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·REPORT
OF THE
POSTS AND TELEGRAPHS
ACCOUNTS ENQUIRY
COMMITTEE, 1931
SIBILA
OVERMIENT OF INDIA PRESS
1931

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·1 Live
89
90
91
.
92-93
2 Statement companing the annual contributions to the Deprecia"ton
Fund with andual expenditure on Redewals and Replacemeuts
3 Acerned Depreciation on 1st April 1925
4 Comparison of Straight Line and Sinking Fund methods of pro
ndug for Depreciation
5 Service Cards
6 Resolution of the Government of India, Public Works Department,
No 203 35 T, dated the 2nd May 1882, relating to Lucensed
Telegraph Systems
7 Profit or Loss on the working of the Department in the years
1925-25 to 1929 30 and for 1930 31 (Revised Estimate) and
1931 32 (Budget Estimate)
8 Subsidiary statement of amounts by which foss has to be reduced
or profit increased
94-95
97-99
}
100

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·CHAPTER I Introductory 1 The Posts and Telegraphs Accounts Enquiry Committee was con stituted under the orders and with the terms of reference contained in Resolution No 1012-E.A dated the 11th February 1931 of the Govern ment of India in the Department of Industries and Labour which is re produced belovy The accounts of the Indian Posts and Telegraphs Department were reorganised with effect from the 1st April 1925 in ac cordance with the principles followed in commercial accountancy so as to show inter alia the extent to which the Department as a whole imposed a burden on the general tax payer or brought in additional revenue to the Central Government whose declared policy is that the operations of the Department should be 60 regulated as to avoid in the long run either of those results The new form of the accounts attracted a considerable amount of attention and criticism more specially in the course of the last year due to the large deficit shown in the accounts of the Department for the year 1928 29 2 Before the changes in the system of accounts could be introduced it was necessary to take certain decisions on matters of funda mental importance such as for instance the method of determun ing the annual contribution to the depreciation fund the nanıl ity of the Department for interest pensionary charges etc It was recognised at the time that some of these dec sions arrived at as they were in the absence of reliable or complete data were of a tentative character and it was always intended that such decisions as well as other matters connected with these accounts should be revised as soon as sufficient experience thereof was acquired 3 In their report on the accounts of the Central Government for the year 1927 28 the Committee on Public Accounts recom mended the constitution of a small committee to consider how far the system of accounting at present in force in the Indian Posts and Telegraphs Department really provides a true picture of the commercial working of the Department and as the chief part of the enquiry to investigate the actual results of the existing provision for depreciation and to considưr in particular its adequacy having regard to replacements which are likely to be necessary and to the foundation on which the Capital account as it stands at present is built up During the consideration of the report of the Public Accounts Coir mittee by the Legislative Assembly at their session held on the 7th July 1930 an assurance was given to the House on behalf of Government that necessary action would be taten it out undue delay for the formation of the committee recor in enda by the Public Accounts Committee ·2 4. In fulfilment of that assurance the Governor General in Council is now pleased to constitute the posts and Telegraphs Accounts Enquiry Committee with the following personnel :- Sir Cowasjee Jehangir (Junior), K.C.I.E., O.B.E., M.L.A., Chairman. Mr. G. Kaula, C.I.E., I.A. & A.S., Officiating Controller of Civil Accounts. Mr. F. J. Pearsou, I.S.O., formerly Deputy Comptroller and ACcountant General, General Post Office, London. Members. IIr. S. P. Varma, M.Sc., Deputy Financial Adviser, Posts and Telegraphs. Secretary. 5. The Committee will examine the existing system of accounting in the Indian Posts and Telegraphs Department with a view to seeing how far it achieves its object of presenting a true picture of the commercial results of the Department's orking, and will submit recommendations on the subject. One of the most important matter that will call for investigation in this connection is the provision made for depreciation but the Committee's enquiry mill, of necessity, embrace a number of other matters, chief amongst which may be mentioned the assessment of the Department in respect of pensionary liability and interest charges, the allocation of the sale proceeds of unified stamps, and the credits alloved on account of services rendered to other Departments, etc." 2. Mr. F. J. Pearson arrived in Bombay on 23rd January 1931 and assumed charge of his duties on the 24th January 1931. > > Mr. G. Kaula joined Mr. Pearson on the 9th February 1931 at New Delhi. Sir Covasjee Jehangir arrived at Ner Delhi on the 15th February 1931, and the formal sittings of the Committee commenced the next day. 3. At the outset of our deliberations tre transmitted to the Press, a small communiqué, on the 21st February 1931 intimating that the Committee's investigations would, of necessity, embrace, a number of matters other than the rates for depreciation, and that chief amongst these would be the pensionary liability of the Department, interest charges, allocation of the sale proceeds of unified stamps, credits taken on account of services rendered to other Departments of Government, etc. The communiqué contained a request for such written evidence as may be tendered by the 10th March 1931 by Associations interested in the accounting system of the Indian Posts and Telegraphs Department.

·3 We also addressed a circular letter on the same lines to the various Chambers of Commerce, and other commercial bodies, and to certam Honourable Members of the Council of State and the Legislative Assembly who had, in the past evinced special interest in the accounts of the Indian Posts and Telegraphs Department 4 We held forty seren meetings, and recorded the evidence of a Dusaber of witnesses official and non official 5 The following is a list of the witnesses examined 1 Mr H A. Sams, CIE,ICS, Director General of Posts and Telegraphs 2 Mr FV Leake, General Manager for India, Messrs The British Insulated Cable Company, Ltd, Calcutta. 3 Mr W H Thompson, General Manager, Bengal Telephone Corporation, Ltd, Calcutta 4 Sir Hugh Coche, Kt, ML.A, Bessrs Fergusson and Co, Bombay 5 Mr AC Banerjee, Chief Engineer, Posts and Telegraphs 6 BIr ML Pasricha, CIE, Deputy Director General, Telegraphs 7 Mr J Farley, Director, Telegraph Engineering Northern Circle 8 Mr RS Purssell, OBE, Depaty Chief Engineer, Telegraphs 9 Mr G A. Hopkins, Postmaster General Bihar and Orissa Circle 10 Mr J N Mnkerji, OBE, Electrical Engineer in Chief 11 Br FC Alfrey, Divisional Engineer, Telegraphs 12 Mr N Mukerji MA BL, AIA, Actuary to the Government of India 13 Mr MR Coburn, OBE, Financial Adviser, Posts and Telegraphs ·4 14. Lt.-Col. K. A. Appleby, O.B.E., Postmaster General, Punjab and North-Western Frontier Circle. 15. Mr. P. J. Edmunds, M.A., B.Sc., Director of Wireless. 16. Mr. L. S. Vaidyanathan, M.A., F.I.A., Assistant Actuary, Oriental Government Security Life Assurance Co., Ltd., Bombay. 17. Mr. K. D. Tembe, Deputy Director General, Postal Services. 18. Mr. J. S. Pitkeathly, C.M.G., C.I.E., C.V.O., C.B.E., D.S.O., Chief Controller of Stores, Indian Stores Department. 19. Mr. A. C. Badenoch, M.A., I.C.S., Officiating Controller of Civil Accounts, formerly Accountant General, Posts and Telegraphs. 20. Mr. Jagat Prasad, NI.A., B.Sc., Accountant General, Posts and Telegraphs. 21. Mr. P. N. Mitra, Controller of Telegraph Stores, Calcutta. 22. Mr. D. Colin Campbell, C.A., Director of Commercial Audit. 23. Rai Bahadur P. N. Mukerji, M.A., M.R.A.S., F.E.Met.Soc. (London), Deputy Director General, Staff. 6. We were supplied by the Financial Adviser, Posts and Telegraphs, with a comprehensive memorandum dealing with the subject of our en« quiry. This was supplemented, when necessary, by information on specific matters supplied in compliance with enquiries addressed to the various Departments of the Government of India.

·5 CHAPTER I Accounts prior to Commercialisation wil 7 By our terms of reference, reproduced in extenso up the previous chapter, we are required to examine the existing system of accounting in the Indian Posts and Telegraphs Department with a view to seeing how far at achreves its object of presenting a true picture of the commerczel results of the Department's Torking" The form of the accounts of any undertaking depends on the character of its operations on the conditions in which its work is done and finally on the general policy governing its actitzties In order, therefore, to fulfil the obligations laid upon us, we attempt to describe briefly the various characteristics of the Indian Posts and Telegraphs Department which are reflected in its accounts 8 Under the Indian Post Office Act and the Indian Telegrap' Act the Governor General in Council has the exclusive privilege of conveying letters by post, and of establishing, maintaining and working telegraphs ithin British India, and the Indian Posts and Telegraphs Department of clie Government of India is entrusted with the exercise of this exclusive privilege of Government Actually, the Department provides facilitas for communication nnt ani v th 1.. ph Ta'ah.. of Iudian States agreements and mental organisat that together make up the international communications of the world 9 From the very n. has to be highly centralised so as to yet room has to be found for the g operation In different areas due in turn to the varying stages of economic and cultural development reached by various parts of the Indian Empire On the one band therefore, the Department has to keep abreast with the most modern developments of bighly technical sciences and on the other, it has to He cortent in some rural areas with providing a weekly service throngh 4 postman on foot 10 Again by the nature of its organisation, the Department is directly represented in the most distant and out of the way localities and so provides an agency for the discharge of various miscellaneous obligations of other Departments of the State which could be discharged directly wy the latter only at prohibituie expense ror instance at one end of the scale the Department is found selling packets of quinine ed issung licenses for the sale of salt, and at the other, it is entrusted with the management of a large Savings Banh system which is rapidly growing in the extent and volume of its operations 11 The accounting system depends on the policy governing the opera tions of the Department, and it is therefore of some advantage to our enquiry to trace the development of the policy of Government for the Trorking of the Indian Posts and Telegraphs Department Prior to 1914, th- Post Office and the Indian Telegraph Department were two independent Departments each vorbing under a separate Director General The fcondations of the present organisation of the Post Office Tere laid by the Pont Office Act (Act XVII) of 1854, according to the provisions which, ·6 the Postal Department in the whole of India was placed under the control of a Director General assisted by Postmasters General in the larger provinces, and Deputy Postmasters General, at first designated Chief Inspctors, in the less important provinces and the principal political agencies. Sinilarly, the beginnings of the Indian Telegraph Department can be traced back to 1851 or 1852. 12. The earliest declaration of policy, governing the operations of the Indian Telegraph Department, that we have come across is that contained in Resolution No. 2414, dated the 8th March 1867, published in the Supplement to the Gazette of India, dated April 6th, 1867, relevant extracts from which are given below :- “ Resolution. In the 13th and five following paragraphs of his memorandum, Colonel Glover has fully shown that the greater number of the Indian lines have been undertaken for political, and administrative purposes. Many lines which are of great value in this view would never have been constructed, and could never be maintained tere the directly remunerative character of the Government Telegraph its only object. 2. Even such lines, however, are often not wholly unremunerative in an economical point of view, in so much as they conduce to greater energy of administration and afford means of more directly controlling public expenditure. To the community also they are often of important service ; and, even though not giving a return which would justify their construction or retention as commercial undertakings, have indirectly contributed no doubt to the increasing prosperity of the country. 3. As regards those lines which might properly be regarded as conimercial lines.m-lines, that is, connecting the great centres' of commerce, Colonel Glover has also shown that it is scarcely fair to judge their remuneratire nature by a comparison with the commercial lines of England or of any European country. 4. The far greater distance between the centres of commerce in India, and the greater difficulty of maintaining the lines arising from causes connected with the nature of the country through which they pass, and of the climate, put the case tholly on a separate and special footing and make it difficult to render even such lines vers remunerative. 5. At the same time it has been, as the Officiating Director General points out, the careful study of the Government of India to avoid constructing, as far as possible, lines which do not at least pay their on torking expenses ; but as already indicated above, the importance of lines to the Government and to the public is not in any degree to be measured by the magnitude of their returns ; and the esigencies of the Public Service and Political and Military considerations must, in a large majority of instances, override all considerations of economy. Under these circumstances, and with regard to the general working and to the manner in which telegraphic communication has been introduced into India, the Governor General in Council is not disposed to consider the financial results, disclosed by Colonel Glorer's papers, as wholly unsatisfactory."

·13 The operations of the two Departments des eloped side by side with the general development of the country and by the year 1858 It became possible to regard the Post Office and the Telegraph Department as quase commercial Departments which according to Resolution No 4245, datea tbe 28th July 1688 issued by the Government of India in the De partment of Finance and Commerce are maintained for the purpose of renilemng particular services on payment made for the services rendered or for the articles supplied and the functions of which are not part of the ordinary ideas of Government or administration 14 It is a far cry from 1867 to the present times and the lapse of time is evidenced in the change of policy that has taken place in the intervil The arst public indication of the ner orientation tbat we have been able to trace is contained in a speech made by the Hon ble Sır (then Mr ) Balcolm Hailey Finance Member of the Government of India in the budget debates of the Legislative Assembly on the 10th March 1921 when he stated that' the Telegraph Department like the Postal Department is a source of revenue to the country but ne have not I can admit to the House been able hitherto to get the exact amount of net revenue which the Posts und Telegraphs Department brings us in 15 The most recent declaration of the policy of the Government in respect of the combined department is contained in the following state meni made by the Hon ble Sir Atul Chatterjee Member in charge of the Department of Industries and Labour in the Legislatne Assembly on the 121) March 1924 I entirely agree with Mr Neogy in considering that ti e Post or ce should be looi ed upon as public utility service But in the saine way as the Railways and any other organisations which are for the benefit of the general public and are looked upon as public utility services should at the same time pay their way I consider that the Post and Telegraph Department should pay its own Tray and I have the authority of my Honourable Collea rue the Finance t do not look to the Postal nue earning Depar nt Honourable friend At the same time I wish him to understand that there is no reason whatever the the Postal and Telegraph Depart ment if it is properly managed should be a burden on the tax paver It has to be remembered that the Government enjoy a aluable monopoly in the Postal and Telegraph Department and in my view tbat monopoly should be so worked as to be a source of benefit to the general tax pay er fythout being & burden on him" 16 The changes in policy have altars reacted on the system of ac coints Prior to 1st April 1914 the Post Office and Telegraphs were two separate Departments each Tith its own accounts The gross receipts of the tro Departments formed part of the rerenues of the Government of India who found all the money required for expenditure whether yorling expenses or capital A capital head of accounts was not allotted in the general scheme of Government accoonts to either Department and all <spenditure whether Capital or Working Expenses ras included under the sime major head Moreover errenditure incurred in the Public Work Department on buildings meant for the tro Departments ord under the Public Works heads of accounts A pro form ·6 > 7 ; the Postal Department in the whole of India was placed under the control of a Director General assisted by Postmasters General in the larger provinces, and Deputy Postmasters General, at first designated Chief Inspetors, in the less important provinces and the principal political agencies. Sinni. larly, the beginnings of the Indian Telegraph Department can be traced back to 1851 or 1852. 12. The earliest declaration of policy, governing the operations of the Indian Telegraph Department, that Tre have come across is that contained in Resolution No. 2414, dated the Sth March 1867, published in the Supplement to the Gazette of India, dated April 6th, 1867, relevant extracts from Thich are given belor “Resolution. In the 13th and five following paragraphs of his memorandum, Colonel Glorer has fully shoirn that the greater number of the Indian lines have been undertaken for political and administrative purposes. Many lines which are of great value in this vier would nerer have been constructed, and could nerer be maintained were the directly remunerative character of the Government Telegraph its only object. 2. Eren such lines, however, are often not holly unremunerative in an economical point of view, in so much as they conduce to greater energy of administration and afford means of more directly controlling public expenditure. To the community also they are often of important sertice ; and, even though not giving a return which would justify their construction or retention as commercial undertakings, have indirectly contributed no doubt to the increasing prosperity of the country. 3. As regards those lines which might properly be regarded as conimercial lines. lines, that is, connecting the great centres of commerce, Colonel Glover has also shown that it is scarcelyfair to judge their remunerative nature by a comparison with the commercial lines of England or of any European country. 4. The far greater distance between the centres of commerce in India, and the greater difficulty of maintaining the lines arising from causes connected with the nature of the country through Thich ther pass, and of the climate, put the case wholly on a separate and special footing and make it difficult to render gren such lines very remuneratire. 5. At the same time it has been as the Officiating Director General points out, the careful study of the Government of India to aroid constructing, as far as possible, lines which do not at least par their own trorking expenses ; but as already indicated abore, the importance of lines to the Government and to the public is not in any degree to be measured by the magnitude of their returns ; and the esigencies of the Public Service and Political and Military considerations must, in a large majority of instances, override all considerations of economy. Under these circumstances, and with regard to the general torking and to the manner in rhich telegraphic communication has been introduced into India, the Governor General in Council is not disposed to consider the financial results, disclosed by Colonel Glorer's papers, as tholly unsatisfactory."

·7 13 The operations of the two Departments developed side by side with the general development of the country, and by the year 1888, it became possible to regard the Post Office and the Telegraph Department as quasi commercial Departments which, according to Resolution No 4145, datea the 28th July 1888, issued by the Government of India in the De partment of Finance and Commerce, " are maintained for the purpose of rendlering particular seryices on payment made, for the services rendered or for the articles supplied, and the functions of which are not part of the ordinary ideas of Government or administration" 14 It is a far cry from 1867 to the present times, and the lapse of time is evidenced in the change of policy that has taken place in the interval The first public indication of the ner orientation, that we have been able to trace, is contained in a speech made by the Hon'ble Sır (then Mr ) Malcolm Hailey, Finance Member of the Government of India, in the budget debates of the Legislatise Assembly on the 10th March 1921, when he stated that “the Telegraph Department like the Postal Department is a source of revenue to the country, but we have not I can admit to the House, been able lutherto to get the exact amount of net revenue which the Posts und Telegraphs Department brings us in " 15 The most recent declaration of the policy of the Government in respect of the combined department is contained in the following state ment made by the Hon'ble Sir Atul Chatterjee, Member in charge of the Department of Industries and Labour, in the Legislative Assembly on the 12th March 1924 “I entirely agree with Mr Neogy in considering that the Post Office should be looked upon as public utility seruice But in the varie way as the Railways and any other organisations which are for the benefit of the general public and are looked upon as public utility services should at the same time pas their way, I consider that the Post and Telegraph Department should pay its own tray and I have the authority of my Honourable Colleague, tbe Finance Member, in saying that the Government do not look to the Postal and Telegraph Department as a revenue purning Department I hope this statement will satisfy my Honourable friend At the same time I wish him to understand that there 19 no reason whatever why the Postal and Telegraph Depart ment if it is properly managed should be a burden on the tas payer It has to be remembered that the Government enjoy a valuable monopoly in the Postal and Telegraph Department and in my sies, that monopoly should be so worked as to be a source of benefit to the general tas pag er without being a burden on him" 16 The changes in policy have always reacted on the system of ac Prior to 1st April 1914 the Post Office and Telegraphs were two separate Departments each with its own accounts The gross receipts of the tra Departments formed part of the retenues of the Government of India tho found all the money required for expenditure, whether worlung expenses or capital A capital bead of accounts tas not allotted, in the general scheme of Government acconnts, to esther Department, and all cependiture, Tshether Capital or Vorking Expenses pas included under the same major head Moreover, expenditure incurred in the Public Works Department on buildings meant for the two Departments tras rerorded under the Public Works heads of accounts A pro forma statement of counts ·8 the Capital Outlay in the Indian Telegraph Department was included, however, in the Telegraphis section of the Finance and Revenue Accounts of the Government of India, beginning with the year 1871-72. 17. The two Departments were combined in 1914 but the only important change then made was that the receipts and expenses of both the Departmients were shown under a single major bead in the Finance and Revenue Accounts. A statement of Capital Outlay on Telegraphs continued to be attached as an Appendix. 18. This arrangement continued until the reorganisation of the accougts made in connection with the constitutional changes consequent on the passing of the Government of India Act, 1919. The changes effected In 1921-22 were as follows (i) Two capital heads were provided for recording Capital Outlay, one outside, and the other within, the Revenue Accounts of Government. (ii) It was decided that the expenditure incurred by the Public Works Department on buildings meant for the use of the Indian Posts and Telegraphis Department should be recorded, finally, under the Capital heads mentioned above. (ii) The original Capital Outlay incurred by the Public Works Department in the past ou Posts and Telegraphs buildings was also transferred to those heads, but without any financial adjustment. (iv) Commencing with the accounts for 1921-22 Capital Outlay on Telegraphs, other than that on stores and suspense, was debited to Capital Outlay not charged to Revenue ". Outlay on the purchase of stores for Telegraphs and all Capital Outlay on Postal buildings continued however rc be charged to " Capital Outlay charged to Revenue". (v) Changes were also made in the accounts of working expenses of the Department. Interest on Capital Outlay was charged for the first time in the accounts for the year 1921-22, a separate major lead being opened for the purpose in the Revenue section of Government accounts. Superannuation allowances and pensions were debited to the Department for the first time in the accounts for the year 1923-24, while credits for work done by the Department on behalf of other Departments, like those in connection with the Savings Bank and Cash Certificates, etc., were included in the departmental accounts for the first time in 1924-25. 19. The changes described in the preceding paragraphs relate to the official accounts of the Government of India as presented annually to Parliament. In addition, pro forma statements, purporting to show the general financial position of the Post Office and of the Telegraph Department used to be prepared and included in the annual Administration Reports submitted by the heads of the separate Departments prior to 1914, and by the Director-General of Posts and Telegraphs, after that date, to the Government of India up to the year 1924-25 ; but our conclusion, reached as a result of our examination of the methods in force before the ·9 1st Apnl 1925 is that the accounts for the years ending with the financial year 1924 25 were not commercial accounts in the real and accepted sense of the term It is evident therefore that no attempt at a comparison of the profits or losses on the working of the Department after the commer cialisation with those shown in the accounts prior to that date is possible at this stage Any estimate that may therefore be prepared of the aggre. gate surplus or deficit on the working of the Department in the past 19 likely to be erroneous and misleading ·12 CHAPTER IV. Capital and Block Accounts. 23. As its name indicates, the Capital Account shows the total amount of Capital Outlay on fixed assets, such as land, buildings, plant and machinery, and of working capital in the shape of stores and capital suspense accounts. It also includes capital receipts. The term Block Account " is used to indicate "a ralued register of assets", the maintenance of which is essential to a commercial system of accounts. The total of the Block Account represents the value of fixed assets and is thus included in the Capital Account. 24. The development of the Capital Account of the Department is the eve oi" commercialisation" and thereafter has been described briefly in the preceding two chapters. It is, however, necessary to state here that although the two capital heads of accounts, “ 56—Capital Outlay not charged to Revenue” and “ 18—Capital Out were continued after 1st April 1925, the method of booking was altered substantially. All Capital Outlay in the Department including that on stores " and on works in progress” in the workshop, is initially recorced under "56–Capital Outlay not charged to Revenue”. Subsequently, the amount relating to Post Office buildings and Railway Mail vans is transferred to “ 18–Capital Outlay charged to Revenue ". This, however, does not make any difference to the finances of the Department ; as stated before interest is charged on all capital outlay. 25. A valuation of telegraph assets was made in 1872 and a valuation of the assets of the combined Department was made in the years 1924 and 1925 in connection with the commercialisation. An inventory of all assets. existing or 1st April 1925, was obtained from the officers in charge, and the assets were valued either on the basis of recorded information, or by the application of certain average costs per unit. In the sequel, a deficit was found and had to be written off. The details of the deficit are explained below. The recorded Capital Outlay at charge of the combined Department at the end of 1924-25 was :- Rs. Capital Outlay not charged to Revenue 3,40,01,064 Capital Outlay charged to Revenue 18,49,44,790 Total 21,89,45,854 As a result of the valuation, the capital of the Department was fixed at Rs. 20,20,23,566 leaving a deficit of Rs. 1,69,22,288. Subsequent investigations, chiefly in connection with buildings, reduced, by the end of 1929. 30, the amount of this deficit to Rs. 1,29,83,517 composed of the following items Rs. (a) Errors in accounting 17,44,602 (6) Value of assets which had ceased to belong to the Department 5,51,048 ·13 Rs -477 083 (c) Net transfers from Capital (d) Unexplained differences net (details given below) 1 11 64 950 Total 1 29 83 517 The details of the unexplained differences included above were as follows Decrease of Increase of Cap tal at Cap tal at charge charge Rs Rs 17 30 80 Buildings Laines and Wires pparatus and Plant Masts and Aerials 96 32 428 32 98 055 34 726 1 29 30 483 17 65 533 Met decrease of Capital Rs 1 11 64 950 26 If retrospective effect is given to these corrections which were made JL Jar1013 years since 1925 26 inclusive the net amount left at charge of the Cajital Account on 1st April 1923 would be Rs 20 59 62 337 com prising - Rs Fixed assets 18 98 99 933 Stores and Suspense 1 60 82 238 Total Deduct Receipts on Capital Account 20 59 82 171 19 634 Net Total 20 59 62 337 27 As mentioned at item (1) of paragraph 21 it was decided that the mit al amount at charge of the Block Account shoul I be the deprce ate value of existing assets as on 1st April 1925 The next stage of the valuation undertaken in the years 1924 and 1925 consisted therefore of a calculation of the depreciated value which together with the accrued depreciation or arrears in depreciation as it has been termed in the Valuation Report makes up the onginal value of the fixed assets as shown in the previous paragraph For this purpose the Chief Engineer Tele graphs fixed the expected effective lives and residual values of various classes of assets But the dificulty of the problem did not and LIIPTLPH(DUB) ·14 with this because very little information was available in the Department, as to the dates of the original construction or last reconstruction prior to 1st April 1923, of a large portion of the property. This difficulty was finally overcome, by the officer entrusted with the valuation, by estimating, for property for which reliable information was not available, an average age on 1st April 1925. This having been done the problem be. came simplc ; and the accrued depreciation was calculated by the application of the usual straight line metliod. 28. The accrued depreciation on 1st April 1925, as originally fixed in thie Valustion Report was Rs. 9,30,76,950. As a result of corrections made subsequently, the amount at the end of 1929-30 was Rs. 9,09,85,728. The capital account on 1st April 1925, as fixed in 1930, comprised the following itenis :- Rs. 1. Fixed assets. Depreciated value, as on 1st April 1925 of assets constructed to end of 1923-24 Rs. 8,84,11,268. Original cost of assets constructed during 1924-25 Rs. 1,05,02,937 9,89,14,205 II. Stores and Manufacture Suspense“-Opening balances 1,60,82,238 Total III. Deduct Receipts on Capital Account 11,49,96,443 19,834 . Net · 21,49,76,609 29. The opening balance of the Stores and Manufacture Suspense Accouut (Rs. 1,60,82,238) included in the Capital Account of the Department for 1925-26 represented the book value of the stores, etc., on 1st April 1925. No attempt was made at the time of commercialisation to determine separately the book value of obsolete and unserviceable stores held in stock aud included in the opening balance. From the Appropriation Accounts of the Department for the five years 1925-26 to 1929-30 it appears, hovyever, that a total sum of Rs. 21,64,643 has been written off during that period, by debit to Working Expenses, as the loss incurred in the disposal of unserviceable and obsolete stores. The revised estimate for 1930-31 contains a further provision of Rs. 2,55,000 for the same purpose. In addition, a sum of Rs. 5,91,000 has been debited to the Working Expenses of the Department in the three years 1927-28 to 1929-30 on account of the Writing down of the value of serviceable stores which were borne on the books at too high a rate. We understand that these writes-off have been sanctioned as a result of investigations made by a special committee appointed by Government to deal with a large accumulation of old stores. 30. We consider that the stores in stock immediately prior to coinmercialisation should have been examined, and that the value of only such stores as were serviceable should have been included in the opening ·15 balance ch the Stores Account on 1st April 1925 Similarly, stores which were serviceable should have been included only at their proper written down value We think it is unfair to burden the commercial accounts of the Department as constituted from 1st April 1925, with the abnormal loss on the disposal of a large amount of unserviceable material actum lated in the past The Department has suffered a further loss in that at has had to pay interest on this total amount of Rs 30 10 643 frou. the date of commercialisation to the various dates on which different lots of this material were disposed of or to the date when the value was written down We recommend that both the items of loss should be taken int) account i assessing the net result of the working of the Department after ronimercalcation 31 The Capital Account includes a sub head entitled “Receipts on capital accourt" intended to provide for the reduction of the capital at charge, in cases in which the sale proceeds of an asset are substantially in excess of the amount included in the Block Account in respect of that asset Sir Arthur Dickinson who was requested by Government to earn ne the propriety of this arrangement, made the following remarks “ The realised surplus over original cost less accrued depreciation resulting from the disposal of a fixed asset should be credited to a capital reserve account to which should be charged any losses due to sales of similar assets for sums less than the difference between the original cost and the amount standing to the credit of depreciation fund in respect of those assets" We agree that as a matter of correct accounting it would be preferable to have a capital reserte account so that such credits may not appear as part of the main Capital Account ·16 OEAPTER V Depreciation and Lives of Wasting Assets. :32. The question of the rates for calculating the annual depreciation of the wasting assets of the l'osts and Telegraphs Department has received specific nud prominent mention in our terms of reference, and has received a very large amount of detailed cxaininntioji at our hands. Depreciation is a true clement of cost and, in modern accountancy, a proper propertion of the capital invested in the wasting assets of an undertaking is always included in one form or another, in the cast of the products manufactured or morviers rendered. :38. There are several methods for determining the proportion of capital that sliould be set aside in cach year or other accounting perioil, but theriye lunin all one object in viour, which is to secure that by the time tlıcauset is vxpect to become arless, the capital invested in it is' recovereri from the parnings. The estimating of the period during which the asset is likely to render useful service, or the life? as the period is torined by lccountants, is therefore a matter of prime importance. If the life is mer estimated the cost per unit goes 11p, and as prices are generally competitive the accounts of the undertaking show a loss. If on the other hand the lives are over-estimated, the cost is understated and the accounts phone nr: exagerateid profil. 34. Als mentioned briore, the lives of different classes of assets used in the valution and adopted for the Depreciation Fund calculations, were fixail by the Chief Engineer, Telegraphs, on the best information then avuilable to him. They are shown in Appendix 1 attached to this report. We love ascertained that the net life of cacl class was arrived at, after anaking deductions from the estimatrd physical life, for climatic conditions, accidents, reconstructions, obsolescence and, in the case of copper wirt, even for thefts. In other words, the lives fixed were net effective lives for ench life group. 35. From the documents placed at our disposal, we also learn liiat it was intended that the estimate of lives and the working of the Depreciation Fund should be reviewed after a few years' experience had accumulatoil. The experience has been striking, and the disparity between the amounts contributed to the Depreciation Fund during the period from Ist April 1925 and the amonnts nctually spent on rencwals and replaceinents was noticed by tlic Accountant-Gencral, Posts and Telegraphs, in his Report on the Appropriation Accounts of the Department for 1927-28. The matter was discussed by the Public Accounts Committee in their sittings of 1929 and their liscussions led eventually to the appointment of our Committee. A detailed comparison between the annual contributions and the annual expenditure on renewals and replacements, in respect of various classes of assets, has been instituted in a statement supplied by the Financial Adviser, Posts and Telegraphs, reproduced as Appendix 2 to this report, and the total amounts for the six years ending 1:30-31 are as folloits : Renewals and Contributions. Replacements, Rs. Rs. Buildings 5,30,525 3,07,312 Posts 68,36,417 16,76,671 ·17 Iron wire (Telegraphs) Iron wire (Telephones) (opper wire A cumulators ilanual Exchange Automatic Exchange Subscribers Apparatus Masts and Aerials Other items I lectric Installation Cables Renewals and Contributions Replacements. his Rs 26 54 411 13 13 350 663 015 43 732 30 09 503 4 36 441 6 32 359 2 44 869 3 98 811 358 401 5 02 331 13 266 8 21 651 21 508 85 678 7910 15 96 212 348 265 4 10 141 87 503 6 57 214 2 73 519 > Total 1 87 88 331 51 62 749* NB_This is the gross expenditure on the renewal of assets of the kinds mentioned Only a part of it aggregating about Rs 13 lacs was found from the Depreciation Fund while the balance was met from interest bearing advances 36 The disparity is admittedly very large but it is necessary to mention certain considerations which must deter one from drawing any definite conclusions as to the correctness of the annual contributions on the basis of these figures The annual contribution is determined not only by the hfe span of the asset but also by the original cost Consequently even in a running concern of considerable age if there is a series of yeus in which there was a marked increase in the cost per unit of plant due to a rise in prices the contributions for depreciation during the succeedling Sears will be heavier than usual and this disparity will not disappear until the plant erected in the period of high prices has been reconstructed at the end of the life span at rates which are markedly lower if not entirely normal Aguin with assets the estimated life span of which is fully long pg 30 years for posts 24 years for iron wire and 75 years for luildings the experience of six years or even more cannot be a rehablu guide as to the correctness of the assumed Ife Lastly there is the on Siderition that the assumed life is an average figure fixed after taking into conuderation a number of factors such as climate soil accidents etc Fren in the same class of assets these factors lave varying Influe ice in determining the actual date of reconstruction Experience in other countries has shown that even in respect of a homogeneous life group of assets sulject to the same climatic and other conditions reconstru tions do not all become necessary exactly on the expiry of the life but are spread over some years before and after that date Remembering the creat rriety of conditions to which the plant of the Posts and Tele raphs ety of material a very marked eral years both before ud after the date of expiry of the life Taking these cons dera tious nto account the testimony of the figures contained in the statement is not by itself sufficient for questioning the suitability of the lirea fired by the Chief Fngineer Telegraphs 1 2 ·18 37. We accordingly decided to obtain as large a body of direct evidence as was possible from gentlemen competent to express an authoritative opinion on these matters. The names of the witnesses who appeared before us have been given else here. We examined a number of selected officers of the Department who had large experience of the plant used by the Department. In addition, the Chief Engineer, Public Works Department, New Delhi, was good enough to furnish us his views on the life of buildings through the Chief Controller of the Indian Stores Department. Lastly, we also examined two gentlemen of the commercial community engaged on business involving the manufacture and use of plant similar to that used by the Department. The unanimous opinion of all these witnesses is that the lives fixed in 1925 and used in the Valuation Report are, in the majority of cases, largely under-estimated. 38. After weighing the large body of evidence that became available to us, we have come to the same conclusion, and, except in one or two cases, our proposals involve a lengthening of the 'life' for each class of asset. The lives which we recommend and the reasons therefor are set out below, but we desire to state that the life as recommended by us is, in every case, the net effective life, fixed after taking into consideration, all the usual factors, viz., the influence of climate, soil, and atmosphere, liability to damage by accidents, storms, floods, and cyclones, and ordinary obsolescence. Moreover, they are averages' applicable to the plant in its entirety and not to a particular plant or to that in a particular area or locality. The residual values recommended by us represent percentages applicable to the original value in situ. The lives and residual values of such assets as are not dealt with specifically should, in our opinion, be Jeft unchanged at the present figures. (i) Buildings. The life of buildings varies naturally with the design, the inaterial and the climate, etc. Under the rules for allocation in force in the Department, temporary structures and buildings of small value are not included in the Block Account. Moreover, the bulk of the cost of the departmental buildings has been incurred in Presidency towns and large cities, and at the headquarters of districts where, invariably, the buildings are constructed by competent engineers and the structures are soundly designed and of good material. We also examined the register of buildings maintained by the Accountant-General, Posts and Telegraphs and obtained specific evidence from witnesses with personal knowledge who testified to the good condition and large residual life of some very old buildings which are in use at present. We recommend, after inaking allowance for obsolescence, that the net life of buildings should be fixed at 100 years, the present life being 75 years. Following the present practice we do not propose to fix any residual value. (i) Electric lights and fittings, etc. The life of these assets fixed ar present is 12 years net, with a residual value of 5 per cent. We reconmcnd a net life of 16 years with a residual value of 3 per cent. (iii) Underground cable.--The life fixed at present is 24 years with a residual value of 5 per cent. We recommend the life being increaser to 36 year's net, as an average for all classes of underground cable usca in the Department, whether laid 'solid ', or directly undergrounil. Ve Icave the residual value of 5 per cent. unchanged.

·19 por (int (W) Submarine cable -The life fired now is 12 years net without any residual value After taking into consideration the great liability OL this class of asset to damage and loss from accidents in rit(13 e rucom ud i net life of 20 years without any residual value (0) Aerial cable --The present life is 10 years with a residual valu of 5 per cent In view of the rapid deterioration to which aerial cables are subject in India we recommend that the life be left unchanged at 10 years Let but that the residual value be reduced to 3 per cent (21) Pusts (including brachets) - The Department uses three kinds of posts viz Tooden rail and galvanized tubular The number of the list vamed is very small and may be left out of consideration The present esiunatt of the life of posts is 30 years net with a residual value of 10 On the evidence before us we should be justified in inercisins the life to at least 50 years but to be on the safe side we recommarla life of 45 years net as an average for all kinds of posts We would leave the residual value unchanged at 10 per cent (ur) Copper and bronze wire --The amount of bronze wire rispl 15 very amall The life taken in the Valuation Report for both hinds of vna 27 vars with a residual value of 20 per cent As an average for the whole of India, we recommend a net life of 40 years and we would rus the residual value to 30 per cent (vu) Iron Tre Telegraph Circuits -The life prescribed at present is 21 cars with a residual value of 4 per cent As an average for the whole of India and taking into account the liability to corrosion of Wales near the sed coast we recommend a net hfe of 36 years with the old 1 st dual vlue of 4 per cent The evidence before us would have justificd ori" fixing ? Inger life but we prefer to take a cautious view (1.2) Iron Wire Telephone Circuits -The life of this class of wire is low as it is ge ierally light gauge wire The life fixed at present is 10} Tears path a residual value of 4 per cent On the evidence before us te recommend a average net life of 15 years with no change in the residual value (2) 11 11 eless masts aerials and carths ---This is composit luc group the life of masts being very much longer than that of aerials and earths The difference in life is compensated for however by the differ ence in the proportional costs of the tro components in the average wireless installation Doreover this class of plant is in the present condition of wireless telegraphy and telephony liable to rapid obsolescence 'The piesent life is 30 years with a residual value of 10 per cent Tahin, into consideration the respective lives and comparative values of the compo Itents we recommend an equited life of 15 years net for the whole group or 7 ieduction of 15 years on the present life We also recommend reducing the residual value from 10 per cent to 8 per cent (21 Manual Exchanges Priate Surtch Boards - The life fixed it I resent is 12 tears with a residual value of 5 per cent We recommund a net life of 15 years but with the same residual value (211) Engines Votors and Suitch Gears etc - The life fixed at pre sent for all kinds of this plant including those used in wireless stitions is 12 years with a residual value of 5 per cent In view of the rapid Onsolescence of wireless plant we recommend that the group should be a ·20 divided into two portions, one for wireless and another for the plant in other branches. For the former we recommend a net life of 12 years and for the latter a net life of 16 years. We recommend a residual value of 2 per cent. for either class. (rii) Automatic Exchanges.-Practically no experience of the effective life of automatic telephone plant is available. at present. The life fixed now is 20 years net with il residual value of 10 per cent. As tre desire to be conservative, we recommend a life of 25 years net with a residual value of 5 per cent. (rin) Subscribers' ipparatus.--The life fixed at present is 8 years with it residual value of 5 per cent. On the evidence before us, we feel justified in recommending a life of 10 years with a residual value oi 5 per cent. (21) Elcctric and Telegraph Instruments. The life fixed at present for this class, including plant used in wireless stations, is 12 years net with a residual value of 5 per cent. As in the case of " As in the case of “ Engines, motors and switch gears, etc.", we recommend that the group be divided into two subgroups, so that wireless instruments and apparatus may le separated from other varieties. For the former we recommend a life of 10 years without any residunl value, while for “ the electric and telegraph instruments" of other branches we recommend a life of 25 years with a residual value of 5 per cent. (irri) lccumulators.---We do not recommend a change either in the life or in the residual value of accumulators and our recommendation in favour of the present estimates applies cqually to all accumulators including those used in wireless stations. (Ivii) Workshop Plant and Machincry. The present estimate of life is 20 years and we would leave it unchanged. The residual value should be reduced from 10 per cent. to 5 per cent. (xviii) Motor I'chicles and Launches. We would leave unchanged ile lifc fixed at present, viz., 10 years with a residual value of 10 per cent. 39. Wc lave given our recommendations as to the residual values of various classes of plant in the preceding paragraph when dealing with the lives. We revert however to our recommendation to increase the residual value for copper wire from 20 per cent. to 30 per cent. Some of the witnesses have recommended the residual value being placed much higher. We are, however, impressed by the large fluctuations in the market price of new copper, which naturally controls the price that can be obtained from the sale of scrap copper, and consider that on the whole 30 per cent. is the most appropriate figure. 40. The lives and residual values recommended by us as well as thuse in use at present are given in Appendix 1 to this report.

·21 CHAPTER VI Allocation of expenditure between Renewals and Replacements and Working Expenses 41 Some of the causes of the disparity between the actual expenditrie on rer en als and replacements, and the amounts of the annual contribu tions to the Depreciation Fund, have been indicated in paragraph 36 As a result ot our proposals for the refixation of Ines, the disparity will be remedied to the extent it was due to the under estimation of the ettective lives of assets Our esamination of the matter leads us to think, however that the disparity is not due solely to the inappropriateness of the lives hitherto adopted, but also to other causes For instance, the averige amonnt spent annually on the renewal and replacement of assets in the Posts and Telegraphs Department is about 5 per cent of the original value of the plant, while in the British Post Office it is as much as 2 pri cent This may be due either to the standard of maintenance being higher in India than in Great Britain or to the Indian rules governing the allo cation of expenditure between . Working Expenses on the one hand and Renewals and Replacements' on the other, being such as to prevent ex penditure which really relates to the latter head from being debited to it 49 Tinder the allocation rules the following items of expenditure are dalited, inter alia, to 'Working Expenses (71 Cost of reconstructing a portion of a building, if Rs 1000 or less (12) Cost of replacing a motor vehicle or launch af less than Rs 10,000 (111) Cost of replacing parts of subscribers' telephone apparatus (tr) Cost of replacing internal telephone wiring in subscribers' premises if the cost is Rs 50 or less (vl Cost of replacing any other asset if the amount is Rs 250 or less (22) Expenditure on the dismantlement, shifting or re aligunrnt of lines and wres (211) Cost of replacing or renewing an asset when it is not debitable to renewals and replacements 43 Simuar limits have also been prescribed in the rules for allocation of expenditure between Capital and Revenue but we consider that the application of the same rule in allocations between a Depreciation Funa and Working Expenses vitiates the accounts to a serious degree Jt in the case of an asset, the whole cost of which was charged to Capital, only & small portion has to be replaced at a cost falling within these limits the expenditure is debited to Revenue in spite of the fact that Revenge has been toutributing to a fund created for this contingency ever siuce the original asset was erected The aggregate amount of such items in a Large undertaking will be sery large We have obtained from the Department a statement of the cost of erecting a single unit of each class of plant, and we find that the monetary limits imposed at present in respert of ren i als and reconstructions are high enough to cover the cost of erecting to quote a few examples, several new posts several spans of copper wire and several miles of iron fire ·22 44. It has been suggested to us that the imposition of these monetary limits saves the preparation of a large number of detailed estimates for petty works of reconstruction, as they can be charged to the grant for maintenance for which detailed estimates are not necessary. We do not consider this a sufficient justification for a rule which vitiates the accounts so considerably. The saving in clerical and other work involved in the preparation of estimates, can also be effected by some suitable device like that of a single omnibus estimate to cover all sucli expenditure during the year. We are strongly of the opinion, therefore, that there should be no monetary limits in the matter of expenditure debitable to renewals and replacements, and that in accordance with the practice followed on State Railways the cost of replacing complete units should be charged to the Depreciation Fund. We understand that the application of the unit' principle was considered when the rules were framed but that it was foundi impossible to define precisely what constituted a unit. We consider, however, that the difficulties should not be insuperable. 45. There is yet another way in which expenditure chargeable to renewals and replacements is being possibly debited to Working Expenses. Some officers of the Department have deposed before us that the cost of repairing damage done by storms is charged almost entirely to Working Expenses despite the fact that the liability to serious damage by floods, cyclones and storms was taken into account in fixing the normal effective life of plants. The Accountant General to whom the matter was referred has stated that the expenditure on storm repairs is allocated according to the character of the work involved irrespective of the cause. It was not possible for us, during the time at our disposal, to investigate this matter iu detail but we have no doubt as to the impropriety of dehiting the cost of replacements necessitated by storms and accidents to Working Expenses, when this contingent liability was and is definitely provided for by the annual contributions for depreciation. We recommend, therefore, that this matter should be investigated fully and necessary orders issued so as to cusure that the contribution is utilised for the purpose for which it is made 46. Thero is yet another provision in the allocation rules deserving of comment. A portion of the annual expenditure on the maintenance of lines and wires is transferred annually to the debit of the Depreciation Fund. The amount to be transferred in this manner is determined in accordance with the instructions contained in the following extract from the Posts and Telegraphs Initial Account Code, Volume II-Engineering Account Code : "110-A. Petty expenditure on replacement of posts including brackets, stays, couplings, etc., and wires including insulators, which is recorded under the head “ Repairs to Telegraplı and Telephone lines-Pure Maintenance's under " IV- Deduct Working Expenses ” is a proper charge to the head “ 56-I (1) - Renewals and Replacements of Wasting Assets ", as such replacement has the effect of prolonging the lives of the assets concerned. A portion of the expenditure hooked against “Pure maintenance charges " under Working Expenses should, therefore, be transferred annually by the Deputy Accountant-General, Posts and Telegraphs, Telegraph ·23 iure Branch Calcutta to the head " 56 I (b)-Renewals and Re placements at the rates given below TELEGRAPHS Slores --50 per cent of the gross value of stores issued to pure maintenance Cash-30 per cent of the value of stores transferr together with freight charges TELEPHONES Stores -20 per cent of the gross value of stores 139UPU to pure maintenance charges Cash --30 per cent of the value of stores transferred together with freight chrrges Of the amounts thus trinsferred to the head 56 1 (1) 30 yer cent should be allocated to Posts and the other 50 per cent to Wires--Iron and Copper--in proportion to th mileage under each The final distribution of this amor nt between the head 56 I (b) and the Depreciation Fund will be determined in accordance with the principle lail down in Article 46 of the Posts and Telegraphs Initial Aount Code Volume I In order to enable the Deputy Accountant General Pots and Telegraphs Telegraph Branch Calcutta to allocate the charges between Iron and Copper tire the Divisional Engi neers Telegraphs should furnish him early in Juni cvery year a statement showing the total wire mileage under each as it stood on the 31st March preceding' 47 It was explained that this arrangement had been authorised on the consideration that the replacement of small parts which is effected at th» cost of maintenance serses to prolong the life of the plant If as recom mended by us all expenditure incui red in renewing or replacing a'uuit asset is debited irrespective of the amount to Renewals and Replac ments' tlient may stul be we expect some necessity for continuing tl 18 practice We suggest therefore that the practice should be continued for one or two years and the matter renewed in the light of results at the changes 11 the allocation rules suggested by us ·CHAPTER VII. Accrued Depreciation. 48. IInving expressed our view of the decisions taken by Government in respect of the Block Account, and having made our recommendations for the revision of the expected life and residual value of each class of assets, we have now to consider the effect of the latter on the amount of illcrued depreciation and on the amount initially at charge of the Block account on 1st April 1925. To do this it is necessary to examine in some Metoil onc aspect of the calcnlations made in 1925. We have already stated that for a great portion of the property of the Department reliable informntion as to the date of the original construction or last reconstrucljon prior to the commercialisation, was not forthcoming at the time, and that the difficulty was overcoine by assuming in respect of each class of asset, the average expired life on 1st April 1925. 19. We have had the advantage of discussing the procedure then adopted with the oflicer who was entrusted with this duty. We have also discussed the matter with other witnesses, and they are unanimously oſ opinion that a better attempt is no more possible now thau it was thien. After careful consideration we have come to the conclusion that having regard to the complete absence of reliable information as to the date of original construction, or last reconstruction prior to 1st April 1925, in respect of a Inrge proportion of the assets of the Department, and to the fact that the effective lives of various classes of assets had been fixed by competent authorities, the method followed and the results achieved in 1925 were the best that were possible. 50. There is, however, an aspect of the matten to which we desire to drar pointed attention as it underlies the principle which we have adopted for our recalculation of accrued depreciation. In the Report on the valua. tion of the assets certain expired lives were assigned, on particular dates, to plant the exact dates of construction of which were not known. We felt doubtful of the accuracy, cven approximately, estinale of the average expired life that was possible in the conditions in which the valuation was inade. number of engineers, with experience of such matters, who appeared before us as witnesses, joined in stating that while an actual inspection of the plant and its general condition could enable an estimate being made of the residual life, or, in other words, the further period for which the property may be expected to last, it was impossible to estimate the expired lifc or age. The same view has been placed before us in another form by an expert commercial Accountant. We accept this view and reach the conclusion that the assumptions as to age, made by the officer entrusted with the valuation of the property, were really assumptions as to the residual life of the old property on 1st April 1925, but expressed in another form, and further that in fixing the age and consequently the residual life, he was influenced, as was only right and proper, by the expected life of the plant as fired by the Chief Engineer, Telegraphs. 51. Going a step further, the natural result of this conclusion is that, in cases where we have recommended a modification of the expected life, the estimates of the residual life on 1st April 1925 should also be reconuilerco. of any ·25 _ Any dis We decided however to place this problem before the Director of C'ommercial Audit, and his reply is quoted verbatim "I would suggest that depreciation over or undercharged, should under no circumstances be written back at once I would leave the estimated figure for plant as it is until the registers now in preparation are complete or nearing completion crepancy can then be sutably dealt with in the accounts 52 This view coming from the source it does has received our earnest attention In deciding the matter, we have been influenced by the con sideration that the interests of exact accounting demand the inclusion of the modifications that may be necessary as a result of the reassessment of the expected lives of different classes of plant The general lengthening of the expected life recommended by us should lead to a decrease in we arrears of depreciation or the initial opening balance of the straight line Depreciation Fund recommended by us in the next chapter If on the othe our recommendation as to the latter protes unacceptable, the decrease in arrears of depreciation will lead to a consequent increase in the Block Account and the interest chargeable thereon 53 As regards the recalculation itself, we desire to emphasise that the data available to us to day are in reality no better than those avail able to the officers entrusted with the valuation in 1925, and that the method we had to follow is also the same All that we have been able to do 18 to re assess the residual life of each class of asset on 1st April 1925 proportionately with the increase in the expected life recommended by us Having re assessed the residual life we have simply recalculated, on the straight line method, the accrued depreciation and the depreciated value on 1st April 1925, of assets of each class constructed prior to 1st apul 1924 54 The method followed may now be described in detail The original value of each class of asset was divided into two portions one represent ing the value of plant the exact date of construction of which is known and the other that of property about which reliable information is not forthcoming For the former, the accrued depreciation has been calculated hy applying the usual straight line method on the basis of the lives and residual values recommended by us In respect of the latter we re assessed the unerpired life on 1st April 1925 increasing or decreasing it as compared with that fixed in 1925 proportionately with the increase or decrease in the life span An instance will make the method clear In the " 'Twee assut t of a 1 at a fifth years TEC ultant figures for the ages on 1st April 1925 and 1st April 1906 were thus fixed at thirty six years and seventeen years, respectively, as against twenty four Fears and five years taken in the Valuation Report 55 For those assets the exact date of construction or last reconstruction of which is not known, we thus fired separately for each class, the prospective lives and the ages on 1st April 1925, as shown in the sub 11 1 total ·26 joined table. For purposes of comparison we have also shown in the saine table the ages and prospective lives on the same date as fixed in the Valua. tion Report. Residual lifc and age on 1st April 1925 (of assets for which actual dates of construction or reconstruction (irc 110t known). As in the valuation Report. As fixed by the Committee. (laes of neret. Normal clective Jile. Residual liſc, Agcor expired ljle. Normal effective Jilc. Residuall liic. Age or expired life. Years. 30 27 Ycare. 6 Years. 24 23 23 12 Years. 9 8 2 Icars. 36 32 34 19 28 ) Years. 45 10 36 20 36 25 16 2 Tdegraph. Posts Copper wird Iron tirc Sobrnarine cable Underground cable Instruments Engines, motors, etc, Telephone. Posts Iron Fire Underground cable moned 5 8 15 9 10 10 10 7 6 11 30 101 24 101 45 15 36 34 15 34 2 . We have to add that, as the total original cost of buildings and electrical installations, the actual date of construction of which is not kuon, is very small, viz., Rs. 2,98,429 out of a total original cost on 1st April 1925 of Rs. 3,62,65,618, we did not consider it necessary to recalculate the arrears of depreciation in respect of such buildings. For others, the ages of which are known a recalculation has been made. 56. Having fixed aner the expired life of each class of asset on 1st April 1925 the arrears of depreciation hare been recalculated in the ordinary way on the basis of the new lives and residual values on the straight line" formula. The detailed results of our calculations are set out in Appendix 3 to this Report. The accrued depreciation on 1st April 1925 conies to Rs. 8,25,35,096 compared with Rs. 9,09,85,728 fixed at present (vide paragraph 28). The aggregate decrease in the arrears of depreciation due to the revision of lives and residual values is thus Rs. 84,50,632. The results are summarised in the following table separately in respect of each branch of the Department - Branch of the Department. Original Falue on Ist April 1925. Arrears of depreciation Depreciated on let April Talue 1925. on 1st April 1925. Post Office Telegraphs Radio telegraphs Telephone Rs. 2,37,25,998 14,62,89,457 47,01,157 1,51,83,321 Rs. 58,48,201 6,98,72,526 27,96,873 40,17,496 Rs. 1,78,77,797 7,64,16,931 19,04,284 1,11,65,825 Total 18,98,99,933 8,25,35,096 10,73,64,837 ·27 07 The accrued depreciation and depreciated values on 1st April 1920 may be classified as follows according as they relate to assets acquired ou a date prior to the 31st March 1917 inclusive or to those acquired subsequently Assets of the period up to 31st March 1917 inclusive Assets or he period from 1st April 1917 inclus ve Branch Total orginal valde Accrued depreciation Deprec ated value Accrued depreciation Depreciated value Post Office Telegraphs Radios Telephone Total Rs 55 96 378 6 69 93 689 23 08 958 29 45 638 Rs 19789 493 3 86 25 245 9 72 478 20 80 716 RS 2 51 823 28 78 837 4 87 915 10 71 858 Rs 50 88 374 377 91 686 9 31 806 88 85 109 R: 2 37 25 998 14 69 89 457 47 01 167 1 51 83 321 778 44 663 5 46 67 862 46 90 433 5 26 96 975 18 98 99 933 58 In conclusion we desire to point out that the correction of the figure for accrued depreciation reconimended by us is purely an ex ceptional measure justified by the exceptional circumstances in which our Committee has been called together and has made its enquiries The re calenlation recommended by us should not be quoted as a precedent for re opening past transactions whenever on subsequent occasions it is found necessary in the light of further experience to revise the lives or residual values as now fixed by us The reasons for this view are fairly obvious Such revisions of the expected lives of plant are incidents common to com mercial accounting and are inevitable as more experience is gathered of accounting incidental to the institution of & depreciation fund If every such revision of the life leads to a re fixation of the accrued depreciation at will be impossible to achieve any stability in the results of working as portrayed in the accounts All that should be permitted or attempted in such a case should be a readjustment of the future contribution for depreciation regard being paid of course to over or under provision a' ready made We understand that the principle we recommend for adop tion in the Indian Posts and Telegraphs Department in this regard is being actually followed in the British Post Office ·28 CHAPTER VITI. Straight Line versus Sinking Fund. 59. We now advert to an examination of the financial effects, on this Posts and Telegraphis accounts, of the decisions of Governinent relating to the Block Account, the institution of a depreciation fund, and the financing of the expenditure on renewals and replacements. The decisions may be recapitulated as follows :- (i) The initial amount at charge of the Block Account should be the deprecinted or present" value of the fixed assets as on 1st April 1925 calculated on the 'straight line' method. (ii) The depreciation fund should be worked on the sinking fund plan, under which the interest payable on deposits in the fuud sliould be credited to thic fund itself and not to thic revenues of the Department. This fund will be required to provide only such depreciation as accrues after the 1st April 1925. (iii) In view of the above decisions, the expenditure actually incurred, each year, on the renewal and reconstruction of assets, after deducting therefrom an amount equivalent to so much of the depreciation of the renewed or replaced assets as might be regarded as having accrued after the 1st April 1925, should be treated as “capital advances". (iv) The aggregate amount that may be debited to capital as a consequence of (ii) will be limited to the arrears of depreciation existing at the time of opening the depreciation fund. Owing, however, to the impossibility of identifying a particular asset, with a view to determining its age at the time of replacement or renewal, and distributing the expenditure on replacement between current and accrued depreciation, it will be assumed that, except in special cases of preinature replacement, etc., each asset when replaced or renewed after the 1st pril 1925 hias then lasted out its normal life. 60. The decision at (ii) of the preceding paragraph in favour of a sinking fund was made on two grounds. It was considered that, in a state coin:nercial undertaking, there is not the same necessity, as in a commercial concern, for accumulating in the depreciation fund amounts that will, at crcry stage of the life of each asset, be equal to the accrued depreciation, and that it is sufficient if the original cost of the asset is available in the fund on the date on which replacement is expected. The second and much the more important reason was that in the state of the Department's finances at the time, it was important that the annual contributions ior depreciation should be kept as low as possible. 61. The relative burdens upon the revenues of a concern, in operating a straight line depreciation fund and a sinking fund, are illustrated by the calculations given by us in Appendix 4 to this report. An examination of this Appendix leads to the following conclusions : (1) Taking into consideration the interest payable on the capital at charge, the interest receivable on the depreciation fund assets, and the contributions for, depreciation to be set aside from revenue, a sinking fund is more expensive than a straight line depreciation fund.

·29 (2) At every stage during the life of the asset the amount available in a sinhing fund is less than the amount available in a straight line depreciation fund, and the deficit increases with every year of expired life until after about half the life has expired when it begins to decrease (3) The decrease in the deficits for successive years after about half the life has expired and the ability of the sinku; fundu produce on the expiry of the full life the fall amount of the original value of the asset are both due to the frets that com pound interest is credited to the fund and that the multiplica tion of interest is more rapid in the latter half of the life period 62 The conclusions set ont in the previous paragraph demonstrate that in the case of an old established progressive concern the relativc ex pens veness of straight line and sinking fund methods is a matter which depends on a dumber of factors some of which counterbalapre eacb orber cg rate of acceleration ' in the annual capital outlay homogeneity of the assets, uniformity of climatic and other conditions to which the assets are subject, fluctuations in prices regularity of reconstructions etc Bnt the most important one is whether the average age of plant on the particular date is more or less than half the expected life 63 Ve can now apply these theoretical considerations to the facts of ther commercialisation of the accounts of the Department The original value of the 'fixed assets' of the Department on the 1st April 1923 was Rs 18 98 99 933 Substracting from this Rs 1 67 62 339 being the residual value of the assets the amount to be depreciated comes to R$ 17 31 37 594 The accrued depreciation on the same date as recalculated by us and which the monetary inder of the average age of the plant amounts to Rs 8 25 35 096 The average age of the plant of the Department on that date comes therefore to 825_1731ths of the full life In other words the average age of the plant was nearly half the full life Consequently the cost of provider depreciation on the straight line method should not differ apprec ably from that on the sinking fund plan providerl that in either alternative a depreciation fund was instituted simultaneously with the creation of the Department and not at an intermediate date as was actually done 64 The effect of interest may now be considered The rate at wbich interest has been charged to the Department on its capital outlav, and that which has been granted on its depreciation fund during the six years of commercialısed accounting are shown belowy - Year Rste per cent on Capital Outlay Rate per cent on Depreciation Fund balances 1925 26 1026 27 1927 28 1928 29 1999 30 1930-31 RE 5 66 5 43 6 38 5 63 6 31 5 68 4 5 3 75 3 75 4 00 5 68 LiІРТЕР, ·30 6 It will be noticed that excepting for the year 1930-31 the former rate has been considerably higher than the latter, the maximum difference being 1.68 per cent. in 1926-27. Again, as will appear from paragraph 57, the bulk of the arrears of depreciation by which the capital account was reduced relates to a period for which the rate of interest on capital outlay has been fixed in perpetuity at 3.3252 per cent. On the other hand the rate charged on interest bearing advances, for renewals and replacements, is the current rate of interest as shown in the second column of the table given above, and therefore the rate of interest that the Department has to pay and will continue to pay is much higher than if the capital account had not been written down. 65. There was also a further disturbing factor consisting of a mistake in the method of calculating the annual charge for depreciation, the full effects of which do not seem to have been realised. The defect is best described by an illustration. Take an asset with an original value of Rs. 1,000 without any residual value, with an average expected life of 40 years. Suppose also, that both its expired age and remaining life on 1st April 1925 are 20 years so that the depreciated value on that date is Rs. 500. The amount that should have been provided is an amount which, contributed yearly, would have, at compound interest, yielded Rs. 500 at the end of the unexpired life' period. The amount to be provided, in the hypothetical case taken, should have been Rs. 15.938 per year. What was actually provided was a sum which would, with compound interest provide Rs. 1,000 in 40 years. This amount for this particular case is Rs. 9.343 pen year., It will therefore be seen that the actual amount set aside for depreciation was smaller than what was actually required. The amount that would thus be available at the end of 20 years will be Rs. 293 instead of Rs. 500 as required. 06. Speaking in general terms, to give full effect to the decisions of Government as regards the allocation of the cost of reconstructing an asset between interest bearing advances and the Depreciation Fund, it was necessary that the calculations should be made as if the Departinent had to maintain two Sinking Funds, one for the assets borne on its Block Account at their depreciated value, and another for those constructed or reconstructed after 31st March 1924. The rate of contribution per rupee of the amount to be depreciated, in respect of the first sinking fund, should have been one that would have yielded the depreciated value of the assets, less residual value, in the estimated unexpired life of those assets. The corresponding rate for the second fund should have been one which would have yielded the original value less residual value, at the end of the full life of that class of asset. In view of the more rapid accumulation of compound interest in a sinking fund in the latter half of the life cycle cf an asset than in the earlier half, the rate for the first would be higher than that for the second, the actual disparity depending on the unexpired life of the old assets on 1st April 1925. 67. The increased cost to the Department of providing fon depreciation, due to its depreciation fund being started without an appropriate opening balance on 1st April 1925 is shown in the following table based ou the lives and residual values recommended by us. The table shows, for each year of commercialised accounting that has passed, the amounts that should have been contributed, on the basis of lives and residual values now fixed by us, to a sinking fund with an appropriate accumulated balance ·31 at its credit on 1st April 1925 (Column 2), amounts that should have been contributed, on the basis of the new lives and residual values, in order to give fnll effect to the decision that the Department must find all depreciation accruing after 1st April 1925 (Column 3) and lastly the amounts actually contributed, on the basis of old Ires and residual values (Coluna Sinking Fund Contributions Year. Had a fund existed prior to 1925 26 (New lives and residual values) @ 41% To a fund started initially in 1925 26 (New Liyes and residual values) @ 41% Actuals (Old lives and residual values) 2 2 3 1925 26 1926-VT 1927 28 1928 20 1929 30 1930-31 Rs 17,71,576 18,18,339 18,82,203 19,29,463 19,79,015 19,87,864 Ra 30,08,813 33,63,207 33,20,894 31,42,614 31,40,611 31,09,290 Rs 31,30,657 30 05,142 32,75,454 33,47,935 33 63,448 31,33,000 1,13,68,460 1,88,84,465 2,92,55,833 68 A comparison of the figures in column 2 with those in colunun 3 of the table makes it clear that a sum of Rs. 75,16,003 represents the extra cost, imposed on the Department, of providing for depreciation accrug after 1st April 1925, by the fact that the depreciation fund was started at an interinediate stage in the bistory of the Department The total amount that should hare been contributed on the basis of the revised Ives is shown to be Rs 188,81,465, while the amount actually contributed on the basis of the lives and residual values hitherto ip force yas Rs 1,92,55 633 That the effect of the original underestimation of lives has been sufficient to compensate for the error made in calculating the annual amoubt that shonla hare been charged to working expenses to cover depreciation accruing after 1st April 1925 is a mere coincidence If there had beet no underestimation of the lives in the first instance, the amount actually available in the depreciation fund to day would hase been very much less than the amount that should have been there to meet the liability imposed on the Department. Conversely, the annual contributions that should have been made to the sinking fund from 1st April 1925, on the basis of the old lives and residual values, should have been rery much higher than what they actually were 69 We are included to think that at the time the sizkin fund tas preferred to a ght line depreciation fuod, on the ound of cheapness, dne regard was not paid to the various complications Ve consider, there fore, that the whole basis must be re examined anew.

·32 70. The arrangement whereby the general exchequer makes interest bearing advances for meeting, partially, the cost of renewing assets borne on the Block Account at their depreciated value, is essentially favourable to the general exchequer and unfavourable to the Department. As stated in paragraph 57, the total “ arrears of depreciation as calculated by us comes to Rs. 8,25,35,096, and of this Rs. 7,78,44,663 appertains to the period ending 1916-17, the rate of interest, on capital outlay, for which period has been fixed in perpetuity at 3.3252 per cent. As and when, the old assets are renewed, and advances are taken, the Department will have to pay interest at the new rates which have never been less than 5 per cent. since 1925. On the rehabilitation of its assets, therefore, the Department has lost and will lose in the shape of interest, at the rate of nearly 2 per cent. per annum. The total amount of interest bearing advances taken for reconstruction in the six years ending 1930-31 comes approximately tu Rs. 47,83,884 and the additional charge for interest, calculated at the difference per cost per annum between the rate of interest actually charged on capital outlay in those years and 3.3252 per cent. comes to Rs. 1,05,617 per annum. This increase is a recurring and ever increasing burden and the only prospect of its diminution lies in a fall in the general rate of interest payable on Government borrowings to 3.3252 per cent. Then again, the decision to write down the capital account instead of giving the Department an opening balance in its depreciation fund equal to the arrears of depreciation on 1st April 1925, imposes an unnecessary and unjustifiable burden on the finances of the Department over a large number of years to come, whether the depreciation is calculated on the straight line or on the sinking fund plan. The extent of this unnecessary burden, if the sinking fund plan is retained, has been indicated in paragraph 68,--that on the straight line would have been heavier still. 71. We consider, however, that all these results are misleading and a correct perspective can be obtained only by a reconstitution of the depreciation fund account on the following basis :- (1) that the capital account of the Department is left unchanged at the amount shown in the Finance and Revenue Accounts on 31st March 1925 except for Rs. 1,29,83,517 which was written off as representing errors in accounting, wrong allocation of expenditure and value of assets lost or abandoned, etc.; (2) that the Department should pay interest on the full amount of the capital at charge at 3.3252 per cent. in respect of outlay incurred up to the year 1916-17 inclusive, and at varying rates for outlay in subsequent years ; (3) that the depreciation fund of the Department is given an initial opening balance of Rs. 8,25,35,096, being the amount of the arrears of depreciation on 1st April 1925 ; and (4) that as the arrears of depreciation are calculated on the straight line method, the depreciation fund should continue to be worked on the same method and interest on the depreciation fund balances should, following the usual practice, be credited to the revenues of the Department.

·33 72 The account of the straight line depreciation fund for the six years ending 1930 31 would be as follows 1 Depreciation Fund Account (Straight line). Opening balance Contribu tion Year. Withdrawals for reconstruction Closing balance 1925 26 1926 27 1927 28 1928 29 1929 30 1930 31 Rs 8,25,35,096 8,56,53,030 8,88,81,767 9,23,73,955 9,59,17,549 9,98,79,428 R$ 41,98,309 43,38,713 45,18,390 46,75,079 48,02,794 48,31,155 R8 10,80,375 11,06,976 10,29,202 11,31,485 8,40,915 9,07,000 Rs 8,56,53,030 8,88,81,767 9,23,73,955 9,59,17,519 9,98,79,428 10,38,03,583 Total 2,73,64,440 60,95,953 73. The effects on the profit and loss account of the Department would have been as shown in the subjoined table, but we would point out that the rates of interest on the balances of the depreciation fund are those which were actually allowed by Government in the respective years, and not the rates charged in those years on the capital outlay of the Department.

·Effects on the Profit and Loss account, of the straight line Depreciation l'und from 1st April 1925 to 31st March 1931. Contribution for Depreciation. Additional expendituro Interest carned on Depreciation Fund balances. in tho year Yoar. Incrcaso in interest on Capital outlay. (column 2+5). Amount ro. quired on the straight lino basis. Surplus + or deficit of column 7 compared with column 6. Amount actually contributed on tho Sinking Tund basis. Additionnl amount re. quired (column 3-4). 1 2 3 4 5 0 7 8 Rs. Rs. Rs. Rs. Rs. Rs. Rs. 34 1925-26 28,53,969 41,98,309 31,30,657 10,67,662 30,21,621 37,84,233 --1,37,388 1926-27 27,86,352 43,38,713 30,05,142 13,33,571 41,19,923 32,72,584 --8,47,339 1927-28 27,42,728 45,18,390 32,75,454 12,42,936 39,85,664 33,98,601 -5,87,063 1028-29 27,06,880 46,75,079 33,47,935 13,27,1411 40,34,024 37,05,830 --2,68,194 1929-30 26,55,183 48,02,704 33,63,445 14,30,319 10,94,532 44,05,432 +3,10,900 26,26,678 48,31,165 31,33,000 16,98,165 1930-31 (Roviscd Es. timate). 43,24,733 57,84,597 +14,59,864 1,63,71,690 2,73,64,140 1,92,66,033 81,08,807 2,44,80,497 2,44,11,277 -60,220 ·35 It will be seen from the table given above that on the basis of the les and residual values proposed by us a straight line depreciation fund operated on the basis of a settlement like the one sketched out in para grapk 68 would not have been more espensive than the sinking fund that tras actually adopted The final result on the six year, working would have been more or less that is ROW shown by tlie accounts but the Depart ment vould have the prospect of increasing benefits from the strught line system in future 74 We recommend accordingly that the Block Accout and the dcpreciation fund account should be revised retrospectively from the 1st April 1920 on the basis suggested by us The only argument that ein perhaps he urged gunst our proposal would seem to be in the fact that while the Department will be requred to pay interest at the rate of 33232 per cent in respect of capital outlay incurred up to 1916 17 in clusive the interest earned on the accumulations in the depreciation fund is at the rate current for the year This may be favourable to the Posts and Telegraphs Department and unfavourable to the general exchegaer We consider however that such an objection would be based on a mis apprehension of the nature of the two transactions The capital expendi ture of the Department is represented by fised assets of long life and was found directly or directly from perpetual loans at z loriate vf in terest There can be no question of returning those loans just as there can be no question of dismantling and withdrawing the fixed assets. She assets of the depreciation fund on the other hand are liqul assets which are utilised year after vear by Government for financing their Ways and "Ieans progiamme 'They are more mobile and can be reasonably expected to earn the same rate of interest as is paid by Government on its borrow ings To An incidental advantage of the settlement worked out on the lines indicated by us in paragraph 68 would be the great simplification in all accounting relating to the depreciation fund Some of the directions in which this simplification could be effected are indicated below (a) At present the cost of the reconstruction of an asset has to be distributed between the depreciation fund and interest bear ing advances Oming to the lack of reliable information as to the age of the individual asset on the date of reconstruc tion a broad assumption is made to the effect tbat the asset has lasted its expected life on the date of acconstruction The results of this assumption are not as defimte is the formula would indicate because the life of any class of asset hotellr homogeneous it be is an average figure and the actual date of reconstruction may be some years before or some years after the date of expiry of the average life Lastly, as the life of vasting assets as recom mended by us may be as much as a hundred years the capi tal lubility of the general exchequer will remain unliquidat ed tor a very large number of year a state of affairs which 111 our opinion is not desirable (b) As explained in paragraphs 65 and 66 two singing funds will have to be maintained from Ist April 1925 for a very long time to come one for the assets borne at their depre ciated values on 1st April 1925 and one for thoset at ·36 a their original value. This would have been unsatisfactory enough if the former was an unchanging amount. As matter of fact however as any money is spent on reconstruction either out of the depreciation fund or out of interest bearing advances its amount must be adjusted by deduction from first and addition to the second. (c) The calculations on the annual depreciation and checks on the adequacy of the assets in the depreciation fund are undoubtedly very much simpler on the straight line plan than on the sinking fund method. 76. Thic disadvantages, some of which are enumerated in the previous paragraph, would all disappear if the straight line plan is adopted, as recommended by iis, retrospectively from 1st April 1925, with a cousequent saving in the matter of accounts both in executive offices which are responsible for preparing the estimates of works and in the accounts offices where the value accounts are consolidated and maintained. 2 ·37 CHAPTER IX Receipts and Payments on account of Interest 4-Preliminary Remarks 77 Interest on Capital enters into a number of calculations of the cost of services ienrlund to or by the posts and Telegraphs Department but this aspect of the question is dealt with only briefly at the end of this chaptei which deals mainly with the more important matter of the interest on capital outlay and if the term may be used on the lish assets or liabilities of the Department Under this category as to le included the interest paid or received by the Department on the following amounts (1) the total arount at charge of capital account (12) the 1 lance at credit of depreciation fund and (111) the acci rulated loss or profit on the working of he Depart ment after the accounts were commercialised B-Interest on Capital Outlay 78 The history of the decisions affecting the capital account has been given in an earlier chapter of this report and it is therefore sufficient here to recapitulate that the total amount now at charge of the capital account comprises the following items (a) depreciated value as on 1st April 1925 of assets constructed up to the 31st March 1924 , (1) original cost of the acarısıtion or construction of new assets after 1st April 1924 (c) interest bearing advances made after 1st April 1923 for the reneral and replacement of assets representing the utilisa tion of the arrears of depreciation (d balance at charge of the stores and nanufacture suspense accounts and (e) a deduct item being the aggregate of receipts capital ccorrit 79 Interest on outlay incurred up 1916-17 is charred at a fixed rate of 33952 per cent from 1917 18 it is calculated at a rate fixed from vear to year by the Govertunent of India Interest on the capital outlay of the Departmert was charged for the first time in the acrounts for 1921 ? but the debits in that and the three succeeding vears Tere limited to interest payable on the outlas on tele graphs not charged to revenue As stated in paragraph 21 it was de aded in conrection with the commercialisation of the accounts that inter est should be charged on the total capital outlay of the Department se irrespective of the source from which the money had been found whether from borrowed funds or from the cash balances or the revenue surpluses of the Government of India EO The decision to charge interest on the entire capital o itlas of the Department has been the subject of criticism in varions quarters on the ground that in the past capital expenditure was found out of the respone on ·38 surpluses of the Government of India, and that these surpluses of GoT. erument Frere partis built up by large surpluses surrendered by the posts and Telegraph.s Department. It has been claimed that the Department should not be esempted from the payment of interest on a large portida of its capital outlay. Te hare accordingly examined this claim and here discussed it with witnesses competent to express an authoritative opicion on the matter. Before proceeding to consider the Tro sides with question and recording our own conclusions we should recall that prior to the cominercialisation of the accounts the responsibility for meeting th: losses on the working of the Posts and Telegraphs Department, both before and after the amalgamation of the two branches, las entirely on the Government of India, and that in earlier years the Telegraph Departuet and possibly also the Post Office, were run at considerable loss. Naturalis, therefore, richerer there was a profit on the working of the Department the profit was appropriated to general revenues. In chapter IT of this report we have indicated the nature of er. penditure which was and is shown under the head “ Capital Outlas charged to Rerenue” in the Finance and Revenue Accounts of the Gorernment of India. The fact of certain amounts appearing undur this head does not, huterer, prove conclusively that the amount iras actualis found out of surplus rerenues or cash balances. As regards the allegation that the capital outlay mas found from surplus rerenues of the De partment we have already recorded our opinion, reached after an esiini. nation of the old accounts, that no reliance can be placed on any estimate of surpluses earned by the Department in the past based on the old accounts. To our minds, it is not inconceivable that the reconstruction of the accounts of those years on a commercial basis mar gira a vhols different result. Such a reconstruction is not impossible and a clair based solely on supposition cannot he admitted. 81. We are inclined to think that some of the objections raised to the charging of interest, are based on the practice followed in the accounts of certain commercial undertakings. As a matter of fact, the proprie of including interest has been the subject of a prolonged controvery in accounting circles in which eminent exponents of accounting theory and practice are found in opposite camps. The authorities opposed to the inclusion of interest (other than interest on debentures) have adradeed the follotring grounds in support of their sier : (i) interest is not an item of cost its inclasion in cost results in an inflation of intentory ralues and an anticipation of profits ; (i) interest is an anticipated expense and an item of this nature cannot therefore be included in “ total cost " or taken into account in “ cost finding": (iii) the inclusion of interest introduces an unnecessary complics. tion without any commensurate adrantage, for instance, every revision of the rate of interest on a loan from bankers Tould require a remision of the cost formule. (iv) interest is a return on capital and consequentis it is prost on capital whether it be the capital of a sole treder, of & rarinerchin, or of a company. 7

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·38 surpluses of the Government of India, and that the ernment were partly built up by large surpluses sur anii Trlegraphis Department. It has been claimed should now be exempted from the payment of inte; of its capital outlay. We have accordingly examini discusspil it with witnesses competent to express ili on the matter. Before proceeding to consider question and rrcording our own conclusions we to the cominercialisation of the accounts the respo locaps on the working of the Posts and Telegraplı and after the amalgamation of the two brani Government of India, and that in carlicr years i and possibly also the Post Office, were run at cr therefore, whenever there was a profit on the the profit was appropriated to general revenu: in chapter IV of this report we liave penditure which was and is shown under charged to Revenue" in the Finance and Government of India. The fact of certain head does not, hurrerer, prove conclusively found out of surplus revenues or cash ba tion that the capital ontlay was found fi partment we have already recorded our nation of the old accounts, that no reliar of surpluces carned by the Departmer accounts. To our ininds, it is not inco? the accounts of those years on a co different result. Such a reconstructi hased colely on supposition cannot he 81. We are inclined to think t the charging of interest, are based o of certain commercial undertaking of including interest has been the accounting circles in which emine practice are found in opposite i inclusion of interest (other than he following grounds in suppor (i) interest is not an in an inflation 0 profits ; (ii) interest is an ant cannot therefoi inio account ir (iii) the inclusion of tion vithout erery revisio Trould requir. (iv) interest is a on capital partnership ·41 D-Interest oil diccumulated profit or loss on the uorking of the Depart ment 87 As stated at item (vi) of paragraph 21 the Posts and Telegraphs Department receives a rebate or pays a surcharge as the cise may be in respect of interest on the net profit or loss on the workin of the com mercial branches of the Department as determined by the accounts Το give effect to this decision the rebate or surcharge is calculated on the ascertained accumulated profit or loss and in practice it means that it is based for suclusion in the accounts of any one year, on the progressive result of working up to the end of the previous year Thus the amount to be included in the accounts for 1930 31 will be a surcharge at the rate applicable to capital outlay on a sum of Rs 95 14 984 which was the Piogressive loss on the working of the entire Department to the end et the ve 11 1929 30 1 he loss on the working of the non commercial juortion of the Wireless Branch of the Department is excluded when computing the amount of the surcharge We have considered the equity of this decision and have come to the conclusion that it is both sound in principle and useful in practice It retains to the Department the benefits from any profit that it may earn and thus provides a continuous incentive for economical working 88 We have examined the method of exhibiting the charge for in terest in the Profit and Loss account of the Department in the Finance and Revenue Accounts and find that the amount shown as 'interest on capital outlay' ineludes the rebate or surcharge allowed to or recovered from the Department We consider that this method is not appropriate and that the entry should be made in such a way as to show separately the amount of interest on the capital at charge of the Department and *hat of the rebate or surcharge 89 Ve bate a further suggestion to make As stated above the loss on the worling of the non commercial portion of the Wireless Branch of the Department is excluded m calculating the progressive profit or loss on which rebate is granted or surcharge levied It is not unlikely that similar decisions may be taken in the future in respect of other activities of the Departinent It is therefore of some importance that the amounts on which interest is actually charged or credited to the Department should be shown clearly in the published accounts of the Government of India In our opinion, this object Tould be best gained by appending to the Prost and Loss account a subsidiary statement containing an analysis of the profit or loss on the working of each branch of the Department set out in such « fash on as to exhibit clearly how the amount in respect of which the Departincnt incurred the liability for surcharge or carned the title to a sebate has been arrived at L-Interest in Cost Calculations 90 In addition to the main items of interest dealt with in the pre ceding portion of this chapter interest enters into the calculatıcns of the amount charged l or paid to the Departinent as remuneration for various services Our views about the method of including interest in these cal culations are given in a subsequent chapter but there is one item which is more suitably dealt with at this place Railway Mail Service vehicles used for carrying mails are constructed in accordance with ·42 arrangements made by Government. The broad principle of these arrangements, however, is that, if the capital cost of the vehicles is found by the Railway Department, the Posts and Telegraphs Department, has to pay the interest vu the capital cost in addition to the charge for hauling the vehicles with their mails. We understand that the rates of interest charged to the Posts and Telegraphs Department on the capital cost of such vehicles, and the rate paid by the Railway Department to general revenues on their own capital account have not always been the same. It is difficult to institute a rigorous comparison in the tinie at our disposal, but we understand that the comparison attempted in the following table gives a fairly accurate idea ;- Interest on Railway Capital Outlay. Interest charged to the Post Office. Period. Rate. Period. Rate. Up to June 1898 From 1st July 1898 4% 51% From 1906-07 to 1918-19. 1919-20 From 1st April 1922 61% Fixed rates of 4 or 38 % Actual average rate for the year on the mean non-specific debt. The rates charged varied from 3.2964 to 3.500. 3.4076% on expenditure to end of 1916-17 and 5.9328. From 1920-21 the rate on expenditure to end of 1916-17 has remained constant at 3.252. The rate on subsequent expenditure has been as follows:-- 5.1979 5.1038 Varying rates not exceeding 5.6900. 54% Expenditure incurred after 3rd June 1922. 1920-21 1921-22 Subsequently It will be seen that sometimes the rate charged to the Posts and Telegraphis Department has been appreciably higher than the rate paid by State Railways on their own capital outlay. We are of the opinion that the two rates should be equal.

·43 OHAPTER X Pensions 91 Previous to the year 1923 24 actual payments of pensions to retired employees of the Commercial Departments of the Government of India were charged to general revenues In 1924 it as decider that with effect from the accounts for 1923 24 the amount of these payments should be shown under the appropriate heads in the accounts of the respective departments themselves The amounts actually charged in the Posts and Telegraphs acconcts in the years 1993 24 and 1924 25 were Rs 32,51,608 and Rs 33,60,683, respectively 92 In connection with the commercialisation of the acrounts, it was decided that the actual payments of Posts and Telegraphs pensions will be debited to general revenues, and that the posts and Telegraphs Department will make, each year, a contribution based, not on actual payments during the year, hut the pensionary liability to be met on the retirement of employees then in service In the absence of and pending a reliable actuarial estimate of this liability, the annual contribution was fixed at Rs 50 lacs erch sive of extraordinary pensions and those granted under the provisions of the Worlmen's Compensation Act This sum was adopted in the accounts for 1925 26, 1926 27, and 1927 28, as a round sum comprising roughly a fifty per cent increase on the actual pension payments of the Posts and Telegraphs Department in the year 1923 24 View of the growth of expenditure upon departmental establishments, the amount was raised to Rs 58 lacs in the accounts for 1928 29 and Rs 60 lacs in those for 1929 30 An actuarial investigation was also started meanwhile, and its results became available early during the last financial year 93 The annual pensionary liability of the Department has heen defined as the actuarial present value of the proportionate amount of the pensions ultimately payable to the existing employees which would be carned by them in any particular year The formula on which the Department is at present authorised to work is as follows " The annual charge equal to the annual pensionary liability of the Department should be 82 per cent of the total pay and leave salary of the pensionable establishment excluding any special pay and allowances that do not count for pen- In sion" It will be scen, that under the arrangement, Government undertake the lah lity for finding the pensions for all service rendered prior to 1st April 1925, without nemanding any contribution They also under tale to find the money for all pensions that may be granted in respect of service rendered after that date in return for a contribution calculated on an actuarı il basis 94 The large amount of the increase in the pension charges of the Department that lias occurred as a result of the commercialisation has attracted criticism in some quarters, and it has been urged that the amount appearing in the annual Profit and loss account of the Depart ment should be limited to that of the actual payments of pens ons made in the year to retired employees of the Department It is urged that ·44 there is no danger of the Posts and Telegraplis Department either becoming bankrupt or ceasing to exist and that the Department is as much a part of the Government of India as other departments. Consequently it is held that there is no necessity to include in its annual accounts an estimated amount 10 cover its liability instead of the actual amounts paid to pensioners. 95. We liave csamined tliis argument and are convinced that it frustrates the whole principle of the commercialisation of accounts the object of which is to ascertain the true cost of the operations of the Department. The liability for pensions of employees is one which materialises a long time after the service which earns the pension is rendered ; and its truc nature is consequently apt to be overlooked. Pension is of the 22117 of defcrred pay and therefore an intrinsic part of the cost of establishment. It should accordingly be taken into account along with immediate payments for establishments when determining the cost of running the Department as a rhole, or that of rendering a particular service. The same practice is followed in the commercial accounts of the Britislı Post Ofőce and we do not see any reason for recommending a reversion to the old practice of taking only actual payments into account. 96. Having accepted as correct the decision to include the estimated amout of the pensionary liability of the Department we investigated for ourselves the basis on thich the formula of 8.2 per cent. given in paragraph 93 as fixed. The calculations had been made by the then Actuary to the Government of India and his successor appeared before us to give oral evidence and also furnished us with a memorandum describing the basis of the calculations. We also arranged to examine as a witness an Actuary with experience of life insurance and actuarial work who, before giving evidence, had a conference with the Government Actuary. 97. It has been stated to us that the Government Actuary defined the scope of the enquiries which concluded only during the last financial year as folloirs : " The idea, I take it, is to charge the Posts and Telegraphs Departient henceforward in each year the cost cr, in other words, the actuarial present value of the proportionate annount of the pensions ultimately payable to the existing oployees Trhich would be earned by them in that year. This cost would be as a percentage of the actual annual pay of the pensionary establishment of the Department. The fact that no provision was made in past years would be ignored and no charge would not be made of the proportionate amount of present employees' pensions corresponding to past service" 98. We understand that this definition was accepted as correct and steps were taken to collect the following information in respect of each class of pensionable officials : (2) Number in service ; (ii) Scale of pay ; and (177) Pension inles.

·45 It took a long time to collect this information and the Government Actuary agreed to work the average ge ut entry service at ietirement in tion finally subitted to the Actuary about the end of 1928 did not coutaul these two last items in full and he had therefore to make such assumptions as he considered sutable The following table shows the groups under hich the Government Actuary classified the entne staff of the Posts and Telegraphs Department and also some of the assumptious made in the calculations and the resultant pensionary percentages Average age Staff groups (in years) of entry into pensionable Bervice Average length of Service (in years) at re tirement Annual pens onary charge expressed 23 & percentage of the annual pay bill at 41 % per annum compound interest 20 21 32 32 2 3 11 6 (6) Inferior servants (15) Postmen and others in higber Tanks who joined the Depart ment as postmen (111) Telegraphists and others in 22 32 23 32 92 who joined the Department as clerks () Gazetted officers (2) All classes 25 30 11 2 9 125 le par 99 In addit on to the assumptions tabulated above the Government Actuary had to mahe certain assumptions as to the average length of service at entry ntn various higher ranks of the non gazetted establish ment On the basis of the assumptions the Actuary prepared hypothetical life and service tables applicable to the five groups of officials taking the same number in each group as that actually employed in the Department Illowance was made for death after retirement on pension centages showu in the table were all calculated on a 41 per cent interest basis It is understood that the Finance Department decided however that the rate of interest should be taken at 5 per cent insteart A artailei recalculation on ti e 5 per cent basis was not made but a rough calcula tion indicated that the overall average of 93 per cent should be reduced to 82 per cent 100 During the course of our discussion it was discovered that a mistake had been made in the statistics supplied to the Government Actualy as regards the number of higher appointments to which men of the postmen group could expect promotion The departmental repre sentatives and the Government Actuar both stated to us that the data supplied to the Government Actuary on which he had to make his calcula LI IPTA PH ·46 tions were not very reliable. Our investigation of the matter convinces us that this is not an understatement of the case. Although certain information supplied recently by the Department to the Government Actuary bears oil goierally the appropriateness of the assumptions made by him in his calculations we feel that those assumptions still remain to be substantiated by more suitable and sufficient statistics. The comparative importance of such a verification of the assumptions is illustrated by the fact that the various factors entering into an actuarial calculation of perisionary liability arrange themselves in the following order based on the magnitude of their effect :- (i) Length of service at retirement (ii) Scale of salary ; (iii) Rate of interest ; and (iv) Hortality both during service and after retirement. Partly because of the mistake in the information supplied to the Government Actuary and partly because of other considerations we decided that the matter requires further investigation to be undertaken in three different stages. 101. An immediate calculation was obviously required to rectify the mistake in the statistics relating to the promotion of postmen to higher ciasses. It was also considered that it would be more satisfactory to have detailed recalculations made on the basis of a 5 per cent. rate of interest. The Government Actuary undertook to make this calculation after verifying, as far as possible, the data used by him in consultation with the Department and we quote his report to us on the results of the revision “The results given previously have now been found out to be wrong oting to the defective data supplied by the Department in respect of the postmen. The statements furnished by that Department showed that the number of selection appointments to which the postmen were eligible to rise was 11,968 whereas the correct number was 3,600. Had the latter figure beci adopted previously, the results at 41 per cent. and 5 per ceni. rate of interest would have been as follows: Annual pensionary charge expressed as a percentage of the annual pay bill on the basis of Class of official, 41% rate of interest. 5% rate of interest. Inferior servants Postmen Telegraphists Clerks Gazetted Officers All classes 2.288 8.953 9.145 9.193 11.162 8.424 1.992 7.947 8.093 8.165 9.943 7.465 • .

·47 102 The immediate revision described in the preceding paragraph does not in our opinion ghe 1 result which is fully reliable We are of the opinion that a further detailed investigation should be undertaken which can be completed within the next few months In consultation with the Government Actuars we have drawn up the following instructions to indicate the lines on which this revision should be undertaken I The entire staff of the Department should be divided into large groups and suitable sub groups on the basis of the rules of recruitment, scales of pay and conditions of promotion etc As an example the pon gazetted establishment in the Postal Branch may be grouped as follows Group 1 --Inferior servants 32 000 men Group II --Postman class (includes mail guards postmen village postmen etc ) 32 000 men Group III --Departmental Branch Postmasters class (includes also Overseers, Head Post men Reader Postmen und Sorter Postmen) 32 000 men Group IV Ministerial establishment- (n) Time scale 29 000 men (b) Selection grade-(includes also Inspect org Head Clerks Head and Sub postmasters in the selection grade and clerks and others in the selection grade) 2000 meu II The history of the services of a sutable number of men in the various classes should be tabulated in such a way as to enable the prospects of promotion from a lower to a higher grade being expressed numerically (a) For instance Inferior servants (Group I) can be promoted to the postmen class (Group II) The history of the service of ten postmen at the bottom of the scale in each postal division should be collected and analysed As there are roughly between 150 and 200 postal divisions the analysis would cover the evnerience of betwen 1 500 and 2 000 men out of a total establishinent of 32 000 men and would enable statistics being prepared both for the average probability, and the average age at the time of promotion to the Postman class ro) Again Group III consists of Departmental Branch Post masters Overseers Head Postmen etc and constitutes promotion group for men of the Postman class The neces sarv statistics should be collected by analysing the bistory of Rervices of five men of this group at the bottom of the time scale in cach postal dit 1910n (c) Promotions from Group JII to Group IV are very few and may be neglected Promotions from sub group (a) to sub-group (b) of Group IV is an important factor in the determination of the pensionary liability The satistics should be obtained by analysing the history of services of five men at the bottom of the scale of sub group II comprising Inspectors, Head Clerks etc, in each division a ·48 our III. In the case of gazetted officers, whose total number in the Department is not large, we are of the opinion that the statistics should be col- Iccted to cover as large an experience as possible. IV. The statistics of retirement sliould cover the following information : (a) Date of birth. (0) Age of entering into service qualifying for pension, inferior or superior. (c) Length of service from the date shown against the previous item, at the time of retirement. (2) Nature of pension granted-- vliether invalid, superannuation or retiring. ic) The group or sub-group, as determined in connection with item (1) above, in which the officer was substantive at the time of retirement. V. To secure accurate results it is necessary that suitable forms of service cards should be prepared to meet the varying requirements of each group. These should be filled up from the records of service and then furnished to the Government Actuary for his investigation. At request, the Government Actuary kindly drew up service cards for the Various groups and these are appended as Appendix 5 to this report. 103. The method outlined by us in the preceding paragraphs has been designed to furnish fairly relinble results in the minimum of time, but the continued accuracy and reliability of the percentages must be checked from time to time. In order that this may be done it is necessary, so we are advised, to maintain a hypothetical Pension Fund account as from Ist April 1925. The account should be started with an initial opening balance equal to, the sum of the capitalised value of the pensions which were being paid on 1st April 1923 to the retired employees of the posts and Telegraphs Department, and of that of the proportion of pensions which had been earned by the staff employed on 1st April 1925 in respect of their service to that date. To this Fund should be added year by year amounts calculated on a proper actuarial basis to cover the pension earned by service in ench of those years and also the interest earned on the accumulations in the Fund. The actual payment of pensions would be charged to the Fund ; and actuarial investigations at intervals of 5 to 7 years could then be made to ascertain whether there has been a deficit or a surplus as a result of the transactions since the last valuation. 104. To maintain this account on the lines indicated in the preceding paragraph it is necessary that life and service tables should be maintained in respect of all the employees of the Department, so that the necessary actuarial calculations may be made whenever required. It is also necessary that reliable information should be available as to the amounts of We addressed the Auditor actual payment of pensions in each year. We addressed General in regard to the latter necessity. He has, in reply, pointed out certain difficullies in the matter. For instance, the correct allocation of the actual payment of pensions will involve an examination of the details of service rendered by all existing pensioners. The matter is also complicated by the fact that under the existing arrangements with local Governments all pensions, including those of Posts and Telegraphs employees, ·49 sanctioned before 1st April 1921 and paid in India, are borne by the provinces by whom they were paid at the time As regards the future, me quote the Auditor General's opinion in extenso * If, however, the idea of the Committee is merely to ascertain very approximately the actual amounts of pensions paid in each year to retired employees of the Posts and Telegraphs Department, it may be possible though not without some extra labour, to arrange for the necessary figures being collected by the Account ing Officers in India and in England Under this arrangeinent the pensions of all those who were serving in the Posts and Tele graphs Department at the time of their retirement mav be taken as chargeable to that Department and as a set of 10 portion of the pension of any officer who retired from other departinents should be taken as chargeable to the Posts and Telegraphs Department even though a portion of his service was spent in the latter Department The figures calculated under this arrangement will not however, give a precise idea of the total amount of pensions actually debitable to the Com mercial Accounts of the Posts and Telegraphs Department' 105 The difficulties in the way of determining the actual payments, due to a portion being paid by Provincial Governments will tend to disappear in a few years' time as the pensioners who retired before 1st April 1921 die The difficulty in determining the incidence between the Posts and Telegraphs Department and other departments will continue to exist but we do not think that it will prove insuperable 106 The other requirement for the maintenance of the account consists of reliable statistics of past experience and we consider that arrangement should be made of the expense involved is not considerable for the main tenance of proper service cards of all employees of the Posts and Tele graphs Department 107 We now proceed to examine the appropriateness of the amounts charged on account of pensionary liabihty to the Posts and Telegraphs Department since 1st April 1925 We consider that the percentages now determined by the Actuary as the result of the preliminary investigation should be applied retrospectively to determine the total amount that the Department should have paid on this account In making this calculation the proper way is to apply the particular percentage rate appropriate to xh of the five groups mentioned in paragraph 98 to the annual per fionable pav bill of the stift included in that group Theoretically such a calculation slould yeld a more accurate result than the application of the over all average rate to the pay bill of the entire pensionari estal Jishment because the over all average is a weighted average which will yield accurate results only so long as the relative numbers of the emplovees 11 the different groups continue unchanged 108 We have calculated the amounts of the pensionary contributions both on the basis of the separate average rates as recommended by us in the preceding paragraph and on the over all averge rate as preseribed by Governnient, and the results are compared in the subjoined table For purposes of comparison we have also shown the amounts actunlly contri ated by the Posts and Telegraphs Departnent since 1925 26 M ·اة Pensionary Contributions, Total amount Total amount of contribu. of contribution based on tion based on Amount group percent. over-all ave. actually contriage rates pro. rage percent. buted. posed by Gov. ernment (7.465) Actuary. proposed by Government Actuary. age rate Year. 1 2 3, 4 Rs. Rs. Rs. 1925-26 1926-27 1927-28 1928-29 1929-30 48,63,807 50,35,140 52,62,532 55,88,300 58,35,431 45,78,908 47,44,749 49,57,520 52,76,165 55,17,689 50,00,000 50,00,000 50,00,000 58,00,000 60,00,000 Total 2,65,85,210 2,50, 75,031 2,68,00,000 R. E. 1930-31 B. E. 1931-32 60,11,862 61,32,101 56,85,157 58,01,308 61,93,000 63,86,000 Total 1,21,43,963 1,14,86,465 1,25,79,000 Grand Total 3,87,29,173 3,65,61,496 3,93,79,000 Difference between Difference between columns (2) and (4). | columns (3) and (4). Rs. Rs. 1925-26 to 1929-30 .. 1930-31 R. E. 1931-32 B. E. 2,14,790 1,81,138 2,53,899 17,24,969 5,07,843 5,84,692 109. It will be seen that for almost every year the amount calculated at the over-all rate is lower than that on the separate rates. This unexpected result appears to be due to the fact that in the Posts and Telegraphs Department the gazetted group, the factor for which is the highest, includes a large number of officers whose conditions of service are entirely dissimilar. We find from a reference to the annual Administration Reports that the number of gazetted officers of the Central and All-India Services, Class I, in the Post and Telegraphs Department is small. In addition to this, however, there is a large number of gazetted officers who are on comparatively much smaller rates of pay and are subject to pension rules which are not as favourable as those applicable to the ·51 oilicers of the All India and Central Services, Class I We are inclined to thunk therefore, that there should be separate rates of contribution for the two classes of gazetted officers This can be attended to, if necessary, in the next actuarial investigation recommended by us in para graph 102 Until then as already decided by Government the over all average rate should be adopted On this basis the contributions actually made by the Department in the five vars 1925 26 to 1929 30 exceed the amount required on an actuarial basis by Rs 17,24 969 We recoinmend that the over charge should be adjusted forthith, but would pomt out that really the credit to the Posts and Telegraphs should be larger The contribution rate has been applied to the entire amounts shown in the accounts under the detailed head “ pay” which includes certain emolu ments which are not always taken into account when deterioining the amount of pension, eg, pay of substitutes, officiating pay, etc ·54 the other hand, the stamps are unified and, we understand, that the apportionment between the Post Office and the Inland Rerenue Department has been the matter of a controversy which was recently referred to the Actuary to the British Government. As a result of his recommendations, the British Post Office now makes over to the Inland Revenue Department 80 per cent. of the total value of all two-penny stamps issued, and the matter is to be reviewed in 1932. At the other extreme, we find that in the Union of South Africa, although the stamps are unified and are used both for postage and revenue purposes the gross sale-proceeds are retained by the postal administration. A remark to this effect is made in the annual Administration Report but apparently no attempt is mude to ascertain or indicate the proportion creditable to the Revenue Department. 116. The nature of the case is such that no method of apportionment can he suggested without being open to challenge as being inappropriate. The problem in India, is, to our minds, even more difficult than in England. In the latter country the initial and most common rate of stamp duty for which unified stamps are used is two pence, while the initial postage rate for letters and postcards is one and a half pence. It was thus possible for the Actuary's Department in England to evolve the formula described in the preceding paragraph. In India, on the other hand, the initial rate for stamp duty and the initial letter rate are the same, viz., one anna. 117. Certain important criticisms of the methods and calculations adopted hitherto suggest themselves. In the first place, the increase in the amount payable to the Civil Department is calculated on the basis of the increase in revenue from general stanips, without any reference to the fluctuations in the sale proceeds of postage stamps. We understand that the possibility of derising a method of calculation based on the sales of postage stamps was considered at one time but was given up as likely to yield unreliable results, the proportion of the Civil Department's share of the gross sales being small. 118. Another criticisin that suggests itself is that in the calculations no allowance has been made for the remission of stamp duty on cheques and bills of exchange sanctioned in 1927. The second method by which the assignments are calculated is such that a fall in the revenge of a Province deriver jointly from the hypothetical sale of the one anna receipt stamp and from one anna coloured impressions has to be made good by increasing the assignments and the entire annount of these is found from postal revenue. As the l'emission of the duty on cheques and bills of exchange must hart resulted in a diminution of the gross sales of the one anna unified stamp and in a much larger diminution in the revenue from one anna coloured impressions, postal revenues have to bear not only the actual diminution in the gross sales of the one anna, unified stamps, but also to make good to the Provincial Governments the fall in the l'evenue from the one ama coloured impressions. We do not know if the Government of India are committed to make good to the prorinces the fall in revenue from the remission of the duty on cheques and bills of exchange but, be that as it may, there appears to be no justification for calling upon the Posts and Telegraphs Department to make good to the provinces this fall in revenue. We understand that the diminution in rerenne from this remission was estimated at Rs. 7 lacs in 1929, and re consider that this amount must be taken into the calculations.

·55 119 The fall in the revenue from one anna coloured impressions 13 shown in the following table Average annual revenue for the theanum. Province 1902 1919 22 1926 29 Re 31 911 59946 97 782 14 134 22 010 16 775 1 413 Madras Bombay Bengal United Provinces Punjab Burma Bihar and Ongsa Central Provinces Assam Rs 79 828 3 30 0W 2 84 417 36 691 49 296 69 225 3 209 3220 142 Re 41 000 118 00 151 000 20,269 * 1 496 3 420 564 *Information not available Seeing that the figures in the last column of the table relate to the years 1926 29 te, before the present economic depression became most acute it seems indicated that the bulk of the decrease of revenue from coloured impressions is due to tlie remission of the duts on cheques and bills of exchange This conilusion is further strengthened by certain figures of the revenue from instruments impressed or denoted with a stamp dut of one anna in the Midras Presidency in the ten years end iny 1921 22 According to these figures out of a total revenue for the ter years of R$ 99 102 2-0 R 511 163 8 0 was contributed be the dutv on cheques and Rs 32 904 8 0 by the duty on bills of exchange It is not possible for us to attempt an estimate of the amount of the reduc tion in the assignment from proslal revenues on this account but that it should be fairls appreciable is indicated what is stated in the succeed ing paragraph 120 As stated in paragraph 112 two methods of calculation hase been adopted and the assignment to each piorince is fixed at the mean of the two results The second formula is X X(2- aferine-tre 100 2 There arbitrary percentage to cover increases in stamp duty sanctioned in 1933 (para 112) 2 = Average annual revenine (1936 29) from general stamps in cluding assignment and colourell impressions = average annual revenue (1996 29) from increhed prouincial duties Cajerage annual revenue (1926 29) from coloured impressions a = current assignment I= average annual revenue from general stamp 1909 Os including revenue from one ant one anna coloured impressions and ·56 y = average anmal revenue from one anna receipt stamps and coloured impressions in 1902-05. The formula can be resolved as follows: 100+k 100 X { (z-i-c-a) -1)-c} 100-* * {ten.com, 2o It will be seen that, as c increases the assignment decreases, and vice versa. 'The amount of this decrease or increase is : 10071 100 (91-C2)+(01-02) 10#*{$+1}{s=;} х Fragolong) 100+k 200 Where c, and C, represent the revenus from coloured impressions in any two years respectively. As the variables of the formula vary from province to province a separate calculation will have to be made in respect of cach and the sum of these results will give the total decrease in the assignment from postal rrvennes. It is to be noted that as the remission of duty on cheques and bills of exchange was made from 1st July 1927. while r' and 'y'relate to the years 1926-29 the calculation made on the basis of the above formula will not represent the true effect of the remission. 121. To test the fairness of the present allocation we addressed the Chambers of Commerce to help us with figures of the comparative use. by their members, of postage stamps for postal (and telegraph) purposes on the one hand and revenue purposes on this other. The statistics supplied by them indicate that ronglily the face value of stamps used for revenue purposes is between onc-sixth and one-seventh of the face value of stamps purchased. The proportion of stamps used by large business houses and firms for revenue purposes inust obviously be the least favourable to the Posts and Telegraphe Department. On the other hand, the bulk of stamps sold by the Department is used by the average literate citizen whose requirements for revenue stamps are extremely small. Again, the ratio of the value of stamps used for revenue purposes to the gross sales of ordinary stamps and postal stationery, will be smaller than that indicated by these statistics, as these commercial concerns use very little embossed stationery. 122. Lastly, tre understand that the amount handed over by the British Post Office to the Inland Revenue Department as the latter's share of the sales of unified stamps is only 1ļ20th of the gross sales of stamps and stationery. In Great Britain, the unit of stamp anty for which unified stamps are used is ttro pence while the main letter rate is one pence and a balf. In India, on the other hand, the main letter rate and the main rate for denoting stamp duty are the same, viz., one anna. Other things ·57 being equal therefore, the ratio between the assignment to the Civil Department and the gross sale of postage stamps and stationery must be very much less 123 Taking all the factors into consideration we are of the opinion that the present proportion whereby more than 1)15th of the cost of postage stamps and postal stationery is made over to the Civil Department is considerably too high and unfair to the Posts and Telegraphs Depart ment 124 It is difficult however to suggest a method of distributing the gross sales of postal stamps between postal revenues and the Cul Depart ment which would be equally fair to either The difficulty of the problem is best illustrated by the practice in South Africa alluded to earlier Our own examination of the matter and of the statistics collected by us leads us to the conclusion that no mathematical or statistical method of comput ing the respective shares will command the confidence of all parties We consider therefore that the only way to obtain a fair and reliable basis on which to make a distribution in future years is to introduce separate revenue stamps for a limited period of sav 3 years and then to revert to the use of unified stamps The ratio found to subsist between the sales of the separate revenue stamps and those of the postage stamps can then be adopted as the basis for distribution in the future We realise that the proposal might inconvenience the public to a certain extent we therefore suggest that the separation should be a temporary measure In this con nection we would suggest that as in the Unted States of America the Posts and Telegraphs Department shonld be required to sell these separate revenue stamps at all its Ollices LIIPT&Ph ·CHAPTER XII. Press Traffic. 125. The rates for Inland Press telegrams introduced from 1st January 1882, were as shown below : Class. Unit number of Unit rate. Tords. Each additional Fords. Address. Rs. as. Rs. as. 32 Urgent Ordinary Deferred 32 2 0 1 0 08 Free. Do. Do. 02 0 I 32 . A reorganisation of the tariff was effected in 1905, to give effect to the desire of Government for cheapening information for the benefit of the reading public and the smaller newspapers. Tro revisions were effected in the year 1905, and the rates levied at present, which are given in the next paragraph, are the same as those introduced from November 1905 except that the telegrams were then classed as " deferred" or " ordinary ", instead of being styled “ordinary " or " express” as at present. 126. The existing rates for Inland · Private and Press telegrams compare as follows : For Inland private telegrams. Unit number of Unit rate. words. Additional words, Class. Address. Each wordi Rs. Rs. as. 02 Express Ordinary as. I 8 0 12 12 12 Charged for :: do. For Inland Press telegrams. For each 6 words. 02 0 ] Express Ordinary :: 48 48 1 0 08 Free. do. It will be seen that the Inland Press rates are one-sixth of the inland Private rates for both the express and ordinary classes. In addition, there is another special concession to the Press in that, inland multiple press messages, addressed to several places, are charged for as a single message whether all the addresses are in the same town or not, a copying fee of only four annas per 100 chargeable words, plus A annas for the exdess, being charged for each destination after the first. In the case of private multiple telegrams, the concession of being charged only a ·59 &% copying fe», for every telegram after the fir-t, is limited to ressages del vered at two or more addresses in the same free delivery area of a telegraph office 127 The reasons for which these concessional rates have been sanc tioned to the Press fall outside our terms of reference, as they constitute questions of the general poliey of the Government of India The con Cessions are not unusual, being gr interl on one scale or another in most civilized countries and the grant of similar concessions on foreign press telegrams is also provided for in the Conientions and Treaties drawn up at the International Telegraph Conventions We note, however, that ac cording to the information at our disposal there is at least one important country, Germany, where no connession whatever seems to be granted on Orland Press telegrams 128 We are concerned, by the terms of our reference, with the eflect of lus concession on the results of the commercial working of the Deparı ment as pictured in the accounts l'he loss accruing to the Department from its Press traffic formed the subject of comment by the Accountant General, Posts and Telegraphs, in his Appropriation Report on the ac counts of the Posts and Telegraphis Department for the year 1923 24, and his estimates of the loss under varying conditions were as follows (a) if no concession is given to Press telegrams and if they are charged for as private telegrams, the Department would have received an additional revenue of a little over Rs 50 lacs, (b) of the concessional rate for Press, telegrams is removed and the multiple Press concession remains, the additional revenue would amount to about Rs 24 lacs, (c) if the concessional rate remains, and the multiple message con cession 2$ removed a rough estimate of the incrrase revenue is Rs 4 lacs, (a) of the rates for Press telegrams are increased in proportion to the increase in rates effected for private telegrams since 1905, and the multiple message concession is allowed to remain, the increased revenue would amount to about Rs 10 lacs, (e) if the rates for Press telegrams are increased in proportion to the increase il rates elected for private telegrams since 1905 and of the multiple concession is withdrawn, the revenue would be increased by something like Rs 20 lacs” The number of Press telegrams dealt with during 1923 24 was 445,320 This number incieased to 505,450 during 1929 30 and the estimated loss referred to above will now be correspondingly increased 129 We have examinert the estimates of the Accountant-General do not think that the difference between the amount actually recovered, and that recoverable at the rates applying to public traffic, is a true measure of the loss incurred by the Department, for, an enhancement suffi cient to raise the Press traffe rates to the level of those chargeable 02 ordinary traffic must inevitably reduce the volume of traffic We consider that a truer measure of the loss is the saving that could he effected of no Press traffic had to be handled , and, at our request, the Director MI1 We ·60 General of Posts and Telegraphs, has kindly prepared an estimate of this amount, based on the statistics for 1929-30. His estimate is summarised below : Number of inland Press telegrams 505,450. Corresponding number of signalling operations 505,450 X 2.86 X 3 X 4.72 2,04,69,511. N.B.-These factors are conversion factors meant to allow for the length of Press messages and for multiple telegrams, and must be applied to determine the actual amount of work involved in the disposal of this traffic. Amount of saving if the traffic is not handled. Rs. On pay of Telegraph Masters, Operative telegraphists and clerks including leave reserve, etc. 16,07,000 Pensionary charges at 8 per cent. of pay 1,28,000 Delivery charges 50,000 Engineering charges 8,92,000 Audit charges 21,000 . - Total saving 26,98,000 Deduct receipts froin Inland Press messages 5,45,000 Net saving. 21,53,000 per annum. 130. It will be readily admitted, we trust, that a private telegraph system, like the one operating in the United States of Amcrica, irould grant only such concessions on its press traffic, as it could afford to meet from the profit it derived from its other traffic. From this standpoint, the following statement comparing the proportions between the amount of the revenue from, and the amount of expenditur: on, Press and Private telegrams, in India and in Great Britain, during the year 1929-30 is interesting and instructive :-- Inland Press. Private. Percentage Percentage of Percentage of of gross Percentage of gross income on cost. loss on loss on income on cost. cost. cost. Great Britain India 31.50 20.20 '68.50 79.80 75.00 91.48 25.00 8.02 ·61 Speaking with the reserve that is necessary when dealing with statistics relating to two different countries and prepared on two different sys. tems, the figures do indicate that the concession granted to the Press in India, is on a larger scale than that granted in Great Britain In the latter country the loss on Press traffic is only 435 per cent of the gross working cost, lugher than that ou private traffic, wlule in India the loss 1$ 71 3 per cent higher than that incurred in respect of private traffic 131 We have also exaniand the possibility of reducing the loss, by providing differential rates as is the practice in Great Britain for day and might press traffic We have come to the conclusion however, that such an arrangement will not bring about any economy, and may possibly lead to increase in expenditure 132 After considering the question in all its aspects, we are of the opinion that because the Posts and Telegraplis Department is not liberty to levy the rates which would be justified on principles of com. mercial arcountancy or of traffic rating, it is entitled to be reirubursed the loss it incurs on its Press traffic, calculated as indicated in paragraph 129 In case it is found impossible to arrange for an actual credit to the Department, by debit to some other head of account, it should be arranged that tbıs loss should be exhibited separately in a subsidiary statement analys ing the profit and loss on the working of each branch, and that its amount shoula be excluded when determining the amount of surcharge or rebate, pavable by or to the Department, on the progressive loss or profit on its working LIIPT&Ph at ·62 CHAPTER XIII. Concessional Rates for Foreign State Telegrams. 133. Telegrams on Government business sent within Indian limits arc charged for at the same rates as are payable by private persons ; lut Foreign " telegrams on the business of the Imperial, Indian, Dominion and British Colonial Covernments are charged Ciovernments are charged for at half the ratos lerinbile from thic public for private foreign telegrams. This concession is granted jointly by all the telegraph administrations over which the telegrams are transmitted, viz., the British, the Dominion and the Colonial Governinent, the Cable ('ompanies, the Indian Radio Telegraph Company and the Indian Posts and Telegraphs Department. 13.1. The concession of half rates granted on the Indian Telegraph system applies both to telegrams originating or ending in India, and to those passing over Indian wires on their way between two foreign systems. The total charge for private ordinary telegrams to Great Britain and Europe generally is, at present, Rupee one a word via the Eastern Telegrupih iompany and annas twelve a word via Indian Radio Telegraph Company. The corresponding charges on State telegrams are eight annas and six annas. The charge per word for a State telegram is apportioned between the Telegraph Administrations concerned in the following manner : Tia Tig Eastern 1. R. T. fr. fr. Indian terminal charge .115 .113 British terminal charge .075 .075 Share of the Company .710 .510 Total .700 .900 Or *(8 as.) or (6 as.) XOTE.The exchange rate between the gold franc, which is the money unit in international telegraph accounts, is fixed at present at Fr. 1 =.54 Rs. 135. The reduction by one-half of the Indian terminal charge, i.E., the Indian share of the charges on telégrams originating or ending in India, vas introduced with effect from 1st August 1905, in the case of messages exchanged with Europe and transiting Europe, Aden and Africa ; and with effect from the 1st July 1906 in all other cases. The similar reduction in the 'transit' charge, i.e., the Indian share of the charge on telegrams passing over Indian wires on their way from one foreign system to another, was made with effect from the 1st January 1907. When the concessions were granted originally, Government authorised the Indian Posts and Telegraphs Department to take credit, pro forma, ·63 for the difference between the charges at public rates and those at the con cessional rate Administration Reports TI or 1923 24 was Rs 78 686 commercial isation' was that only real credits should be included in the accounts The practice of showing this item as 1 credit was therefore, discontinued 136 We have ascertained that on the foreign State telegramas recented in and sent from India, the loss of revenue resulting from the application of balf the Indian ' terminal' rate was approximately as follows R's Year 1926 27 56 271 1927 28 39 887 1928 29 71 095 The average annual loss is thus Rs 62,400 Similarly, the average loss from the surrender of half the Indian transit' charge on Britiul and Colonial Government messages is Rs 8 544 a year We have also been furnished with the following statistical estimate of the loss For the month of April 1930, the number of, and India's share of the charges on, such concessional messages were No Valve Rs Originating in India 1,166 5,087 Terminating in India 1 330 1,895 Transıtıng India 367 654 If the concession is abohshed the annual gain to the Department would thus be RS 61,014 on messages orginating in India, 22 740 on messages terminating in India 7,848 on messages transiting India 91,632 The greater part of the gain to the revenues of the Department would be at the expense of Indian revenues and the losers would be (1) the Departments of the Government of India, their subordinate and attached offices, and local Governments and Administrations as regards outward messages from India, (?) the India Office and the High Commissioner for the inward messages received in India ·64 137. We have cousidered the difficultics arising from the fact that the concession has been granted jointly by a number of parties. As regards the cable and radio companies, we would point out that they are commercial concerns working for profit, that they charge half rates for State traffic in virtue of the provisions of their agreements with the State, and that this concession is part of the price they pay to obtain the landing or operating rights. On the other hand, the Indian Posts and Telegraphs Imparuncit does not work for a profit and the levy of half terminal and transit rates on traffic which costs the Department just as much to handle as ordinary traffic represents a dead loss, There can thus be no question of the companies withdrawing the concession. The British Post Office can, however, follow up the increase in the Indian shares by a corresponding increase in the Britishı shares from .075 to .15 franc. If it does, the further additional cost to Indian revenues as a whole would be about Rs. 33.000 a year, and this amount will go to the British Post Office. YOTTB'or the calculations made in this paragraph it has been estimated that 90 per cent of the foreign stnte telegrams sent from India are to Great Britain, and that 33 per cent of the state messages received in India are from the Ilighi Commissioner's oflice the expenditure in which is debitců to Iudian ICTONNL'S, 138. We appreciate that the position involves factors which may lead To complications if the Indian shares of the tariff are raised to the normal level. At the same time there does not appear to be sufficient reason for depriving a commercial department of revenue admittedly due to it. Ilaving considered the matter in all its aspects, re are of the opinion that the dificrcnce between the normal (public) and concessional terminal charges on foreign telngrams on state business, originating from or terminnting in India, should be reimbursed to the Department through an annual adjustment in the accounts. Whether the Central Government should recover from the Provincial Governments the shares proper to them is a matter for the former to decide. The aggregate amount of credit to the Department, anr the shares allocable to Provincial Governments and the Departments of the Central Government, should be based on the results of an actual count of the traffic for two specific periods nf two weeks cach, carried out each year along with the census which is taken hy the Telegraph Check Office for determining the telegraph share of the sales of stamps. We make 110 recommendation in respect of messages transiting India, as the amount involved is small, and the matter is not free from complication. 1 ·65 CHAPTER XIV, Concessions to Indian States 139 The Indian Posts and Telegraphs Department makes a grant, free of charge, of service postage stamps to certain Indian States which TA in postal unity with the Department In the case of a few other States in postal unity, the Department has undertaken to cariy frte of clarge, within the territories of the State, correspondence md postal articles sent by State officials on the business of the State 140 This arrangement has been the subject of discussion in the Public Accounts Committee on more tban one occawon, and thev made the following reconimendation in para 18 (4) of then a eport dated the 22nd July 1930, on the Appropriation Accounts of 1928 29 "We notice that not much progress has been made in the disposal of questions relating to adjustments between the posts and Telegraphs and other Departments We desire to press the recommendation made by our predecessors last vear that the settlement of the items should be expedited, as mean bile the true commercial results of the working of the Department cannot be ascertained In particular, we desire that the question of the free grant of postage stamps to Indian States should be examined in order to see whether the Department should not get a credit for the amount in view of the commercialisation of the accounts 141 The relations between the Indian Posts and Telem aplis Depart ment and Indian States came under the examination of the Indian States Committee, 1928 29 and he suljoin extracts from their report so far as thes are relevant to our examiinition of the same problem "Paragraph 97. The efficiency and security of the postal arrange iments of India are matters of Imperial concern, in which the public in British India and the States are equally interested The services of the Imperial post office ure enjoyed by the Indian States in common with the rest of the countri Fifteen states have their own postal departments and are outside postal unit Fise of these states have conventions with the Imperial post office and work in cooperation ith it In the other ten states the greater part of the correspondence within the state is carried by the local post offices huile branches of the Imperial post office exist at most important places and currs corres pondence across the state frontiers In most of the convention states, Imperial post offices esist only on terntory which is British for purposes of jurisdiction such as railwa Stations, the residency area, etc The state postage stimțis of the live convention states are valid for correspondence to any part of India, but not overseas, while the stamps of the other ten states are not valid anywhere outside their respectue states The existing arrangements work well and it would not be in the interests of the publie in either British India or the States + ·66 to alter them. We do not see our way to recommend an extension of the convention system as desired by certain states. In the five convention states no questions arise that cannot be settled in the ordinary course as at present. In the ten states where the British and State postal systems exist side by side questions may arise as to the opening of new post offices. This is at present a matter of joint discussion and we recommend no change." Paragraph 101.-A claim is also advanced that state correspondence should be carried free within the state or that a liberal allowance of service stamps should be allotted to the states for this purpose. Allowances of service stamps are given in certain cases on no apparent principle. We recommend a settlement of this question once for all on definite principles." 142. Our otu examination of the documents placed at our disposal leads us to endorse the view of the Butler Committee that the grants of service stamps have been made on no general principle. Broadly speaking, however, the concessions bare been made in most cases to attain throughout India a unified postal system, which would conduce to the general convenience of the public, and the ultimate advantage of the Departinent. We are not, therefore, in a position to recommend, immediately, either the stoppage of these concessions or the allocation of the cost thereof to any other department of Government. Moreover, since the Round Table Conference has recommended that Posts and Telegraphs should form a federal subject, the question of concessions to Indian States will be discussed fully in the immediate future. In the circumstances, we prefer not to express any definite opinion on the general principle involved in this matter, but we suggest that no further concessions should be granted, at the expense of the Department, until the constitutional issues have been settled. 143. We would, howerer, like to draw attention to one aspect of the matter which seems to have escaped attention in the past. Most, if not all, of these grants were made in connection with postal operations and the relations between the Department and the states in the matter of telegraph and telephone communications are governed by an entirely different set of principles. The service postage stamps which are given free of charge to the states should not, in our opinion, be available for paying charges on telegrams, but from the evidence before us we are clearly of the opinion that as a matter of fact some portion of these grants is being used for this purpose. We recommend that suitable steps should be taken, say by means of a special overprint, to prevent the use of these stamps for paying charges on telegrams.

·67 CHAPTER XV. Departmental zersus Combined Telegraph Offices 144. The Indian Posts and Telegraphs Department deals with its telegraph traffic in two kinds of offices called Departmental Telegrapa Offices and Combined Post and Telegraph Ofices Departmental Telc. graph Offices are manned by telegraphists who may belong either to the General or to the Station Service, and are under the control of a Telegraph Master On the other hand, the telegraph branch of a Combined Office 29 stared by postal clerks who have been trained in signalling and who work under the control of the Postmaster Departmental telegraph offices perform only telegraph worl and are opened for specific reasons which may be technical, military or political in nature From the standpoint of the posts and Telegraphs Department, a departmental telegraph office is opened only when it is found that efficient telegraph service cannot be rendered by postal signallers in & combined office 145 The aserage monthly pay of a postal clerk is Rs 101, that of a Station Service Telegraphist is Rs 123 and that of a General Service Telegraphist is Rs 175 Thus, there is a difference, (1) of Rs 22 a month or Rs 264 a year betreen the pay of a Postal Signaller and that of a Station Service Telegrapluist, and (n) of Rs 74 a month or Rs. 888 a year, between the pay of a Postal Signaller and that of the General Service Telegraphist In addition to his pay, a General Service Telegraphist is entitled to frec quarters or to house rent allowance of approximately Rs 35 a month in lieu of free quarters 146 In para 97 of their report, the Posts and Telegraphs Department Committee of 1921-25 (Ryan Committee) recommended that the policy of converting Departmental Telegraph Offices into combined offices should be vigorously and consistently pursued The Committee also observed, in para 94 of their report, that it for purely military or political reasons the Indian Posts and Telegraphs Department is compelled to provide an office with a more espensire establish. ment than is justified by departmental requirements there seems no equitable reason why thoso departments whose demands are responsible for the extra expenditure should not be required to make an equivalent contribution in order to cover it” 147 We find that the Department has consistently pursued the policy of the conversion of departmental into combined offees as as shown by the following statistics Number of Year Combined Opices Departmental Offices, 1994 25 1930-31 :: 3,439 4,234 154 81 ·68 Of the eighty-one departmental offices which exist at present, we understand, that only 62 are required for departmental reasons. 148. An idea of the additional cost involved by the maintenance of departmental offices where combined offices would have sufficed, can be gathered from paragraph 92 of the Ryan Committee's Report wherein it is stated that in 1923-24 the conversion of twelve small offices from departmental to combined yielded an annual saving of Rs. 34,000 approxi. mately. The conversion of nineteen offices should therefore lead, on the 1923-24 basis, to a saving of roughly Rs. 54,000 per year. 149. We fully endorse the view of the Ryan Committee that a commercial department like the Posts and Telegraphs Department should not be required, for extra-departmental reasons, to employ an agency which is uunecessarily expensive, without being reimbursed the additional expenditure incurred by it. If it is found impossible to convert these nineteen offices into combined offices, the only deduction that we can draw at present is that these nineteen offices are being maintained for the needs or convenience of some other department of Government. We, therefore, recommend that a credit for the extra expenditure caused by keeping them as Departmental Telegraph Offices should be given forthwith to the accounts of the Posts and Telegraphs Department, by making recovery from the department concerned.

·69 CHAPTER XVI General Service and Station Service Telegraphists 100 Closely connected with the question of Departmental Telegraph Oficus 2.7sus Combined Post and Telegraph Offices, is that of the emplus meat of the two kinds of telegriphists General Service and Station Service This matter was dealt with at some length by the Ryan Committee in paia graph 98 et seg of their report. 161 We understand that the qualifications and training of General Service and Station Service Telegraphists are precisely similar, and that there is no question is to the relative efficiency of the two for the disch uge of their duties The General Service Telegraphist is however wable to transfer at any time to anv part of Indir while the Station Service Telegraphist cannot be transferred from the station to which he is attiched Tor this bability to transfer, the General Service Telegraphist secenses not only pay on a higher scale than his Station Service compeer but in addition the benefits of free quarters or a house rent allowance of Rs 35 per mensem The average monthly cost of a General Service Telegrapluist including allowances is stated to be about Rs 210 while that of a Station Service Telegraphist is Rs 129 or Rs 112 according as he is, or is not, attached to certain expensive localties 152 When the Rvan Committee submitted their report to Government the proportion of the General Service to Station Service Telegraphists was 80 20 This indicated that 80 per cent of the sigpalling staff in depart Dental Telegraph Ofhces was transferable to meet Auctuations in trafla or to enable staff being found for places where local recruitmept of Station Service Telegraphists was not possible The Ryan Committee reconn. mended tuut the proportion of General Service Telegrapluists should be reduced to 50 per cent and stated that the attainment of this proportion will result in an annual saving on the then expenditure, of approximat ly RS 7 Incs in pay and Rs 4 30 000 in house rent allowances or Rs 11,30 000 in all 153 In viety of the large reduction in the number of Departmental Telegraph Offices which has occurred since the Ryan Committee submitted their report and the rapid development of educational facilities wluch 13 taking place we consiųer flit eren a proportion of 20 per cent recota mended by the Ryan Committee, is excessive as compared with the require ments of the Department 12 the matter of transferable staff It 12% zot possible for us to test our view bs collecting statistics of the arcrrige number of transfers actually made every tear, but we find that Station - hon omninyed in such stations as Ootacamund, er of places in Burma there it iray raplusts would present difficulties תת 154 The respectile numbers of the members of the also the strength of the local service to which the ·70 stopped, on 31st Diarch 1926 and 1930, were as shown in the sub-joincd table Telegraph Masters. Telegraphists. 31st Marchi 1926. 31st Dlarch 1930. 31st March 1926. 31st March 1930. General Service Local Service Station Service .. 322 29 2 302 15 4 2,350 108 540 2,183 64 533 Total 353 321 3,004 2,780 Accorring to the table Telegraph Mfasters and Telegraphists of the General Service still number $0 per cent, of the total staff of Telegraph Masters and Telegraphists. Thus, it will be seen that the Ryan Committee's recommendation does not appear to have been given effect to. We understand that the annual casualties amongst this staff come to 189 and that the staff required to fill the vacancies is recruited on the results of a competitive examination and by promotion, in the proportion of 92 General Survier Telegraplists and 97 Station Service Telegraphists. Even if it be assumed that all the casualties will take place amongst the General Servicc and Local Service staff, a period of about 10 years must elapse, on the present basis of recruitment, before the approved proportion of 50 per cent. can be attained. 155. We are of opinion that the General Service scheme is now not necessary for the work of the Department. We understand that it sometimes lappens that a General Service Telegraphist or Telegraph Master is able to stay in the same place, often the place of his choice, for many years without transfer. Thus while enjoying the better pay and the house rent concession, he is virtually a Station Service Telegraphist or Telegraph Master though he has always to face the chance of a transfer. 156. Our terms of reference preclude us from dealing with questions of policy and retrenchment, but no commercial undertaking would face with equanimity the prospect of unnecessary expenditure amounting to scveral lacs of rupees per year. Seeing that the employment of a more Highly paid staff than is required is not necessary for departmental reasons, any figures purporting to show the cost of the Department must he yitinied to this extent. In the circumstances we recomniend that at least further recruitment to General Service should be stopped forthwith. Our terms of reference do not make it necessary for us to study the conditions of employment of the General Service men. But Tre would suggest the adoption of a scheme whereby all Telegraph Masters and Telegraphists should in future be employed on a uniform scale of pay, with liability to transfer on payment of extra remuneration for the period of transfer. Such a scheme would then enable the Department to make a charge against other departments, such as the Military Department, if the transfer-has to be made for the requirements, or on the initiative, of such other department ·71 CHAPTER XVII Adjustments for services rendered A--Rents charged to Rarlays and Canals for use of urres and apparatus supplert to them 157 Although in the early days of Telegraphy Indian Railways were allowed to construct their owd telegraph lines it was decided by the Gov ernment of India in 1871, that full control over such telegraph lmes should be vested in the Telegraph Department, and as a result of this decision all such lines constructed by railways were acquired by and added to the a sets of, that department Thereafter, the Telegraph Department re covered from the railways, the cost of maintenance of these lines Pio tracted and highly controversial discussions followed regarding the assess ment of the maintenance charges but for our purposes it 18 sufficient to state that since the 1st April 1909 a flat annual rental of Rs 24 per mile of wire has been charged to railways for all telegraph wires leased to them by the posts and Telegraphs Department Since 1909 the cost of un tuming lines has been affected to a considerable extent by price fluctuations as well as by the increasing use of copper wire instead of irou Tali in the construction of such lines 158 For some scars past the Posts and Telegraphs Department has bern enlearouring to worh out revised rentals to cover the cost of main tarung telegraph lines rented to railways This examination has since been carried out, and the annual rates for wires rented to railway would be, it is zeported as follows - Iron wire Copper wile Interest Depreciation Maintenance Rs 896 4 83 7 66 Is 21 00 7 63 7 06 21 15 37 19 or roundly 21 SO 37 00 These rentals if accepted by the railway authoriti vould bring in addı tional revenue of approximately Rs 4 lacs per auntim, to the Department on the basis of the present wire mileage in use br the railtrays 159 The Posts and Telegraphs Department also constructs and maintains telegraph lines along canals, and prior to the 1st April 1930 rccos crect the maintenance charges at a flat rental of Rs 24 per annum per mile of wire This rental was revised with effect from the 1st of April 1930, and the following rates were substituted Iron Wire Rs 3+ per annun Copper wire - Rs 50 per ·72 In arriving at these rates, however, a more or less arbitrary assumption was made regarding the division of establishment charges in conncction with the maintenance of telegraph lines. The investigations now completed would seem to indicate that the correct average rental for lines off railways should be Rs. 40 per annum for iron wire and Rs. 56 per annum for copper wire. The question of further enhancing the canal rales in accordance with these conclusions is therefore under consideration. 160. The question of the revision of the rent which railways and canals have to pay to the posts and Telegraphs Department for the use of telegraph wires and apparatus supplied to them has received the attention of the Public Accounts Committee on various occasions in the past few years. Tlie importance of the question to the commercial accounts of the Department will be realised from the following statement comparing the revenue from this source, and the total receipts of the Telegraph and Radio Branches of the Department, during the last few years - Rent of wires and instruments leased to rail. Total revenue. ways and canals. Rs. Rs. 1923-26 42,19,377 2,87,83,979 1926-27 44,32,790 2,84,39,847 1927-28 49,20,034 2,89,40,639 1928-29 50,96,832 2,96,90,093 1929-30 54,09,963 2,80,34,013 1930-31 (R. E.) 58,00,000 2,71,97.000 1931-32 (B. E.) 58,00,000 2,81,17,000 361. Apart from such general considerations as the rise in the cost of establishment, material, transport, etc., which has occurred in the interval since 1908, it is obvious that a rent which is cconomic for iron wire cannot be sufficient to cover the supply of copper wire which is considerably more expensive. We understand that the demand of Indian Railways for copper wire circuits is increasing rapidly, and that of late a demand has arisen for copper wire of gauges heavier than that of the standard copper wire liitherto supplied by the Department. It would appear, therefore, in the absence of an adequate rent for copper wire that the Department has been locurring a certain amount of actual loss on this transaction, and that this loss is increasing rapidly. This case is one in which, in our opinion, early settlement is very desirable. B.--Revenue from telegrams booked at licensed telegraph offices. 162. Under the orders contained in Resolution of the Government of India, Public Works Department, No. 203-35-T., dated the 2nd May 1882, reproduced as Appendix 6 to this report, revenue from inland telegrams addressed to any place in India, handed in at Railway Telegraph Offices is retained in full by the Railway adininistrations. Similarly, the Posts and Telegraphs Department on its side retains receipts from telegrams handed in at its Telegraph Offices for delivery from Railway Telegraph Offices. It has been brought to our notice, that the credit received by the Posts and Telegraphs Department under this arrangement is not a fair a-silent of the work performed or service rendered.

·73, 10ILS 163 We understand that this case has been under examination fo very long time A note detailing the proposals was submitted to the alway Board some years ago Certain criticisms and counter claims Pre ma le by the Bourd We are informed that the figures in the original ots are being revised and that further negotiations are contemplited a the circumstances we have not thought fit to examine this question in ctail, from the point of view of both the Departments but we are trongls of opinion that there should be no further delar in the negotia If the Departments cannot come to an understanding rithm a reasonable distance of time we would suggest the appointment by Govern ment of an arbitrator to effect an earlt settlement Ciscellaneous Services 161 Besides the important cases discussed in detail in the precedin: sections of this chapter there are several instances of such services rendered by the Posts and Telegrapbs Department to various parties for wluch 110 charge is recovered from them at present We understand however that in some of these cases the question of remunerating the posts and lele graphs Depurtment is under consideration Some of these instanco are (a) Heads of Governments or Administrations and some high Gor ernment officers mentioned in the list given in rule ? 2) Appendıs A of the Posts and Telegraphs Manual Voluna VII have been granted the privilege of special mail bigos while on tour This enables early transmission and deliver of paid correspondence both registered and unregistercih addressed to them in camp without ani post town (6) Paid intard foreign correspondence both registered and un registered not addressed to a post town for Heads of Govern ments or Administrations and the high officers mention d in the list given in Rule 12 Appendix A of the Posts and Telc graphs Manual Volume VII is forwarded in special bags either to their headquarters or in accordance with their tom programmes (c) Abbreviated telegraphic addresses of Government officials are registered free of charge thereas the following charges arn leried in the case of members of the public or firms For one address---Rs 15 a year For the first ten addresses of a single firm--Rs 15 cach a year For the second ten such addresses of a single firm---Rs 780 each a year For each subsequent one-Rs 4 8 0 each a year We understand that the British Post Office does not renler such service free of charge to Government officials (d) Issue of Salt Iicenses ---The Posts and Telegraphs Departmen issues salt licenses in certain localities on behalf of the Sal Revenue Department This Department does not charge an remuneration for this work but the officials who actnall issue the licenses receive a small commission of three ann per license issued ·74 163. is the proposal to levy suitable charges for these services is said to be under contemplation, we do not fcel called upon to make any specific recommendation in regard to any of them. We should like, however, to make the general obscrvation that while the amounts due to the Department may be small in respect of these services individually the aggregate cost incurred lip the Department may be quite appreciable, and we reconmend therefore that this consideration sliould be kept in view in dealing with such matters. 166. We should like to close our remarks in this connection with one general oli.Prvation. We are inclined to believe that in the case of certain classes of employees suelt as counter clerks, the amount of waiting time is 211) Inger than is gonerally realised. For justance we understand that an investigation into this matter made by the British Post Office revealed in some cites a proportion as liigh as 70 per cent, of total time. We Surgest therefore that this factor should be taken into account in making calculations of the cost of services rendered to or on behalf of other departments. 1). -Inter Brunch :1djustments. 167. Is the Profil and Loss account of the Department is required to slow the results of working cach constituent branch, inter-branch adjustruents are necessary in respect of services rendered by one branch to another. The final result of the working of each branch must therefore depend on the suitability and accuracy of the methods by which these muutunl srvices are evaluated and adjusted between the branches. We understand that the leads of the various branches afiected by this system are consulted when the methods of calculation for these adjustments are settled, and that the methods actually adopted have received their con- Cuirrenice. We understand that the various overhead charges that go to make up the aggregate cost of a service are taken into account in fixing the amounts chargeable to different branches of the Department or different Departincnts of Government ; but we have noticed that the authorised code containing ihe instructions for these apportionments does not contain any general statement or instruction to this effect. E.Guarantee calculations. 168. We understand that the Department obtains from interested parties a guarantee against loss when undertaking to provide facilities under unremunerative conditions, and that the amount of the guarantee is calculated in accordance with certain standard formule. In this counection, we liave considered the desirability of maintaining separate commercial accounts for each unit of departmental activity such as a post office, local telephone system or a single trunk telephone line. The usefulness of such accounts is obvious, but the cost would be very heavy, if not al. together probibitive. We think, therefore, that the present arrangement under which such calculations are made as and when required, according to standard instructions contained either in the departmental codes or issued separately for the occasion, is satisfactory. We understand also, that the Accountant-General has been asked to maintain for the first three years of their existence profit and loss accounts, on a simple plan, of small telephone eschanges opened under the orders of Heads of Circles. We desire ·to ampliusise however that any standard method of ascertaining the res alts of the working of an office, that may have been laid down in the pas, or may be evolved in the future, should be reviewed at periodical inters als ko as to ensure that the Department does not undertake to provide a nu service or lease out a part of its monopoly rights without full knowledge or its final implications F-General suggestions 169 The two cases dealt with in paragraphs 157 to 163 relating respectively to the rent for mies leased to rulways and to the apportion ment of telegraph revenne of licensed telegraph offices illustrate the difficulties ind delays that are likely to occur in the settlement of clums of one Department against another of they are left to be seatled by discus 810 01 correspondence This is not surprising as such claims are based on calculations which are, to say the least of a very intricate nature and sometimes involve at some stage or other, certain assumptions which can be made only on the judgment of the oslicers most conversant with the techni calities of the situation On the other hand, the Department that is called upon to meet an increased claim naturally wants to satisfy itself that he calculations are fair Discussion> may thus go on indefinitely while the accounts swier in accuracy We suggest that suitable muchmers should be devised for expediting the final settlement of such cases For instance it may be arr'inged that both the Departments should state their sides of the case and that the two statements should be submitted to an impartial authoritt for adjudication VYe hasten to add however that the evidence placed before us in respect of the two cases referred to does not in any way lead us to think that the delay in the settlement has been caused by the Railway Department of the Government of India Our impression is that the delay has been due to the complexity of the problem, and to the long time that has been taken to collect the data necessary for the calculation 170 The services for which the Department recentes credit from other parties, 01 for which inter branch adjustments are made, are so numerous and their nature is $0 varied, that it was not possible for us, in the linuted time at our disposal, to assess the suitability of the particular methods employed for determining the actual cost of each individual service or to test the accuracy of the rates charged. We have however, examined generally the principles underlying the mothods adopted, and we find that they are both fair and correct Some of the methods were revised recently, others are, we understand, under revi sion but there are set many which were in existence several years ago re, before the accounts of the Department were placed on a comm'rcial basis We are glad to note that the Department is alive to its responsibilities w the patter, but we would like to emphasise the need for an early revision of all such methods and formulae as were determined before 1923 when the full implications of a commercialised system of accounting were perbaps uot realised by the Department 171 We suggest further that definite instractions should be issued by Govertiment and incorporated in one of the recognised codes, that a proper proportion of charges of the following nature, should altis be included in erery calcnlation of cost or rate per unit, and in determining the lump sum amounts that may be due to the Department rendered by it 4 ·76 2 T. Supervision charges (0) Subordinate non-gazetted supervision. (0) Gazetted supervision. () Circle nffice charges, (d) Charges of the Directorate. (c) Accounts and audit charges. NOTE--Thic charges should be inclusive of the cost of lcare whether incurred in the shape of pay of a lenye reserve or otherwise, and a fair share of travelling allowance and contingencies. II. Contribution for pension levied at the percentages fixed by the Government Actual's for determining the contribution made by the Departnient 10 geloral revenues. Tie ainoint to be included in the cost calculation shouli bir bousel on the pay of the staff directly engaged on the work, as rell ins on the allocater share of the pay of supervising stati. III. Recurring expenditure on buildings whether incurred in the shape of rent paid by the Department to owners of buildings or as interest, dapreciation, maintenance charges and rates and taxes. The amount chargeable in respect of buildings should be so regulated as to cover the cost of accommodating the supervising establishments.. 1V. Tintorest, depreciation and maintenance in respect of such assets, other than buildings, as may be required in rendering the service. The rate of interest should be fixed high enough to cover the amount chorgesi liy Government on the capital outlay of the Department. Miscellaucous charges relating to $lore-keeping inclusive of a euitable amount to cover normal incidental losses. 172. Finally we suggest that the calculations should be reviewed periodien!ly and revised to suit changing conditions of accounting and administration, and that the Accountant General, Posts and Telegraphs should be consulted in and his concurrence obtained to, all revisions of the incthods of determining the rates and amounts charged for various services, and where itecessary of the rates and amounts. It will be desirable to include iustractions to this effect in one of the codes. 1 ·77 CHAPTER XVIII Miscellaneous 4-Royalties from Telephone Companies 173 Ye hare considered the propriety of the inclusion, in the commercial accounts of the Trlephone Branch, of the royalty recovered from the liensed Telephone Companies in India These are the Ben al Telephone Corporation, Ltd, operating in Calcutta, the Bombay Telephone Company, Ltd, in Bombay, Ahmedabad and Karachi , the Madras Tele phone Company, Utd, in Madras , and the Rangoon Telephone Company, Lid in Ringoon and Moulmein Under clause 3 (3) of the first schedule of the liceuse granted to these companies, the royalty payable to the Depart mentis fact at five per cent on the gross amount of every son of money paid or payable to the licensees In respect, however, of telephone wires Thich are situated beyond the limits specified in the license, a royalty of sis per cent, is payable The total amounts of these royalties recered durmg the past few years were as follows Yeai Rs 1923 24 2,65 712 3921 25 2,41,284 1925 26 273 797 1926 27 3,09,434 1927-26 3,38,791 2928 29 365,011 1920 30 2,83,265 174 The only argument against the present practice of treatiny nuese royalties as departmental revenue that we can think of is the consideration that this retenue is not derived from the employment of any capital assuts of the Department. The source of a receipt is not, however, the only criterion for deciding its allocation, and due weight must be given to the Principles which regulate the accounts of commercial departinants equally with those of non commercial departments, to the declared policy governing the operations of the Department, and lastly, to the inherent rights of the Department to extend its operations and activities From the standpoint of general principles of accounting, we are of the opwion that there is no other Department of Government with a better title to this revenue, and our vier is borne out by the practice in the British Post Office the accounts of which it is understood, are credited with similar revenue As regards the second consideration, we invite a reference to the declared policy of Government in respect of the working of the Depart- Treat reproduced earlier in this Report Taking into account the various stages of commercial and educational development reached a the country, it is obvious that, in order to secure the acerual neither of profit nor of Icss on the whole of its actirities, the Department must counterbalanco gains of one kind or in one area against losses of another nature or incurred in other places As licenses to operate telephone systems would Le songbt for by private companies only for those areas ibere profits can be secured, for esample, in Presidency towns and large centres of LIIPT&Ph ·78 . industry, it follows that the grant of such licenses prevents the Departmant froin obtaining the gains which it requires to counterbalance inevitable losses of other kinds or in less profitable arcas. From this standpoint, the royally represents merely the quid pro quo for tlie restraint placed on , the operation of the Department. Lasuy. the grant of licenses is due either to a desire to avoid raising large ainoints of capital or to encourage private enterprise. Neither of they consilcrations con, in our opinion, detract from the inherent rigut of thic Dopartment to treat these royaltics as its departmental revenuc. B.mildjustment for 'lags' ann' throwforwards '. 1757. Thir accounts of a comincrcial concern are based on: carnings anul" sorking expenses ", while those of Government are based on actual receipts 6110 actund payments". The reasons for the former practice are Fajriya olrjons. A trading or manufacturing concern is set up general- }swith the sole aim of making a profit and distributing it to its partners or shareholders. The personnel of the partners or shareholders is liable to change is duise of partiers or transfer of shares, and it is therefore of prime it:portance to determine the actual profit and loss for each accounting period with exactitude, so that each partner or shareholder may receive the full amount of his profit or accept responsibility for his share of the loss during the period of his connection with the enterprise. Further, a business concern is subject to taxation and is also subject to be wound up at any time! 176. T13 kloption of the commercial practice in the posts and Telegraphis accounts was considered at the time of commercialising the accounts. It was realisert that the conditions in a great Department of State created for providing a public utility service are somewhat different. The making of profit in the distribution thereof is not its primary funcion. In fact, under the terms of tlic policy got crning its operations the Department is precluded from making a profit or froin incurring a loss A cessation of its operation is unlikely and so is the possibility of its being subjected to taxation. The Profit and Loss account of such a Department partakes. thercfare of the nature of a cost account designed to show whether the Demminent is paying its way, or is a drag on the general exchequer and consequently a burden on the general tax-payer. It was accordingly held bi liorernment that a rigorous adoption of the commercial metliod of treating receipts and disbursements in accounts is not necessary, that such action is likely to involve expenditure incommensurate with the results obtained and that an adjustment to allow for the divergence between "carnings” and working expenses on the one side, and tle actual incomings outgoings on the other, should be made only in d'espect of such items of receipts or expenditure as are subject to violent fluctuations from year to year. 177. Baseci on these principles, the following changes rerc adopted at the time of the commercialisation : (i) The stores and manufacture suspense accounts were transferred to a capital head outside the revenue accounts of the Departinent and of the Government of India. (ii) a depreciation fund was instituted to provide for renerals and replacements as they fall due. and“ ·79 (112) The annual charge for pensions ras based not on the actual payments of pensions to retired employees in iny part cular year but on the present worth calculated on an actuarial basis of the future pensions in respect of the service rer deren in the year Te Late examined the figures of various classes of ieceipts and espenditure hooked in the commercial accounts commencing froin 1st April 1925 and pave come to the conclusion that no further changes are neces sary, at princnt in order to allow for the divergence betre a cash and accrued figurts We should add however that a decision on 1 matter like this cannot boid true for all time and we suggest that th position sk uld be elamined from time to time to determine the necessity or other wise of making similar adjustments in respect of other classes of receipts or expenditure C.--Cost of manufacture of and freight on stamps 178 One item of expenditure which seems to require parti ular atteu tion in this respect is the cost of inunufacture of and freight on stamps and postal stationem The vol nt fletuntions that occurred in the years 1923 24 to 1925 26 were jucidental te understand to the 1 min on of the old practice of obtaining supplies from England and the commen ment of the manufacture of stamps and stationery in the Securit Printin: Press nt Yasak Similar fluctnations n the next four years icre due to the necessity for building up adequate balances of stamp in trasmes This process is probably reaching completion and in future vers the fluctuntions from year to year will not be material Neverthiesen is stated earlier this matter shonld receive periodical attention 179 We obsere also that the ratio of the cost of munnfacture of and freight etu, on stamps to the glass sales is very ligh As 7 commercial department interested in getting its supplies is cheaply as possible it bebores the Department to hecp a leen watch on any tendency either to an increase in the ratio or even to its stabilisation at the present lush figure With the steady fall in prices and the expansion of business 17 the Security Piess the ratio between the cost of nianufacture and the grossale proceeds should tend to fall and fall steadily To be useful this scrutini must be exercised sistematically from Jear to year and re suggest thrt suit able arrangement sliould be ir ade for obtaining the necessary figures and for their revies by competent authorities DCost Statistics 180 A commerenl acerunt supplemented by a systeio of accurate statistics is an inder of the loss or profit on the worljpg of an indiz lua! branch of the Department It is also of usc in the coeching of extra sagance and the pretention of the leakage of revenue and finalit 10 affords a clear indication of the directions in thich the ratas cbarged for service provided by the Department require amendinept We have examined the statistics showing percentage increases of prost?! telegraph end teleplioue rates levied at present compared with those charged in 1914, and also the effect of these on the volume of traffic as distinguished from se some of the statistics pubis a result, me hare resch nt collects a large amount of 1 ·80 statistical informatiou relating to various descriptions of traffic, full use of these statistics is not made in the revision of rates, in the tapping of now sources of revenue and in ascertaining the čemunerativeness or otherwisc of a particular unit or branch of the Department. In order that the Departinent might reap the full benefits of a commercialised system of accounting and of its statistics, we consider that adequate action should be taken to revise the standard methods of costing for the more important services icndered by the Department to the public and of the statistics themselves, 181. a suitable system of cost statistics would be useful in dealing with improvements in the pay and allowances of the staff. It is an accepter principle that in a commercial department the rate of pay to be given to particular individuals or classes of cmployces should have a direct relation to the kind and quality of the work for which they are engaged, and to the remunerativeness of that work to the Department. In the absence of a proper " costing " system, it is not unlikely that greater weight may sometimes be giveri, when dealing with proposals for revisions of pay, to consiciorations of a gcueral character, c.J., rate of pay sanctioned for stafi with similar qualifications employed in other Departments or recruited in particular localities, etc., than would be warranted if due consideration was given to the remunerativeness or otherwise of the nature of the work on which the starſ would be employed.

·81 CHAPTER XIX Conclusions and Recommendations 162 The principal conclusions reached and recommendations made by us are not summarised (1) The lives of various classes of assets as fixed by the Chief Encineer for calculating the depreciated value of fixed assets on 1st April 192) and for calculating future depreciation are mappropriate and generally underestimated The average lives and residual values should be fixed az shoten in Appendis 1 (Paragraphe 38 and 40 ) (11, The estimates of unexpued lives made at the time of the valuation in respect of assets of which the date of construction (or last reconstruc tron) was rot known were based on the expected lives fixed lr the Chief Fugineer As the latter are to be revised the former shonld also be changed part passu and the accrued depreciation on 1st pul 19%re calculated The amount of accrued depreciation on 1st April 1929 should be reduced from Rs 909 85 728 to Rs 8 25 35 096 (Paragraph 56 ) (112) (Q! The decisions to write down the value of fixed assets by the amount of accrued depreciation to their depreciated value on 1st April 192. End to finance reconstructions partly by making advances hearing current ratns of interest have imposed an unfair burden on the finances of the Department (Paragraph 70 ) (0) The institution of a Sinking Fund to provide for de recution acer ung after 1st April 1920 in preference to a straight line depreciation fund was probably sanctioned under a misapprehension of the conparative net cost rf the two methods (Paragraph 73 ) (c) The use of one method for calculating and providing for irrears of deprecration on 1st April 192) and another for depreciation accruin, after that date has led to complications with a liabilito of mistahes occur ring in the accounts (Paragraphs 65 and 75 ) (d) We recommend (paragraphs 72 and 74) that (1) The initial capital account of the Department shoul I be fixed at the amount at charge on 31st Yarch 1923 as slios in the Lunance and Revenue Accounts for that less Rs 1 29 83 517 which is written off as representint errors m accounting and value of as ets lost or abandoned ctc AS slown in paragr iph 26 tbe amount will be Rs 20 53 62 337 (2) The Department should pay interest on the full amount of the (apital at charge at 3 3202 per cent j er annuun in respect of vutlar incurred up to the rear 1916 17 iuclude and at varying rates on outlay in subsequent years (Paragraph Tear 71 ) (31 The Depreciation Fund of the Department should be mstituted ith an initial openinr balance of hs 823 33 096 being the amount of the accrued depreciation on 1st April 1925 (Par? graph 71 ) ·80 statistical information relating to various descriptions of traffic, full use of these statistics is not made in the revision of rates, in the tapping of Now sources of revenue and in ascertaining the remunerativeness or otherwise of a particular unit or branch of the Departinent. In order that the Department might reap the full benefits of a commercialised system of accounting and of its statistics, we consider that adequate action should be taken to revise the standard methods of costing for the more important services rendered by the Department to the public and of the statistics thonscives. 181, il suitable system of cost statistics would be useful in dealing with improvements in the pay and allowances of the staff. It is an acceptcd principle that in a commercial department the rate of pay to be given to particular individuals or classes of employees should have a direct relation to the kind and quality of the work for which they are engaged, and to the remuerativeness of that work to the Department. In the absence of a proper costing system, it is not unlikely that greater weighit may suinctimes he giveri, whien dcaling with proposals for revisions of pay, to conserutions of a general character, c.g., rate of pay sanctioned for stafi with similar qualifications employed in other Departinents or recruited in particular localities, etc., than would be warranted if due consideratio2 was given to the remunerativeness or otherwise of the nature of the work 2011 wliet ile sta'I woull be employed. $ ·81 CHAPTER XIX Conclusions and Recommendations 182 The principal conclusions reached and recommendatious made by us are now summarised () The lives of various classes of assets as fixed by the Chiet Engineer for calculating the depreciated value of fixed assets on 1st April 1927 and for calculating future depreciation are inappropriate and generally underestimated The average lives and residual values should be fixed as shown in Appendix 1 (Paragraphe 38 and 40 ) (11, The estimates of unexpued lives made at the time of the viluation in respect of assets of which the date of construction (or last reconstruc tron) vas rot known were based on the expected lives fixed ly the Chief Forimper As the latter are to be revised the former should also be chaisged part passu, and the accrued depreciation on 1st Ipul 1925 ie calculated The amount of accrued depreciation on 1st April 1927 should be reduced from Rs 909 85 728 to Rs 8 25 35 096 (Paragraph 56 ) (171) (a) The decxions to write down the value of fixed assets, by the amount of accrued depreciation to their depreciated value on 1st April 192. cad to finance reconstructions partly by making advances hearing current sans of interest bave posed an unfair burden on the finances of the Department (Paragraph 70 ) (0) The institution of a Sinking Fund to provide for depreciation accriing siter 1st April 1925 in preference to a straight line dejeciation fuud was probably sanctioned under a misapprehension of the comparative net cost rf the two methods (Paragraph 73 ) (c) The use of one method for calculating and providing for irrears of deprecintion on 1st April 1925 and another for depreciation accruiny, after that date has led to complications with a liability of mistakes occur ring in the accounts (Paragraphs 65 and 75 ) (d) We recommend (paragraphs 71 and 74) that (1) The initial capital account of the Department shonld by fisert the amount at charge on 31st March 1920 as 57 Inho Tinance and Revenue Accounts for that Rs 1 29 83 517 which is written off as representa in accounting and value of assets lost or abod aa.. **- shown in paragraph 26 the amount will be its 2* (2) The Department should pay interest on foula tapital at charge at 3 3252 per cent. para outlay incurred up to the rear 1912 varying rates on outlay in subvanger 71 ) (31 The Depreciation Fund of the comment sith an initial opening to get ? amount of the accrued cu graph 71 ) ·82 (4) The Depreciation Fund should be worked on the straight line method retrospectively from 1st April 1925 and interest on thie depreciation fund balances should be credited as the reremic of the Department. (Paragraph 71.) 2.1.-The net effect of the changes recommended at items (d) (2) and (4) on the cominereinl results of working would be to increase the loss accumulated in the venra ending 1929-30 by Rs. 15,29,084. (11) Interest on capital is correctly included in the Profit and Loss account, irrespective of the source from which the capital outlay was financed. (Paragraph 82.) (7"! During the five years 1925-26 to 1929-30, the rate of interest allowed on the assets of the Depreciation Fund has been considerably lover thon charged on the capital outlay (incurred after 1916-17). In equity the two rates should always be equal ; and we suggest that Government consider the question of giving retrospective effect to the equality in raits. If the quality in rates adopted in the Revised Estimates for 1930- 31 lid cristal from 1st April 1925, the effect of the changes stated at items (ili. (ili (2) to (4) abore would have been to increase the revenue of the Department, for the five years ending 1929-30 by Rs. 62,46,420. (Paragraph SG.) (ri) The rules for allocation of expenditure between working expenses and renewals and replacements are very complicated, and tend to throw in unitecessary and unjustified burden on the annual working expenses. Thing should be simplified and revised to meet the requirements of a straight line depreciation fund. The entire cost, irrespective of its amonnt, of Yerving ok unit asset should be charged to renewals and replacenients (1.l., depreciation fund). The present practice of transferring a portion of the annual maintenance charges to renewals and replacements will probably still be necessary and should be continued therefore until expcrience has been gathered of the working of the ner rules. (Chapter V and paragraph 75.) Iris l'he inclusion, in the Stores Suspense section of the commercial accounts instituted from Ist April 1925, of the book value of all stores, a considerable portion of which was immediately afterwards found to be either userviceable or borne at too high a rate has reacted to the disadvantwere of the commercial results of working in two ways. Departmental working expenses had to meet, in the five years ending with 1929-30, a total loss of Rs. 27,70,643 incurred in the disposal of unserviceable inaterials and writing down inflated values. It had also to meet the interest on this amount from 1st April 1925 to the various dates of disposal. As these stores must have accumulated over a long period before the commercialisation of accounts the commercial accounts have been vitiated. (Paragraph 30.) (viii) The principle of the grant of a rebate or the levy of a surcharge, as the case n'ay be, in respect of interest on the net profit or net loss on the working of the commercial branches of the Department is endorsed. It is necessary, lowerer, that losses that may be incurred by the Department on its non-coininercial activities or on special services which the Departnıent is called upon to render below cost should be left out of account in determining the amount liable to surcharge. (Paragraphs 87 to 89.)

·83 (1.1) (a) Pension is of the nature of deferred pay and an amount to cover this liability calculated on a proper actuarial basis is therefore cor. rectly included in the Profit and Loss account (Paragraph 95 ) (01 The formula adopted for calculating the annual charge, in the revised estimate for 1930 31 and the budget estimate 1931 32, I 82 per cent of the total pay and leave salary of the pensionable establishment ex. cluding pay and allowances not counting for pension This should be lednced to 7465 per cent with retrospective effect from 1925-26 The sun of Rs 17,24 969 which has been contributed by the Department in excess of that 1cquired by the formula, in the five years ending 1929 30, should br restored to the Department (Paragraph 109 ) (ci le recommend that a further investigation should he carried out on the emple plan outlined by us, thin the next few months, and the re calculated vate should be adopted for the future (Parigraph 102 ) (« We consider that a hypothetical pension fund account should be Irurtainerl as from Ist April 1925, in order to check from time to me, the continued accuracy and reliability of the percentages employed to determine the annual contribution We have made suggestions as to how this account should be opened and maintained (Paragraph 103 ) (n) (a) Thų formuin used at present to determme tiic amount pavable to Local Governments and Administrations as their share of the revenue from unified stamps is unsuitable and yields results which art unfair to the Posis and Telegraphs Department In our opinion it is impossible to deduct any mathematical or statistical method which will be fur alike to all parties We recommend that to secure a proper basis for calculating these assignments in the future separate revenue stamps should be introaucel 79 a temporary measure for two or three years The atio found to subsist hutween the actual sales of the separate revenue stamps and those of postage stamps of corresponding values should be adopted as the basis (Paragraph 124) (bi tuntil tbe first results of the test become available the minor defects inrlicated ur the report should be rectified (Parastaph 119 ) (2) The rates charged on inland press telegrams are neither remuneraine in their results nor commercial in their basis and the Department incurs a large annual loss on this traffic We recommend that the Department should be reimbursed this loss as measured by the estimated savings in working expense, etc, which would result if (nus traffic was abolisind Tu case it is found impossible to arrange for an aciuut credit to the Deprrtment, the amount of loss should not be taken into account when determining the amount of surcharge on the progressite loss on working To the year 1929 30, the loss has been estimated at Rs 21,53,000 (Paragraph 132) (21) The Posts and Telegraphs Department should rective credit for the amount or the difference between the normal (public) and concessional terminal charges, on foreign telegrams on State business originating or terminating in India The annual loss incurred by the Department is about Rs 71 000 (Paragraph 138 ) (1111) As the Round Table Conference has recommended that Posts and Telegraphs should form a federal subject, the question of concessions to Indian States is likely to be discussed in full in the immediate future.

·84 We do not, therefore, recommend immediately either the stoppage of the concessions already granted, or the allocation of the cost to any other Department of Government. We suggest, however, that suitable steps should be taken to prevent the use of the service stamps granted free, for paying charges on telegrams, and that further concessions should not be granted at the expense of the posts and Telegraphs Department until the constitutional issues have been settled (Paragraphs 142 and 143). (xiv) The accounts of the Posts and Telegraphs Department should be credited with the amount of the extra expenditure incurred in maintaining Departmental Telegraph Offices solely for the needs or convenience of some other Department of Government (Paragraph 149). (xv) We are of opinion that Telegraph Masters and Telegraphists recruited on the General Service scheme are not necessary for the work of the Department. We recommend that at least further recruitment to General Service should be stopped forthwith. We suggest the adoption of a scheme whereby all Telegraph Masters and Telegraphists should be employed in the future on a uniform scale of pay with liability to transfer on payment of extra remuneration for the period of transfer (Paragraph 156). (xvi) The claim of the posts and Telegraphs Department for revised rentals for wires and apparatus supplied for use by Railways and Canals, and for a share of the revenue froin telegrams booked at Railway Telegraph Offices, should be settled expeditiously by mutual negotiation. If the cases cannot be settled within a reasonable period, they should be referred to an Arbitrator (Paragraphs 161 and 163). (xvii) Suitable machinery should be devised for expediting the final settlement of claims of one Department against another (Paragraph 169). (ariii) A few suggestions have been made for reviewing the methods in use for determining the cost of various services and for the maintenance of a proper system of cost statistics. (Chapter XVII, Sections D, E and F and Chapter XVIII.) 183. In view of the facts that the accounts of the Posts and Telegraphs Department were placed on a commercial basis with effect from Ist April 1925, and that the Department receives or pays rebate or surcharge on the accumulated profit or loss of its working from the same date, we are of the opinion that full retrospective effect should be given to all our recommendations summarised in the previous portion of this chapter. Unless this is done it is impossible to obtain a true picture of the commercial results of the working of the Department as a whole. As a further argument in support of our ġiew that full retrospective effect should be given to our recommendations, we would draw attention to the rule contained in Article 215 (a) of the Account Code issued under the authority of the Government of India. While generally prohibiting the correction of errors in the annual accounts after the latter have been closed, it makes an esception in respect of errors affecting the revenue and expenditure of different Governments, a capital head outside the revenue account, or the rule transactions of a commercial Department. For such errors, the directs that a correction should be made as soon as the mistake is discovered. Retrospective effect is equally justified on grounds of equity. Some of the changes in the accounting system decided upon in connection with the commercialisation were to a certain extent introduced only ·85 gradually For instance, the loss on the working of the non commercial portion of the Wireless Branch of the Department was excluded in the calculation for surcharge for the first time in the accounts for 1928 29 Again, as we have shown, there are still some instances of services render ed, or of unremunerative expenditure incurred by the posts and Tele graphs Department to and for the benefit of other Departments of Gov ernment for which the Department does not receive adequate credit In the circumstances it would be unfair to penalise the Department by levy ing a surcharge on the results of accounts which have not been correctly commercialised 184 The amounts of the Profit or Loss on the working of the Posts and Telegraphs Department in the five years ending 1929 30 as they appeared in the Finance and Revenue Accounts of the Government of India are as follows Profit (+) or Loss ( since commercialisation as in the Finance and Revenue Accounts Year During the year Cumulative result Rs Rs 1925 26 37,03,280 37,03,280 1926 27 1024,962 47,28,212 1927 28 -26,15,138 21,13,102 1928 29 --53 83,557 -32,70,453 1929 30 -62,44,531 -95,14,984 From the total cumulative figure of Rs 93 14 984 shown in the table should be deducted a sum of Rs. 685 697 being the loss on non-commercial activities of the Wireless Branch during 1929 30 The pet loss on the working of the Department accumulated during the five years comes there fore to Rs 88 29,287 185 Our investigations in the matter as set out in this riport low us to the conclusion that these figures are misleading We have accordingly prepared statement of the Profit or Lx for the vhole Department for each of the fire years endio, 1929-30 and this is attar had ax Appendix 7 The recalcnlated prosts or losses are sherrn blom Profit (+) or Ion (-) as rernlcvinteil Year Danez the gar Curdy #1154 1925-26 22,13,720 "272,720 1926-27 179,731 41,10,271 1927 23 - 22,99,514 21,12,727 1922-23 71.16 722 233126/11 1923 39 -3147,475 ---2,747 186 Thr 1 rozet smag trorunft! 1/4 be explained. Thomat srautrylut wir ju ft? appearing in th> publika asumpte zvytry (i) Tir soya frequens in your goodbyn s}s, ten jy4,344) 1 74 to zmu yhteislyseon t's trys ry ·86 (ii) The amounts debited to working expenses on account of the losses incurred in the disposal of unserviceable stores held in stock, and on account of the writing down of the value of serviceable stores, have been omitted, but the consequent saving in interest on stores balances has not been included. (in) Interest has been charged on the original value of fixed assets. (11) Credit has been taken for the interest on the balances of the dcpreciated fund to le operated on the straight line method. The initial opening balance of the Fund has been taken to be equal to the accrucd depreciation on 1st April 1925. The rates of interest on depreciation fund balances are, however, the same as were actually allowed by Government in the res pective years. (1) The entire cost of reconstructions has been charged to the depreciation fund account and consequently the capital account remains unafircted cscept for outlay on new assets. 187. Over and above the changes in the Profit and Loss account shown in paragraph 186, further credits will also have to be taken for various losses incurred for non-departmental reasons, in orde: to present a true picture of the results of commercial working. These modifications cannot be included in the main accounts the final results of which are given in paragraph 185, unless and until decisions are taken to provide actual credits. They are shown in a statement appended to this Report as Appendix 8, which has been prepared on the lines recommended by us in paragraph 89. The effect of these modifications is to show the true amount on thich the Department should get a rebate or pay a surcharge in respect of interest. 188. Taking these changes into account, the profit or loss in each of the five years ending 1929-30 will be as shorn below : Year. Profit (+) or Loss (-) Rs. .. 1925-26 .. 60,98,000 1926-27 28,82,000 1927-28 1,73,000 1928-29 --23,97,000 1929-30 -19,25,000 In our opinion these figures give the true picture of the working of the Department in the past. 189. The correct amount of the cumulative commercial results of working at the end of 1929.30 is thus a profit of Rs. 48,31,000 as against a loss of Rs. 95,14,984 shown in the Finance and Revenue Accounts.

·87 190 Adopting the figures of the latest budget estimates we have also reconstructed the Profit and Loss account for the years 1930 31 and 1931 32 and the results are as follows Profit or Loss as Profit or Loss as Year it appears in the recalculated by na Estimates Rs Rs 1930 31 -1,36,36,000 -1,16 12,000 1931 32 --1,41,19,000 1,28,61,000 191 Taking into account modifications similar to those referred to in paragraph 187, the correct loss will be as follows Rs 1930 31 -79,89 000 1931 32 -91 91,000 192 The figures given in the body of the Report and in the Appendices represent, almost in all cases only the final results of detailed calculations The latter have not been reproduced but files containing these detailed cal culations will be submitted separately for record and reference We regret that we were not able due to the shortness of the time at our disposal, to get our calculations checked by the Accountant General, Posts and Telegraphs 193 It now remains for us to acknowledge the great advantage that we have derived from the information and advice placed at our disposal by the large number of witnesses, both non oficial and official We desire to thank these gentlemen for all the trouble they undertook for our benefit In particular our acknowledgments are due to the various Departments of the Government of India, and to the officers at the headquarters of the Posts and Telegraphs Department who have given us all the assistance that we required 194 It also gives us great pleasure before closing this Report, to place on record our appreciation of the valuable assistance which we have received from our Secretary, Mr S P Varma Officiating Financial Adviser, Posts and Telegraphs who bad, in addition to discharge the duties of the office which be bolds But for Mr Varma's indefatigable energy, his detailed knowledge of the financial and accounting arrange inents of the Posts and Telegraphs Department and his remarkable capa city to marshal and present facts and figures we should have found it impossible within the limited time at our disposal, to complete our task which was more onerous than was originally anticipated COWASJEE JEHANGIR (Junior) Dated the 23rd April 1931. G KAULA Dated the 21st May 1931 FJ PEARSON SP VARMA, Secretary

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·92 APPENDIX 6 (Vide CHAPTER. X) Service Cards A-For Postmen group, 1 Age at entry into service qualifying for pepsion inferior or superor 2 Scale of pay drawn immediately previous to promotion to the postmen group 3 Length of service at the time of substantive promotion to the postmen group NB-Age should be taken as at the nearest burthday, e, 6 months and over should be taken as a year and periods less than 6 months should be Ignored B--For Ficad Postmen Group 1 Age at entry into service qualifying for pension, inferior or superior 2 Scale of pay drawn immediately previous to promotion to the postmen group 3 Length of service at the time of substantive promotion to the postmen group 4 Length of pensionable service at the time of substantive promotion to the Head Postmen Group 5 Scale of pay after substantive promotion as Head Postmen N.B.-Age should be taken as at the nearest birthday, re, 6 months and over should be taken as a year and periods less than 6 months should be ignored 0--For Inspectors Group 1 Age at entry into service qualifying for pension, inferior 07 superior 2 Length of pensionable service at the time of promotion to the Inspectors' Group A.B-Age should be taken as at the nearest birthday, :e, 6 months and Ofer should be taken as 4 year and periods less than 6 months should be Ignored ·93 or 1.-For men of higher non-gazetted rank promoted from the class of Inspectors. 1. Age at entry into service qualifying for pension, inferior superior. 2. Length of pensionable service at the time of promotion to the Inspectors' Group. 3. Length of pensionable service at the time of substantive promotions to the higher rank. 4. Scale of pay after substantive promotion to the higher rank. N.B.-Age should be taken as at the nearest birthday, i.e., 6 months and over should be taken as a year and periods less than 6 months should be ignored. E-For Gazetted Officers. 1. Age at entry into pensionable (superior) service. 2. Length of pensionable superior service at the time of substantive promotion from non-gazetted to gazetted rank. 3. Scale of pay immediately previous to substantive promotion to gazetted rank. 4. Length of pensionable (superior) service at the time of substantive promotion from each gazetted rank to the next higher rank as shown below. N.B.-(1) Age should be taken as at nearest birthday, i.e., 6 months and over should be taken as a year and periods less than 6 months should be ignored. (2) The various ranks should be entered in the cards by the Director General of Posts and Telegraphs, arranged from below uprards, separately for eacb recognised chain of promotion.

·94 APPENDIX 6 (Vrdo CHAPTER XVII, SECTION B ) Copy of Resolution of the Guleruntent of India, Public Thorks Depart ment, No 203 35 l", dated 2nd May 1882 In the Resolution of the 14th of November 1881, it was stated that “the Goycrudient of India is willing and anxious to forward aus schon for developing and facilitating communication by telegraph, so far 15 this can be done without ris! to the interests of the general tax paying community , but in the interests of that community, it is essential that the telegraph service should be self supporting 2 In accordance with this Resolution, the attention of the Govern ment of India has been drawn I to the relation wluch the railway telegraphs should bear to the Imperial Telegraph System in so far as they may be per mitted to be the carriers ot public messages, and II to the economy that must result in the combination of the main tenance of the Government and rulnay telegraphs when eter practicable 3 The State Railway Telegraph fules of 1874 were desigueil Primarily-To make the railway telegrapii Imus subsidiary and auxiliary to the Governinent Trunk System, and as such, they were allowed to retain certain shares of the receipta, varying in proportion to the distances messages were carried Secondurity -- Po provide for the construction and maintenance by the Goverpment Telegraph Department, of all telegraph lines and apparatus which might be required by the State Rail ways 4 The experience of working these rules for over 7 years has shown that, bowever justly they were designed on the principle of the division of receipts varying in proportion to worn such differential division has in practice, caused an amount of account keeping, not justified by the sums involved 5 The Director General of the shares of receipts in favour of railwa out of all proportion to the work done, an future all telegrams should be regarded as appertaining to the Telegraph Depart. ment, on the principle in force in Fngland, by which railway telegraphs act only as agents for the Gozernment sistem, and receive merely a fixex} commission for carrying eachi message 6 The Gorernor General in Council, horreter, whilst admitting the force of the Director General's arguments and the eqnuty of hus proposals, 18 net ertlieless desirous in the interest of the senders of tlegrame that railwars should be encouraged to carry public telegrinhic meungpe to aº great an extent as is compatible with the proper use of their telegraple for the primary purpose of railusdy tralie, and has therefore decidců, after duly considering the present revende of the Government Telegraph ·05 Department, to waive the claims of the latter to a sliare of the receipts ; in the anticipation that any loss thereof will be more than compensated for, loy the effect of the additional facilities thus given to the public. 7. With this object, and also to simplify account-keeping, to ensure uniformity of procedure, and to develop telegraphic communication, it is resolved 1. to extend to canal telegraphs also, the privilege of carrying telegraphic messages for the general public ; 11. that in future, every railway or canal, or other duly licensed Iclegraph office, at which il message may be tendered for dispatch, shall retain the value of the message it sends, er- (ppting such amounts as have to be again disbursed under the rules, for instance, for reply paid, post, registered mes- Sages, etc.; 111, that there shall be but one public telegraphı message system throughout India, applicable to railway, caual or any other tclegraphic system licensed to carry messages for the public ; and IV. to provide for cconomical maintenance, the principle enunciated in Resolution, Public Works Department, Nos. 125-28-T., of the Ith March 1871, that the maintenance of Government and railway telegraphs, should be combined and vested in the Telegraph Department whenever practicable, is affirmec), and is now extended to canal telegraphs. 8. The accompanying set of rules, viz.- I. General Rules relating to the conduct of all Electric Telegraphs licensed under the Telegraph Act to transmit “ Paid messages " for the public ; II. Rules relating to the provision and maintenance of Electric Telegraphs, for i he use of railways and canals, are therefore published, and are to come into force on 1st of January 1883. re-

·APPENDIX
Profit or Loss on the uorking of the Posts and Telegraphs Department
for the years 1925 26 to 1929 30 as shown in Finance and Nevenue
Accounts and as reconstructed.
(Vide CHAPTER XIX)

·97 APPEN Profit or Loss on ile working of the Posts and Telegraphs Department and as (Vide CHAP 1925-26. 1926-27. As re- As re. As shown As shown in F. &. R. constructed. in F. & Ry. accounts. Accounts. constructed. Receipts. Rs. Rs. Rs. Rs. A. Postage Alessnge Revenue B, Miscellaneous Revenue Interest enrned on Depreciation Fund balances, 8,03,22,896 8,03,22,896 2,18,14,646 2,18,14,646 37,84,233 8,23,98,486 8,23,98,480 2,29,05,498 2,29,05,498 32,72,584 Total Receipts 10,21,37,542 10,59,21,775 / 10,63,03,984 ( 10,85,76,508 + Expenditure, C. Direction D. Accounts and Audit E. Traffic Control F. Engineering expenses G. Pensionary Charges H. Stamps, Post Cards, etc. 1. Stationery and Printing J. Postal expenses K. Telegraph Traffic L. Radio expenses N. Telephone expenses N. Provision for depreciation 13,56,876 30,37,957 33,50,870 63,36,351 49,89,048 5,06,035 16,52,271 5,58,91,964 1,48,06,581 6,99,265 15,74,445 31,30,657 13,56,876 30,37,957 33,50,870 59,36,992 45,78,908 5,06,635 16,52.271 5,58,91,964 1,48,06,581 6,99,265 15,74,445 41,98,309 14,49,887 14,49,887 32,39,843 32,39,843 35,00,412 35,00,412 70,29,520 65,07,632 50,02,895 47,44,749 14,93,045 14,93,045 22,03,361 22,03,361 5,86,01,854 5,86,61,854 1,47,75,302 1,47,75,302 7,82,307 7,82,307 16,12,558 16,12,558 30,05,142 43,38,713 Total (Gross) working expenses.. 9,73,32,920 9,75,91,073 10,27,56,126 10,33,09,603 35,37,119 35,37,119 36,86,093 36,86,093 0. Deduct Credits to Working oxpenses. Net Working expenses Interest on Capital Outlay Interest on Accumulated Profit (m) or Logs (+) to end of previous year. Total Interest 9,37,95,801 46,38,401 9,40,53,954 79,94,101 9,90,70,033 9,96,23,570 54,10,077 80,26,810 --2,01,088 --2,10,343 52,08,989 84,16,467 46,38,461 79,94,101 TOTAL EXPENDITURE Net Profit (+) Logs (-) 9,84,34,262 10,20,48,055 / 10,42,79,022 10,80,40,037 37,03,280 38,73,720 10,24,962 5,36,631 ·98 DIX 7. for the years 1925-26 lo 1929-30 as shown in Finance and Revente Accounts reconstructed. TER XIX.) 1927-28. 1928-29. 1929-30. Ag re- As te As re- As shown in F.&.R. Accounta. constructed. As ahown in F. & R. Accounts. constructed, As shown in F. & R. Accounts. constructed Ra. Rs. Rs. Rs. Rs. Ro. 8,47,68,326 2,35,02,720 8,47,68,326 2,35,02,720 33,98,601 8,69,98,182 2,43,69,126 8,59,96,182 2,43,69,126 37,65,830 8,81,80,492 2,47,69,141 8,81,80,492 2,47,69,141 44,09,432 . 10,82,71,046 11,16,69,647 11,03,65,308 11,41,31,138 11,29,49,633 11,73,65,065 16,09,808 32,51,585 31,65,516 83,69,581 50,03,696 19,78,635 24,81,693 6,19,01,248 1,62,05,289 0,91,720 18,25,100 82,73,454 16,09,808 32,51,585 34,65,615 72,13,482 49,57,520 19,78,636 24,81,693 6,19,01,248 1,52,95,289 9,91,720 18,25,100 45,16,390 16,16,071 33,98,222 36,61,459 75,09,716 58,32,313 23,36,739 27,29,952 6,67,81,666 1,54,98,945 9,77,165 20,23,693 33,47,935 15,16,071 33,98.222 36,61,459 71,69,023 52,76,165 23,36,739 27,29,932 6,57,81,666 1,54,98,945 9,77,165 20,23,693 46,75,079 14,13,849 35,12,567 39,18,090 77,60,971 60,34,881 20,40,807 27,32,921 6,85,51,440 1,55,62,268 11,02,40-1 21,80,196 33,63,445 14,13,849 35,12,567 39,18,090 74,33,367 55,17,689 20,46,807 27,32,921 0,85,51,440 1,55,62,288 11.02,404 21,80,106 48,02,794 10,94,19.324 10,84,89,984 11,46,13,906 14,50,3-4,179 1181,69,839 11,87,81,312 40,96,144 40,96,144 51,30,174 55,63,664 55,53,681 10,53,53,180 67,87,384 -2,34,390 10,53,93,841 88,09,592 -2,37,272 51,30,174 10,94,83,732 63,81,101 1,18,968 10,99,01,005 93,62,864 -1,19,003 92,43,861 11,26,16,176 64,01,328 1,73,061 11,32,10,728 93,38, 18+ 1,54,140 55,33,004 85,72,320 62,65,133 69,77,089 91,02,233 11,09,86,184 -48,15,138) 11,39,66,161 -22,96,614 13,67,48,865 --53,83,557 11,91,47,866 30,10,728 11,91, ·99 APPENDIX 7-contd. Profit or Loss on the working of the Posts and Telegraphs Department as shown in R. E. 1930-31 and B. E. 1931-32 and as reconstructed. (Vide CHAPTER XIX.) R. E. 1930-31. B. E, 1931-32. As shown in As R. E. 1930-31. reconstructed. As shown in As B.E. 1931-32. reconstructed. Rs. Rs. Rs. Rs. Peceipte. 1. Postage and Message Rercano 8,23,48,000 8,23,48,000 8,36,30,000 8,30,30,000 B. Miscellaneous Rere 9,50,33,000 2,50,35,000 2,59,75,000 2,69,76,000 nie Interest carned on Depreciation Fund Balances 57,85,000 60,63,000 10,73,83,000 11,31,68,000 10,96.05,000 11,66,68,000 Total Receipts . Expenditure. C. Direction D. Accounts and Audit E. Traffic Control F. Engineering Expenses G. Pensionary Charges 6. Stamps. Post Cards, etc. I. Stationery ani Printing J. Postal Expenses k. Telegruph Traffic L. Radio Expenses M. Telegraph Expenses X. Prorision for deprecietion Working Expenses in England 11,93,000 36,37,000 43,26,000 76,89,000 62,29,000 18,59,000 23,32,000 6,87,73,000 1,59,09,000 11,01,000 23,11,000 11,93,000 36,37,000 43,26,000 74,34,000 56,85,000 18,59,000 23,32,000 6,87,73,000 1,59,09,000 11,01,000 23,11,000 11,45,000 35,95,000 44,95,000 75,87,000 64,22,000 19,40,000 23,82,000 7,05,30,000 1,58,57,000 11,19,000 24,61,000 11,45,000 35,95,000 44,95,000 74,12,000 58,01,000 19,40,000 23,82,000 7,05,30,000 1,58,57,000 11,19,000 24,61,000 48,31,000 31,33,000 50,00,000 24,50,000 7,59,000 7,53,000 7,59,000 7,53,000 12,01,50,000 11,92,51,000 12,24,90,000 12,07,36,000 Total (Gross) Working Expenses. 0. Deduci Credits to Work. ing Expenses 57,10,000 58,15,000 59,15,000 57,10,000 11,43,33,000 11,50,26,000 99,76,000 73,82,000 11,34,36,000 70,4-1,000 11,67,80,000 1,06,13,000 on Not Working Expenses Interest on Capital Outlay Interest accumulated Profit (m) or Loss (+) to end of previous Year 11,30,000+ 13,16,000* 5,41,000+ 4,69,000+ Total Interest 75,83,000 1,04,43,000 86,98,000 1,17,49,000 Total Espenditure 12,01,19,000 12,47,80,000 12,37,24,000 12,85,29,000 Net Profit (+) -1,36,36,000 2,16,12,000 -1,41,19,000 --2,28,61,000 Loss (m) *locludes abatement of laterest on Non-Commercial activities of wireless branch. Interest on Non-Commercial activities of wireless branch has not been deducted here hut it has been separately exhibited in the Subsidisry Statement, ·APPENDIX 8 Subsidiary Statement of amounts by which the loss has to be reduced or profit increased (Vide CHAPTERS LX AND XIX) Vature of Correction 1925 26 1926 27 1927 28 RE 1930 31 BE 1931 32 1928 29 1929 30 Rs Rs R3 Rs R& R8 R$ 71 000 21 03 000 71 000 21 53,000 71 000 21 53 000 71 000 21 53 000 72 000 21 53 000 71 000 21 53 000 71 000 21 53 000 6 86 000 29 10 000 6 56 000 28 80 000 4 30 000 27 14 000 22 24 000 29 24 000 20 11000 22 21 000 I --Lose from concessional rates for Foreign State Telegram II -Loos on Inland Press Trafic III -Logg on non commercial por tion of the Wireless Bratica IV Total Add additional Rebate in respect of Interest on IV VI Total VII.-Amount of Profit or Logg As per Appendix 7 VIII True commercial Profit Iob on which rebato or purcharge should be based 1 21 000 23 45 000 2 46 000 24 70 000 3 96 000 20 20 000 6 13 000 34 93 000 7 43 000 36 23 000 9 56 000 36 70 000 22 24 000 38 74 000 5 37 000 2. 97 000 --50 17 000 -03-8000 110 12 000 1 28 61 000 100 ог 60 98 000 28 82 000 1 73 000 --23 97 000 19 25 000 -79 89 000 --91 91 000 IX-If Coromittee & suggestion (rde paragraph 86 ) is accepted and iaterest on Depreciation Fund 18 allowed at the ratcs charged on Caputa) Outlay, revenue will be further increased by 9 75 00 14 66 000 14 77 000 15 35 000 7 93 000 Explanatory Ves J -The figures have been shown correct to the nearest thousan II --The annual loss on concessional Foreign State messages has in the absence of statistical information for all the years been taken at an Average of Rs 71000 for all the years (tude paragraph 182 (11)] III -The low on Ireen Trafic in the years prior to 19 9 30 has been slown in tle absence of special calculations at the amount estimated for 1929 30 (vide paragraph 182, (01)] IV-Tho loss on non commercial radios has not been worked out for Fears previous to 1929-30 V-Rebate or surcharge in respect of interest has not been calculated on item Ilabore UNIT&-900-29 831-GIPS