E.—7a,

6

Government. That the Province sets aside annually a sum equal to 5 per cent, of the gross earnings of the railway, as a depreciation fund, for renewal of rails and rolling stock, etc., such sum to be paid into separate account, to be dealt with hereafter as may be mutually agreed upon between the General and Provincial Governments. That the materials imported by the General Government for railway extension be carried over the railway at half the rates charged to the public, this being the estimated actual cost to the Provincial Government. That the officers of the Public Works Department be allowed to travel free on the line. That Her Majesty's mails be carried free of charge by ordinary trains, and, if demanded, that an officer travel free in charge of same, the Provincial Government not being responsible. That free access to such parts of the line as may be found necessary, be given to the officers of the Public AVorks Department, and contractors working under them, to enable them to complete the works now in contemplation : all such officers and contractors, and their workmen, to be obliged to conform to the rules and regulations for the working of railways, as far as practicable, not to interfere with the carrying on of the traffic of the railway. That the accounts be audited by the Provincial Auditor, and published in Gazette quarterly, showing the traffic on the line. The guarantee provided by the hypothecation of the jetty dues, as enumerated in agreement dated 25th January, 1870, between your Honor and the late contractors, to continue in force unaltered. That the following agreements which have been made by the late owners of the Port Chalmers Railway be carried out:— 1. Free pass for one year be granted to any persons who may build a house at St. Leonard's township ; and that during the same period, building materials be carried to St. Leonard's for any such buildings at half the rates to be charged to the public. 2. That a berth be provided at the wharf, Port Chalmers, for Messrs. McMeckan and Blackwood's steamers, and all their freight to be carried at 4s. 6d. per ton, less 5 per cent., for twelve months, ending 31st December, 1873. 3. Contract with Messrs. Scoular and Co. to carry their goods at 4s. 6d. per ton to 31st December, 1873. 4. Oliver and Ulph, carry ordinary goods at 4s. 6d. per ton, and bar iron at 4s. per ton, to 31st December, 1873. 5. Contract with George Proudfoot to carry stone to Port Chalmers at Is. per ton, to Dunedin at 2s. 6d. per ton, to 28th February, 1874, from his quarry on the line. The above terms being agreed to by your Honor, all earnings from the railway and wharves attached thereto, and jetties in Dunedin and Port Chalmers, to be Provincial revenue, subject to the appropriation of the Superintendent and the Provincial Council of Otago. I have, &c., E. Richardson, His Honor the Superintendent of Otago, Dunedin. (for Colonial Secretary).

No. 18. His Honor the Superintendent of Otago to the Hon. Mr. Richardson. Sir,— Superintendent's Office, Dunedin, 16th April, 1873. I have the honor to acknowledge the receipt of your letter of yesterday's date, specifying the terms and conditions upon which the General Government is prepared to let to the Province on lease the Dunedin and Port Chalmers Railway. In reply, I have to state that the Provincial Government accepts the lease upon the conditions specified, with the exception of that which provides for the carriage of Her Majesty's mails free of charge. This is a point which I would wish you to reconsider. Although not of material importance in itself, still it involves a principle which —now that the postal service throughout the Colony is colonially charged—would place this Province at a disadvantage as compared with others. I have, &c., The Hon. E. Richardson (for the Colonial Secretary), J. Macandrew, Custom House, Dunedin. Superintendent.

No. 19. The Hon. Mr. Richardson to His Honor the Superintendent of Otago. Sir,— Dunedin, 17th April, 1873. I have the honor to acknowledge the receipt of your letter No. 13105-85, and in reply, have to state that, for the reasons urged by you, I am prepared, on behalf of the General Government, to waive the condition named by mc in my letter of the 15th instant as regards the carriage of Her Majesty's mails free of charge. I would now suggest that a sum be fixed for such service at once, calculated on the cost price, say, not exceeding £300 per annum. I presume that I may now consider that the Port Chalmers Railway is under the control and management of the Provincial Government. I have, &c, His Honor the Superintendent of Otago. Edward Richardson, (for Colonial Secretary).