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PUBLIC RECORD OFFICE

Reference :-

TLC.O. 882

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favourable for the operation of the planting interest will run but too great a chance of gradual abandonment.

7. It will be found that the division and difference of opinion as to the proposed extension to which Mr. Stanhope refers, relates very much more to the mode in which that extension shall be prosecuted than to the necessity for the extension itself. The most prominent opponents of extension on the existing gauge profess themselves to be as eager as any one else to extend the line; and it is a remarkable testimony to the prevalence of the desire for extension, that even the few people who may be supposed really to regard any present prolongation of the existing line with disfavour, utterly repudiate such a supposition. Had Mr. Stanhope been still in office, I should have felt inclined respectfully to request from him some explanation of the significance in his mind of the words "the native interest." The interests of the natives are in almost every case local and sectional. I know of no general "native interest" common at once to Jaffna and to Galle. As regards the inhabitants of the northern and southern extremities of the Island, their wishes, so far as railway matters are concerned, are naturally to divert railway extension in their own direction. The wishes of the people of the provinces chiefly interested may, I think, be gathered from the petition of the 15,000 landholders, enclosed in my Despatch, No. 351, of the 16th September 1886,* and from the proceedings of the public meeting held at Badulla in the course of last year.

Mr. Stanhope remarks on the fact that the Railway Commission had on it no Native member. I find that since 1872 there have been four Railway Commissions, and that upon none of them has a Native sat. My instructions in the present case were, mutatis mutandis, to reappoint the members of the last previous Commission, naming the same individuals, if they were still in the Island, and those holding the same positions as had been filled by those now absent.

8. Mr. Secretary Stanhope partly misapprehends my argument drawn from the indisposition of the Legislative Council to sanction expenditure which may render it more difficult to contract a railway loan. am, of course, aware that under the

present constitution of Ceylon, Her Majesty's Government can command a sufficient number of votes in the Legislative Council to insure the adoption of any measure whatever; but this is a power which is not resorted to without grave reluctance, and only when Imperial interests of a serious nature are at stake. Mr. Stanhope is quite in error in supposing that the two members of Council to whom he refers, and who desire the adoption of a narrow gauge of railway, would not, equally with their colleagues, object to incur expenditure which would render extension itself on any gauge more difficult to effect. The gentlemen referred to have over and over again professed that they, equally with the Government, desire extension; and if it is expected to find them indifferent in this respect, it is a mistake. Her Majesty'a Government, as I bave already said, is not likely to force any measure upon the Council, except where Imperial interests are concerned. Least of all is it likely to do so on a question of expenditure, and, if left to itself, the Legislative Council will, I fear, reject, on account of their possible interference with a future loan, many useful schemes of local improvement. I am almost certain this will be the case with regard to irrigation works, the steady prosecution of which throughout the whole colony is that which I myself have most closely at heart. Their abandonment, in order to devote the funds applied to them to railway purposes, is already advocated in the public press, and will only too surely commend itself to what is called European public opinion.

10. But all these considerations are, as Mr. Stanhope justly observes, subsidiary to the main issue, whether the line can be constructed without loss to the Government, and with a reasonable prospect of paying, at least, the expenses of its construction and maintenance. Mr. Stanhope decides that this cannot be expected, and assigns the following reasons for that conclusion:-

I. That the consulting engineer is of opinion that the cost of construction has been

under-estimated.

II. That the ratio between the working expenses and gross receipts adopted by the Commission is erroneous, and so gravely erroneous as to destroy all confidence in their other calculations.

III. That if a more reasonable ratio between working expenses and gross receipts be accepted (and this is fixed arbitrarily by Mr. Stanhope at 60 per cent), and if the estimated cost of construction be increased agreeably to the estimate of the consulting engineer, the receipts, even if amounting to the sum anticipated by

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the Railway Commission, would not suffice to pay the interest and sinking fund of the proposed loan.

IV. That it is doubtful whether the rates now levied on goods traffic could be lowered so much as is assumed by the Commission, and that the estimate of traffic is not sufficiently free from uncertainty.

10. I will deal with these points separately; but for the moment I will assume that the consulting engineer's estimates are correct, and that the line will cost, if depart- mentally executed, Rs. 6,500,000, or by contract, Rs. 6,843,827, and with this assump- tion, proceed to consider the charge brought against the Commission that its calculations are grossly erroneous in one particular, and untrustworthy in all others. The accusation is a singular one to prefer against some of the most acute men of business in the colony. I venture to think that it is ill-founded.

11. Mr. Secretary Stanhope observes that a ratio of 35 per cent. between working expenses and gross receipts is so clearly inadequate that it ought to have led to the detection of the grave error which had been committed in dealing with one of the most important factors in the question of the prospects of the proposed extension. With all submission, and the utmost deference, I must venture to reply that, after having, with the assistance of the members of my Executive Council, and that of some of the members of the Railway Commission, very carefully and anxiously reconsidered the matter, I am unable to perceive any grave error in the calculations of the Commis- sion, and am compelled to repeat that the estimate of working expenses prepared by it appears to me sound and reasonable, while, if any allowance is to be made for over- sanguine expectations, and the ratio of expenses to receipts increased accordingly, it, at all events, should certainly not be to the extent of nearly doubling it, as has been done in Mr. Stanhope's Despatch.

12. Mr. Stanhope assumes that the estimate of Rs. 275,000 is "solely derived from "the average rate of expense per mile throughout the whole railway system in

Ceylon, with additions for the cost of carrying the traffic over the main line."

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That assumption, however, is erroneous. The estimate of Rs. 275,000 is arrived at by applying to the Haputalé Extension the actual annual expense per mile of line on the Nanu-oya section only (with addition for cost of carrying the traffic over the main line), and this is both a fair and legitimate mode of calculation, seeing that the Haputalé Extension would be merely a continuation of the Nanu oya section, differing from it in no material point, possessing the same natural features, and worked by the same train service. This is very plainly stated in the twelfth paragraph of the Report of the Railway Commission itself, where it is said, "The amount for working expenses "is based on actual experience, and not on an estimate

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manager has taken as a guide the working expenses of the Nanu-oya section, and has added thereto a sufficient sum to cover the cost of running the extra traffic on the main line, besides providing for renewing the permanent way."

13. Had the estimate been derived "solely from the average rate of expense per "mile throughout the whole railway system of Ceylon," as Mr. Stanhope appears to have supposed, the objection," that a calculation of working expenses on the basis of a mere mileage rate prevailing on other lines differing from the proposed line in length and other essential conditions, is obviously unsound in principle," would have been a serious one; but the estimate is not so derived, and the soundness of the calculation is testified by the fact that it is based on those very conditions (exact length of line only excepted) which it is intimated by Mr. Stanhope are essential to an accurate conclusion. The difference of a few miles more or less (in this case 16 miles less) is not of material consequence in applying the proportionate mileage rate if other conditions, such as number and size of stations, and the general working, are also in proportion.

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14. In Mr. Stanhope's Despatch it is further stated that "in making, as adopting, this estimate, no consideration appears to have been given to the proportion of the expenses so calculated to the gross earnings"; and this is certainly true, the gross earnings have little bearing on the question; but every consideration has been given to the expenses which would result from the gross tonnage, which is the material point, and the fact that the calculation has produced such a "ratio between the

working expenses and gross earnings as 35 per cent." by no means proves its fallacy, seeing that the tonnage is exceptionally heavy for the section of line, and that this tonnage can be conveyed the whole length of the main line with but little additional cost, the consequence being that on the Haputalé Extension, as compared with the expenditure, credit must be given not only for the receipts from the conveyance of the traffic over that extension, but also with a small deduction for the R 4