these charges they have to make a contribution to general revenues equal to 1 per cent. on the capital at charge of the commercial lines in the penultimate year plus one-fifth of surplus profits in such penultimate year and one-third of the amount remaining available for transfer to Railway reserves in excess of Rs. 3 crores.

The net payments due from the Railways to general revenues of the Central Government in 1925-26, 1926-27 and 1927-28, calculated in the manner explained above, are as follows:

It will be seen from the statement on the previous page that in order that the full contribution to general Revenues for 1926-27 should be met, a transfer of Rs. 7 lakhs from the Railway Reserve Fund will be necessary.

The foregoing tables and the Net Revenue table on page 6 show that the net revenue of the Central Government from the Railways is as follows, viz. :

1926-27 Budget

1925-26 Accounts, Rs.5,49,03,569; Rs.6,00,87,000; 1926-27 Revised Estimate, Rs.6,00,87,000; and 1927-28 Budget, Rs.5,48,08,000.

The gains from Commercial lines in the same years are: 1925-26 Accounts, Rs.10,76,69,395; 1926-27 Revised Estimate, Rs.7,75,13,000; and 1927-28 Budget, Rs.8,93,04,000.

The Railway Depreciation and Railway Reserve Funds are estimated to have closing balances on 31st March, 1928, of Rs. 1129 lakhs and Rs.1134 lakhs, respectively.

The Great Indian Peninsula Railway came under State management on the 30th June, 1925. The Delhi-Umballa-Kalka Railway was purchased by the Secretary of State on 1st April, 1926.

A commercial system of accounts has been introduced into both of these Departments with effect from 1925-26. The figures of "Net Revenue " shown in the above statement indicate the gain or loss on the working on a commercial basis. The working expenses of the Indian Postal and Telegraph Dept. in 1927-28 include Rs.12 lakhs of new measures designed to improve the pay and allowances of the subordinate staff, but also take account of an increased credit of Rs. 54 lakhs in respect of the management of the work connected with the Post Office Savings Bank and Cash Certificates.

The minus figure of Capital outlay charged to Revenue of the Postal and Telegraph Dept. in 1925-26 is due to the transfer of Rs. 161 lakhs of balances of Stores and Workshop manufacture Suspense to a Capital head of the Accounts, being netted with Rs. 19,94,792.

The greater part of the net revenue receipts shown under Currency ordinarily arises from the interest on the securities in the Paper Currency Reserve, and in respect of loans to the Imperial Bank against inland bills of exchange. Under the Indian Paper Currency Act this interest was earmarked for reduction of created securities in the Paper Currency Reserve. This provision has, however, been temporarily suspended since 1921-22 by legislation and the interest credited to revenue.

The substantial drop in the anticipated receipts in the year 1927-28 is the combined result of the reduction in the amount of investments held in the Paper Currency Reserve both in England and in India and of the comparatively lower rates at which India Treasury Bills held in the Reserve were renewed in 1926-27. Provincial Contributions and Adjustments.

Contributions.-It was provided by the Devolution Rules, made under Section 45A of the Government of India Act, that in the year 1921-22 contributions of specified amount, and in future years similar contributions or such smaller sums as might be determined by the Governor-General in Council, should be paid by the Local Governments to the Government of India. If for any year the total of the contributions was reduced, reductions should be made in respect of those Local Governments only whose last previous annual contribution should have exceeded the specified proportion of the smaller sum so determined as the total contribution, and any reduction so made should be proportionate to such

excess.

The contributions in the first year of the reformed constitution aggregated Rs. 983 lakhs. Permanent remissions of Rs. 375 lakhs were made during the years 1925-26 and 1926–27, leaving unremitted the amounts shown in Column 2 of the table below. The Budget of 1927-28 provides for the further permanent remission of Rs. 350 lakhs as indicated in Column 3 and, with the aid of the Surplus of 1926-27 carried forward to a Special Revenue Reserve, for the non-recurring remission in 1927-28 of the balance (Column 4).

The above includes figures relating to Bengal. The contribution

payable by that Province had, however, as a special measure, been remitted for the years 1922-23 to 1927-28.

The Revised Estimate for 1926-27 provides for the remission for that year of half of Bombay's contribution, i.e., Rs. 28 lakhs, as a special measure of relief to that province.

Adjustments. With effect from 1927-28 the assignments hitherto made by the Central Government to certain Provincial Governments in respect of customs duty on imported stores will

Net Reciepts

52,03,000 1,87,65,000 2,87,04,000 · 7,00,000

37,80,300 11,00,000 2,35,01,000 1,80,65,000

The major revenue head of account "Extraordinary Receipts and Payments" was opened for the first time in 1923-24 to record special receipts and charges of a non-recurring character, which it was considered desirable to distinguish from the ordinary revenue and expenditure of Government.

The increase in the revised estimate for 1926-27 of receipts is mainly due to extra receipts on account of reparation receipts from Germany. The large increase of Rs. 282 lakhs in the payments is nominal only; it represents the transfer of the revenue surplus to a special Revenue Reserve Fund, as explained on page 8.

The large increase of receipts in 1927-28 represents so much of the previous year's surplus re-transferred from the Revenue Reserve Fund to enable the balance of the Provincial contributions to be remitted in 1927-28 concurrently with the existence of an equilibrium budget.

A net improvement of Rs. 34 lakhs in Interest receipts during 1926-27 is due to the fact that rates of interest earned on balances in England were higher than was anticipated when the Budget was framed, although receipts in India fell by Rs. 8 lakhs owing to the sale of certain interest earning securities pertaining to the Railway Provident Funds. Interest payments during 1926-27 other than those chargeable to commercial departments and the Provincial Loans Fund are Rs. 81 lakhs better than the provision in the Budget. The improvement results from a saving of Rs. 61 lakhs on payments in India mainly due to a reduction in the rate of discount on renewal of Treasury bills in the Paper Currency Reserve, and to a saving of Rs. 18 lakhs on interest allowed on the balances of the Reserve and Depreciation Funds. The rates allowed on these balances have dropped from 4 to 33 per cent., as a consequence of the reduction in the rate at which the Government of India borrow in the market. The amount held in the Railway Reserve Fund was also lower than was expected.

A special discount sinking fund will be formed to spread the charge for the discount (Rs. 354 lakhs) in the rupee loan of 1926-27 over the period of the currency of the loan.

The net payments of interest on debt in 1927-28 show a considerable decrease compared with the previous year, indicating the extent to which unproductive debt has been replaced by productive debt.

In view of the reduction in the rates at which Government have recently been able to borrow the rate of interest allowed on the balances of Provident and other similar funds has been reduced from 5 to 43 per cent., with effect from 1st April, 1927.

Provincial Loans Fund.-A Provincial Loans Fund was established with effect from 1st April, 1925, to systematise the arrangements by which advances are made by the Central Government to the Provincial Goverments. Advances to the Provincial Governments, which were previously made direct to them by the Central Government, are now made from the Provincial Loans Fund, which receives advances from the Central Government. As regards advances to Provincial Governments sanctioned priod to the constitution of the Fund, the latter simply takes the place of the Government was vis-a-vis the Provinces. The Fund is charged with interest on the basis of the cost of new borrowing to the Government of India from time to time.

Interest on other obligations.-This includes interest on Post Office Savings Bank balances, bonus on Post Office Cash Certificates, and interest on Reserve and Depreciation Funds, Provident Funds, and on Fixed Deposits of Provincial Governments.

Reduction or Avoidance of Debt.-With effect from 1925-26 a scheme was introduced, for five years, to stabilise the annual provision from revenue for the reduction or avoidance of debt (which will include certain obligatory payments estimated to amount to Rs. 436 24 lakhs in 1927-28) at Rs. 4 crores plus a sum representing one-eightieth of the net amount of new debt contracted (up to the end of the previous year) since 31st March, 1923. In