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European Business Enterprises and Managing Agencies in India

  • European business enterprises and managing agencies played a significant role in controlling a large part of Indian industries until the First World War.
  • These agencies were responsible for mobilizing capital, setting up stock companies, and managing them.
  • Three of the biggest managing agencies were:

Bird Heiglers & Co.

  • Founded in 1864 by Sam and Paul Bird in Allahabad.
  • Initially a contractor for the East Indian Railway (EIR) and North Western Railway (NWR).
  • Expanded into a Managing Agent with interests in the mining and jute industries.
  • First and most successful labor contractor at Calcutta Port.
  • Supplied labor for infrastructure projects across the Indian subcontinent.
  • Notable for a contract during a famine in 1873 to unload and transport rice into Calcutta.
  • Awarded contracts by the Calcutta Port Commissioners’ Railway in 1880.
  • Acquired F W Heilgers & Company in 1917, expanding interests in coal and jute industries.

Different Roles of Bird Heiglers & Co.

  • Coal Ships: Bird Line operated two 6,000-ton coal ships, the Flamingo and the Florican.
  • Contract Labour: Supplied contracted labour to East Indian Railway (EIR), East Bengal Railway (EBR), and Calcutta Port Commissioners’ Railway.
  • Managing Agents: Bird and Company served as the Managing Agent for various businesses, including:
    (i) Assam Saw Mill & Timber: Opened in Sadiya in 1920, manufacturing plywood for tea chests.
    (ii) Barajamda, Gua Iron Ore Mines: Owned by Bird & Company and operating a broad gauge locomotive since 1918.
  • Jute Mills: Bird & Company was the Agent for several Jute Mills in India, such as:
    (i) Dalhousie Jute Co, Champdani:A jute mill in Hooghly District, operating 704 looms in 1917.
    (ii) Northbrook Jute Mill, Champdani: Another jute mill in Hooghly District, operating 544 looms in 1917.
  • Jute Mills taken over by Bird & Company: F W Heilgers & Company had previously been the agent for these mills before Bird & Company took over in 1917:
    (i) Kinnison Jute Mill, near Barrackpore, Calcutta.
    (ii) Naihati Jute Mill.

F W Heilgers & Company

  • A managing agent and merchant company originally established as ‘Wattenbach, Heilgers & Co’. By 1878, it became ‘F W Heilgers & Company’ with an office in Calcutta.
  • The company had interests in the coal and jute industries.
  • In 1917, Bird & Company acquired F W Heilgers & Company.
  • F W Heilgers & Company served as managing agent for several operations, including:
  • Coal operations:
  • Ondal Coal Co, where a railway was identified.
  • Jute Mills: F W Heilgers & Company managed the following jute mills, which were later taken over by Bird & Company:
  • Titagarh Jute Factory Co Ltd
  • Kinnison Jute Mill, located near Barrackpore, Calcutta
  • Naihati Jute Mill

Andrew Yule & Co.

  • In 1863, Andrew Yule, a young entrepreneur from Scotland, arrived in Calcutta and founded the Company as a managing agency during the early days of railways, telegraph, and postal services in India. During the British Raj, the company became a large conglomerate.
  • By 1875, the Company had established significant business interests in jute,teacottoncoal, and insurance.
  • George Yule, Andrew's elder brother, took over the Company in 1875.
  • George Yule was a proponent of liberal thought and was active in public affairs.
  • He served as the Sheriff of Calcutta in 1886 and became the President of the Indian National Congress in 1888.
  • After George's death, Sir David Yule assumed control of the Company.
  • By 1902, the Company managed over 30 businesses, including jute mills, cotton mills, tea companies, coal companies, a railway company, a printing press, and a zamindari company in Midnapur District, West Bengal, promoting agriculture, forestry, fisheries, roads, schools, hospitals, and dispensaries.
  • David Yule was knighted in 1912 for providing food and employment to over 200,000 people during a time of need.
  • Under Sir David Yule, the business expanded into powerpaperengineeringshipping, and more. By 1913, Andrew Yule was the largest managing agency house in India, overseeing 37 companies.
  • In 1919

Jardine, Skinner and Company

  • Founded in 1825 in Bombay, India, initially focused on textiles.
  • Expanded into opium, tea, timber, and petroleum.
  • Early partners were Scottish, reflecting common practice in British managing agencies.
  • Reformed in 1844 in Calcutta by David Jardine and Charles B. Skinner.
  • Engaged in importing cotton goods and exporting indigo, silk, jute.
  • Opium trade became significant due to competition in textiles.
  • By 1860, dominated opium trade alongside Jardine Matheson.
  • Expanded into tea, timber, and petroleum by 1860.
  • Controlled six jute mill companies by 1890.
  • Fourth largest jute mills operator by 1910-11.

Early Operations:

  • Jardine Skinner and Company started by importing cotton goods from Manchester and Glasgow.
  • They exported products like indigosilk, and later jute.
  • Agents in Glasgow included James Ewing & Co., and in Manchester, Matheson & Scott.

Opium Trade:

  • To boost income amidst competition in textiles, Jardine Skinner shipped opium to Jardine Matheson in China.
  • They exported opium to locations like Singapore and other parts of southeast Asia.
  • By 1860, Jardine Skinner and Jardine Matheson were leaders in the opium trade.

Expansion and Prosperity:

  • By 1860, Jardine Skinner was heavily involved in tea trade and later expanded into timber and petroleum.
  • Entered into joint ownership of tea estates with Matheson & Co..
  • During the 1880s, the company was profitable but with modest returns of 2% – 3% on capital.

Financial Challenges and Influence:

  • Faced financial crises in 1848 and 1866, supported by Matheson & Co..
  • Returned the favor in 1890 when Matheson faced difficulties.
  • By 1890, controlled six jute mill companies and was a key player in the Bengal Chamber of Commerce.

Jute Trade and Cartel Formation:

  • By 1910-11, Jardine Skinner was the fourth largest jute mills operator in India.
  • Faced challenges like oversupply in the jute trade.
  • Participated in discussions to form a cartel to regulate the jute trade.

 Nature & Character

  • These were partnership or private limited firms with control limited to 4-5 hereditary individuals.
  • They acted as promoters and financiers.
  • Companies could apply to the managing agency for loans, acting as financiers.
  • In the absence of capital markets, they temporarily bought shares during initial public offerings (IPOs) and later offloaded them, acting as promoters.
  • They played a crucial role in mobilizing capital, setting up joint-stock companies and managing them.
  • Sometimes,Indian financiers provided capital while European agencies made investment and business decisions.
  • They focused on products like tea, coffee, indigo, and jute plantations, mainly for export.
  • They acquired land at low rates from the colonial government to establish plantations and invested in mining, indigo and jute.
  • For more details, refer to information about Bird Heiglers & Co., Andrew Yule & Co., Jardine Skinner & Co., etc.

Question for European Business Enterprise and its limitations
Try yourself:
Which of the following European managing agencies had interests in the coal and jute industries?
View Solution

Limitations of Managing Agencies

  • Excessive Power: Managing agencies held too much power, discouraging Indian capitalists from starting their ventures using the capital they provided.
  • Exclusionary Practices: These agencies had their own chambers of commerce and barred Indian businessmen from joining.
  • Poor Corporate Governance: They were opaque in their operations, controlled hereditarily and shareholders had minimal influence.
  • Misaligned Remuneration: Sometimes, their pay was linked to goals that conflicted with shareholders' interests, such as prioritizing sales over profits.
  • Regulatory Changes: Over time, successive Companies Acts and amendments reduced and eventually eliminated their power.
  • Inter-Corporate Investments: The use of inter-corporate investments as a control method was common even before the abolition of managing agencies.
  • Capital and Decision-Making: Often, Indian financiers provided capital while European agencies made all investment and business decisions.
  • Lack of Innovation: They were rarely pioneering firms, with many being established by speculators aiming for quick profits through offloading shares and selling mismanaged mills.
  • Monopolistic Practices: The same managing agency house straddling different fields and the concentration of capital in a few European houses facilitated monopolies, which British businessmen exploited.
  • Examples: Instances from firms like Bird Heiglers & Co., Andrew Yule & Co., and Jardine Skinner & Co. can further illustrate these points.

Advantages of Managing Agencies

  • Managing agencies are not just about their business dominance but also their significant contributions to the socio-economic and industrial progress of the country.
  • They provided capital at a time when it was scarce, especially since the banking sector was not easily accessible.
  • They modernized the Indian market by introducing the concept of public capital, moving away from the traditional reliance on family capital.
  • In major sectors like tea, jute, or engineering, the largest European managing agencies had such strong brand names that their involvement made it easier to raise capital through public issues.

Question for European Business Enterprise and its limitations
Try yourself:
What was one of the main disadvantages of managing agencies mentioned in the text?
View Solution

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FAQs on European Business Enterprise and its limitations - History Optional for UPSC (Notes)

1. What are the primary characteristics of European business enterprises operating in India?
Ans.European business enterprises in India are typically characterized by their strong emphasis on quality, adherence to international standards, and innovative practices. They often bring advanced technology and management practices, which can enhance productivity and competitiveness in the Indian market. Additionally, these enterprises tend to focus on sustainable business models and corporate social responsibility.
2. What are the main limitations faced by European business enterprises in India?
Ans.Some of the main limitations encountered by European business enterprises in India include bureaucratic hurdles, complex regulatory frameworks, and cultural differences that can hinder effective communication and operations. Additionally, fluctuating economic conditions and market unpredictability can pose challenges for these enterprises as they seek to establish and grow their presence in India.
3. How do managing agencies play a role in the functioning of European business enterprises in India?
Ans.Managing agencies act as intermediaries that assist European business enterprises in navigating the Indian market. They provide essential services such as market research, legal compliance, and local networking. These agencies help in mitigating risks associated with market entry and operational challenges, thus facilitating smoother business operations for European companies.
4. What impact do European business enterprises have on the Indian economy?
Ans.European business enterprises contribute significantly to the Indian economy by creating jobs, fostering technology transfer, and enhancing competition. They often invest in infrastructure and skill development, which can lead to overall economic growth. Additionally, their presence helps in improving standards in various sectors, ultimately benefiting consumers and the economy as a whole.
5. What strategies can European business enterprises adopt to overcome limitations in India?
Ans.To overcome limitations in India, European business enterprises can adopt strategies such as forming partnerships with local companies, investing in cultural training for employees, and engaging in proactive lobbying for favorable policies. Additionally, leveraging digital tools and platforms can help these enterprises enhance their market reach and operational efficiency in an increasingly competitive environment.
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