"Though the initial proposal for building railways in India was mooted in 1844 by East Indian Railway and subsequently by GIPR the actual nod from rulers in Britain came many years later. By 1840s the East India Company was fast losing its grip over control of India and many more agents had already started operating in India with governmental support. The dominant group was determined to hold on to remaining power of appointments in India as long as they could. The directors of East India company were more than properly cautious and British government consulted any matter relating to India with the group. The proposals were pushed aside in the beginning but by the time they realised and were eager to do business with the railway companies, the 1847-49 depression had hit England and it was very difficult to raise funds. It was at this juncture that the promoters insisted that the government must put the new railway companies in a position to guarantee the railway stockholders an annual return. The promoters were able to mobilise London merchants aspiring exports and imports to and from large Indian market and finally in 1849, East India Company signed contract and gave the railway companies better term than they had originally asked in 1844. The contract provided in essence that , private companies would raise the funds for the railways and manage their operations, while the Government of India would excercise high-level supervision of railway policy and guarantee the private companies against risk of loss"
Daniel Thorner's article in Railways in Modern India edited by Ian J. Kerr.