1st. That the communication with India beyond the Isthmus of Suez
should be opened, and carried on by vessels of not less than 520-horse
power, and 1600 tons burthen.
2nd. That a communication between Suez and Calcutta should be
established the first year of the grant.
3rd. That not less than six voyages between Suez and Calcutta should
be performed, in order to entitle the Peninsular and Oriental Steam
Company to the second year’s grant.
4th. That a monthly communication between those places should be
established, to entitle the Steam Company to the third and subsequent
years’ grants.
5th. And that in case a contract should be entered into with the Steam
Company for the conveyance of Mails, the grant should cease, and merge
into such sum as might be paid for that service.
* * * * *
Such were the principal conditions of an arrangement which was
attempted to be construed into a Contract, binding the Peninsular and
Oriental Company to maintain a Monthly Mail Packet Service between
Suez and India, with vessels of 520-horse power, for five years, for
£20,000 per annum. It is, however, obvious that so far from such being
the true construction, it was perfectly optional to the Peninsular and
Oriental Company to discontinue the arrangement, and relinquish their
claim to the grant, whenever its continuance might be incompatible with
their interests.
The Company having constructed another vessel of 520-horse power
and 1800 tons, the “Bentinck,” and purchased a third new vessel, of
similar power and tonnage, the “Precursor,” considered that the time
had arrived when they might improve the postal communication with
India, upon the same principle as that upon which they had improved
the Peninsular and Mediterranean Services, namely, by combining an
important public improvement with a reduction of the public expenditure.
Finding, from a return which had a short time previously been made
by the East India Company to the House of Commons, that the cost of
conveying the India Mails between Bombay and Suez, as then performed
by that Company, with steam packets of an average power of about 200
horses each, and some of which were of inferior speed, was not less
than £110,000 per annum,--the Peninsular and Oriental Steam Company
made a proposal to the East India Company, to relieve the latter of
that Service, and to undertake it with their vessels of 520-horse power
each; and thereby effect a considerable acceleration in the transit of
the Mails--an improvement in the accommodation, and a reduction in the
charge for passengers--a greater facility for the conveyance of light
valuable goods and parcels--and a reduction of about £30,000 in the
public expenditure, inasmuch as the Peninsular and Oriental Company
offered to do the service for £80,000 per annum.
The then Court of Directors of the East India Company being opposed to
the relinquishment of the postal service between Bombay and Suez into
the hands of private enterprise this proposal was not entertained;
and, the matter having engaged the attention of her Majesty’s
Government, it was ultimately arranged that the East India Company
should be allowed to retain the Packet Service between Bombay and Suez,
and that the Peninsular and Oriental Company should submit proposals
for the establishment (under Contract with the Admiralty) of a Monthly
Mail Service between Suez, _viâ_ Ceylon, and Madras and Calcutta, with
vessels of 500 horse-power; and, in connection therewith, a monthly
communication between Ceylon, Penang, Singapore, and Hong Kong, with
vessels of 400 horse-power, thus effecting a Mail communication twice a
month with India, and a Monthly Steam Packet communication with China.
After a lengthened negotiation a Contract was effected, in virtue of
which the Peninsular and Oriental Company were to receive £115,000 per
annum, equal to about 20s. per mile, for the Suez, Ceylon, Madras, and
Calcutta Service; and £45,000 per annum, equal to about 12s. per mile,
for the Ceylon, Penang, Singapore, and China Service.
This Contract was not put up to public competition, and there are
obvious reasons to show why to have done so would have been useless,
and unjust. It would have been useless, because it was well known that
there were then no vessels in existence capable of performing such an
extensive service, on the plan proposed, except the vessels which had,
in fulfilment of the conditions of their Charter of Incorporation,
been provided by this Company expressly for the East India Steam
Communication; and it would have been unjust to the Peninsular and
Oriental Company, after they had been induced to embark so large an
amount of capital in providing ships of a description adapted to
important national objects, not to have given them the opportunity of
executing the Service on reasonable terms.
That the terms concluded upon were as reasonable and advantageous to
the public interests as could have been at that time obtained, is
sufficiently confirmed by the Report of the Parliamentary Committee.
A few facts may, however, serve to further elucidate this point.
In giving in their proposals for these Services, the Managing Directors
submitted therewith detailed estimates of the expenses and receipts,
to enable the Government to see and examine the grounds upon which the
sums required for the Mail Service were based. And it appears, by the
evidence taken before the Committee of the House of Commons, as well
as before another Committee of the House of Lords, on the Post-office
Service, (Session 1847,) that this part of the question was subjected
to a very close and rigid scrutiny at the Admiralty. Also, that an
estimate was made to ascertain what the proposed Services could be done
for by public vessels; the result of which was, that it would have cost
by such means not less than 42s. 6d. per mile, (less such returns as
might be obtained from the conveyance of passengers.)
Looking therefore, to this estimate, and the fact that the Bombay
and Suez Service, with vessels of only about 200 horse-power, was
actually costing, under the management of the East India Company, after
deducting the receipts for passage-money, at the rate of 31s. 6d. per
mile, namely, £110,000 for 70,000 miles, the rates received by the
Peninsular and Oriental Company--being about 20s. per mile for the
Suez and Calcutta Service, and 12s. per mile for the Ceylon and China
Service, or if averaged for the two Services together, about 17s. 1d.
per mile--it cannot be considered as exorbitant by any reasonable or
unbiassed mind; but it will rather be admitted that the Company in
this, as in the previous instances, are entitled to take credit for
effecting a great public improvement, at a less cost than what it
could otherwise have been obtained for.
The following evidence on this subject was given by Mr. Croker, of the
Admiralty.
* * * * *
1388. Does there appear to have been any estimate made by the Admiralty
of the expense of doing that service?--Yes.
1389. When was that made, or when was it sent to the Treasury?--It
appears to have been sent to the India Board.
1390. At what date?--On the 20th of January, 1844; the points upon
which they gave information were, “The practicability of the proposal
made by the Peninsular and Oriental Steam Navigation Company respecting
the mode of ‘effecting the accelerated transmission of the East India
Mails and Despatches between Bombay and Suez, combining therewith,
for the year 1844, a two-monthly communication with Calcutta and
Madras.’ The sufficiency of the means which the Peninsular and Oriental
Steam Navigation Company proposed to employ, and the propriety of
their demand of £80,000 per annum for performing a service which the
Admiralty understood to be that then performed by the East India
Company, namely, conveying the mails by steam vessels between Suez
and Bombay monthly; and, in addition to this, between Bombay and
Calcutta every second month.” The estimate then goes on in detail:
and “With respect to the propriety of the demand of £80,000 per annum
the Admiralty forwarded a statement from the Accountant-general of
the Navy, showing that the cost of building and equipment of the four
steam vessels required for the service, under the naval regulations
would be about £250,000, including £6,500 which the Admiralty added to
the estimate of their Accountant-general to meet additional fittings
for the necessary accommodation of passengers. The Admiralty, however,
had every reason to believe that to this estimate of the cost, &c., of
the vessels, which they considered to be absolutely necessary for the
satisfactory performance of the Mail Packet Service in the Indian seas,
the outlay of the Peninsular and Oriental Steam Navigation Company
would be increased by an additional sum of nearly £50,000, for what may
be termed the luxurious accommodation now expected by passengers. Upon
this speculation the Company, of course, subjected themselves to a risk
of loss, or corresponding advantage. With respect to the item of coals,
which was omitted in the Accountant-general’s return, the Admiralty,
in the absence of precise knowledge, estimated the cost upon the best
information they could obtain, and their Lordships considered the
Commissioners for the Affairs of India to be competent judges of the
correctness of their assumed estimate, as well as of the assumed cost
of coal depôts, coaling, and other incidental and contingent expenses.
The item of oil, tallow, &c., was also assumed, as the consumption of
these articles depended on the construction of the engine, both as to
principle and manufacture. In explanation of the differences between
the following calculations and the Accountant-general’s statement,
the Admiralty observed, that the interest of the money was not taken
into account in naval expenditure; and that 15 per cent. for wear and
tear, and depreciation of hull and machinery, had been adopted, with
six per cent. for insurance, in compliance with the suggestion of the
India Board, for the purpose of maintaining a comparative uniformity
with the estimate given in their Secretary’s letter of the 24th of
November, founded upon the Parliamentary documents supplied by the East
India Company. The investment the Admiralty were willing to admit for
the first cost and equipment of three first-class and one second-class
steam vessels, being £250,000; this capital, if dealt with as
suggested, would require an annual expenditure, for performing the Mail
Service between Bombay and Suez, in wages and victuals, of £35,000;
for coals (taken at 48s. per ton,) £29,000; for oil, tallow, &c.,
£1,500; 15 per cent. on £250,000 for wear and tear, and depreciation
of vessels and machinery, £37,000; six per cent. insurance, £15,000;
four per cent. interest on capital, £10,000; making £128,300. To this
sum of £128,000 must be added the expenses of coal depôts at Bombay,
Aden, and Suez, and the cost of coaling the vessels at these stations,
&c., which, according to the items supplied by the Parliamentary
document, ordered to be printed on 3rd July, 1843, appeared to be, for
coal depôts, £7,644; wages of mechanics and apprentices not attached
to particular vessels, expense of receiving ships, and miscellaneous
charges of the steam department, £8,594, making a total of £16,238;
thus increasing the amount of annual expenditure by upwards of £20,000,
as the Admiralty considered that at least £4,000 difference must exist
between supplying vessels of more than double the horse power and
tonnage of those of the East India Company, making an annual outlay of
£148,000 per annum for performing a distance of 70,080 miles.[4] The
result of this calculation, therefore, exhibited the comparative cost
of the Mail Service on the line between Suez and Bombay as follows: If
performed by the East India Company, in their, comparatively speaking,
small vessels, as shown by their return to Parliament, after deducting
passage-money, £108,000 per annum, which does not appear to include
the cost of coal depôts. If performed by vessels of 500-horse power,
and 1,500 tons, without deducting passage-money, £148,000 per annum.
If performed by contract, by vessels of 500-horse power, and 1,500
tons, £80,000 per annum. The Admiralty, in conclusion, observed, that
should a mail communication, as suggested by them, extending from
Suez to Calcutta, be determined on, the increase in the item of coals
(calculated at 33s. 6d. per ton) would be £15,000, and three coal
depôts, with the expense of coaling, &c., might be taken at £20,000 per
annum, in round numbers.”
1391. What is the date of that report you are reading from?--It is the
report from the Select Committee of the House of Lords, ordered to be
printed 21st June, 1847.
1392. You spoke of vessels of 1,800 tons, and vessels of 1,500 tons; do
you mean to say they were of that number each, or that there were three
vessels 600 tons each?--1,500 tons each, or 1,800 tons each, the larger
class of vessels.
1393. If I understand you, from what you have stated from that report,
the estimate of the Admiralty for the cost of their vessels, for three
first-class vessels and one second-class vessel, was £148,000?--Yes,
£148,000.
1394. That makes no allowance for any receipt from passengers?--It is
without deducting passage-money.
1395. What was the amount of passage-money deducted from the East India
Company’s account, which comes to £108,000?--That will be shown by the
Parliamentary document ordered to be printed on the 3rd of July, 1843,
I presume; It is not stated here.
No. IV.
_Contract for conveying the Bombay Branch of the India Mails
between Southampton and Alexandria._
Two Mail Communications per month with India being thus
established,--viz., that by the Peninsular and Oriental Company to
Calcutta, _viâ_ Ceylon, and that by the East India Company’s packets
between Suez and Bombay,--the Mails for the former being despatched
_viâ_ Southampton on the 20th, by the Peninsular and Oriental Company’s
vessels, to meet the same Company’s vessels plying between Suez
and India, China, &c.,--it became necessary to provide a means of
conveyance for the Bombay branch of the India Mail between Southampton
and Alexandria, which had hitherto been conveyed by the Peninsular and
Oriental Company’s vessels, and was despatched from Southampton on the
3rd of every month. The Government required, at first, a continuous
line of steam vessels, of not less than 400-horse power, to ply between
Southampton and Alexandria, similar to that conveying the Calcutta
branch of the India Mails; and the Peninsular and Oriental Company were
called upon to submit proposals for undertaking the Service on that
plan.
The Managing Directors represented that to undertake the Service upon
that plan would entail a heavy expense upon the public, inasmuch as the
expense of maintaining such a communication, by such vessels, would be
equal to the expense of the Southampton and Alexandria communication
for the Calcutta branch of the Mails, for which the public were then
paying about £30,000 per annum; while the passenger traffic, _viâ_
Bombay, would be considerably less, in consequence of the obstruction
presented to the conveyance of goods, and the high charge and
inadequate accommodation for passengers by the East India Company’s
packets. In short, that, looking to these circumstances, £40,000 per
annum would scarcely be remunerative for such an undertaking.
This plan was, therefore, abandoned; and, after some others proposed by
the Government had been also abandoned, on account of the expense, or
being otherwise found impracticable, the Managing Directors submitted a
plan and proposal for transmitting the Bombay branch of the India Mail
between Southampton and Alexandria, _viâ_ Malta, _without causing any
additional expense to the public_.
This plan was as follows:--They proposed to convey monthly between
Southampton and Malta that branch of the India Mails, by means of steam
vessels which they had recently placed for commercial traffic, to ply
between Southampton, Malta, Constantinople, and ports in the Black
Sea; and to provide a steam vessel to convey the Mails between Malta
and Alexandria, which should run in concert with these Constantinople
steamers, and the East India Company’s steamers conveying the mails
between Suez and Bombay. This plan was adopted by the Government;
and, after some negotiation, the remuneration for this Mail Service
was fixed at £15,535 per annum, or about 4s. 3d. per mile, on an
arrangement for twelve months only, as the Company wished to reserve
to themselves the option of abandoning it, should it prove seriously
unremunerative, or embarrass their commercial traffic. To meet the
expense of this Service, it was proposed to the Government to withdraw
an Admiralty packet which then formed a monthly communication between
Gibraltar and Malta; inasmuch as the steamers of this Company plying to
Constantinople, touched regularly both at Gibraltar and Malta, on their
passages out and home, and would supply the place of that packet, by
which a saving to the public would be effected of from £7,000 to £8,000
per annum. Also, that as, with the two lines of India Mail steamers per
month touching at Gibraltar, besides the Peninsular Mail steamers every
week, Gibraltar and the south of Spain would have no less than six
Mails per month, the Peninsular Mail Service might be reduced to three
times a month, or every ten days; for which the Company were willing
to make an abatement of £9100 per annum from their contract-money for
that Service. These suggestions were adopted, effecting a saving to the
public of £16,000 to £17,000 per annum; and, consequently, the monthly
conveyance of the Bombay branch of the India Mails between Southampton
and Alexandria was, by this arrangement, obtained not only free of any
additional expense to the public, but with a financial benefit to it by
an increase of the postage revenue.