permitted in normal times in trains. I expect the Hon'ble Member of Commerce and Industry and other Members of Government have read the letter of Mr. Gandhi which was recently, published in the papers in that connection. It is very necessary that overcrowding in trains should be prevented, and towards this end it is necessary that strict instructions should be issued to the railway authorities to see that there is no over-crowding. But an enhancement of the passenger fares was not necessary to attain that object and it has not secured it.
The Hon'ble Member said that 30 million less of people travelled during last year. I submit that this again was not solely on account of the enhancement, but also because there were no trains available.
Then my hon'ble friend said that if the revenue were given up now, the difficulties of overcrowding which he has mentioned would arise again. I submit they would not. Try it, and you will find that the number of trains being limited the permissible accommodation in compartments being fixed, there cannot be too much of overcrowding, if you will take the necessary steps to prevent it.
The Hon'ble Member also said that India was suffering far less than the allied countries. I do not dispute that, but the extent to which India is suffering should not be underestimated. In all conscience the people have suffered and are suffering a great deal on account of the war. We certainly do not want to see them suffering more. In view of the high prices that prevail, great hardships are already being suffered by the great bulk of the people. Is it right that more should be added and unnecessarily to their sufferings by the enhancements in question? Nobody can deny, I am sure the Hon'ble Member for Commerce and Industry will not deny, that people in general are undergoing very serious hardships. It is fortunate for them that these hardships are not of the same severity as in other allied countries which are in the, thick of the war. But that does not afford any reason for adding to their discomforts and troubles in a way which is not justified by the requirements of the State. If it was necessary to raise a larger revenue, and if the matter had been taken up by Government from that point of view, I could understand it; but I submit that these enhancements were not necessary for the purpose for which they were made, viz., to discourage travelling, and I therefore submit that they should be withdrawn.
With reference to the remarks of the Hon'ble Sir Robert Gillan, I should first like to ask my hon'ble friend as to where was the necessity of raising the maxima rates. As he has himself said, except in one instance, the enhancements which have been effected, are within the maximum rates which were already in existence. I cannot see that there was any necessity for the maxima being enhanced. The enhancement has given rise to a fear that a further enhancement may be resorted to in the future on the convenient ground that the enhancements already effected have not been found to be sufficient to discourage travelling, I should like to know where the necessity for these further enhancements of the maxima rates was.
Then, Sir, as regards my objection to the procedure adopted, my hon'ble friend has said than I have raised a large constitutional issue. Undoubtedly I have It is grave constitutional issue that at a time like this, when the people are suffering various hardships on account of the war, sufferings which are not unknown and which cannot be un-known to any thinking man in this country, it shoud not be possible for the Railway Board or the Government by an executive order to add to the sufferings of the people by taking from them 61 and odd lakhs in one half-year in the shape of increased railway fares. I do not know what the total of the second half-year will be. In all probability it will be much greater. In fact I find it stated in the Statement in para 169 of the Budget that "it is anticipated that the favourable conditions of traffic which have contributed so largely to the earnings of the current year will be fully maintained in the ensuing year and that the enhancements of fares and rates introduced for the most part during 1917 will in 1918-19 affect the rates of the whole year and consequently add more to the total of receipts than they have done this year."
My friend has not answered the question that I put as to how the enhancements were actually brought about. I did not say that it was illegal. I wanted to know under what law or rule it was done. I certainly said that it was objectionable, and I wished to know whether the matter had been considered by the Government of India and the enhancements sanctioned by them. Neither of the two hon'ble members has answered me. I submit once more that the matter ought to be reconsidered, and the eahancements should be withdrawn.
The resolution was put, and lost.