P.—4.

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No. 119. Mr. Stuaet to the Hon. the Colonial Seceetaey, Wellington. Sic, — Colonial Secretary's Office, Sydney, 16th November, 1876. AVith reference to recent telegraphic correspondence concerning proposed modifications of the contract for the San Francisco Mail Service, I have the honor to transmit to you, for the information of the Government of New Zealand, the enclosed copy of a leteron that subject from Messrs. Gilchrist, Watt, and Co., the general agents at Sydney for the Contractors. I have, &c, The Hon. the Colonial Secretary, Wellington. Alex. Stuaet.

Enclosure in No. 119. Messrs. Gilcheist, Watt, and Co., to the Hon. the Colonial Seceetaey, Sydney. Sic,— Sydney, 10th November, 1876. We have the honor to acknowledge receipt of copies of telegrams from the PostmasterGeneral of New Zealand, dated Ist and 2nd November, to yourself, stating the decision arrived at in AVellington regarding the San Francisco Mail Service, after investigation by a committee and several discussions in Parliament, and offering three alternatives as substitutes for the present contract. In considering these alternatives, we would respectfully point out that Nos. 1 and 2 cannot be acceptable to the Contractors, inasmuch as their chief object in seeking for a change in the present contract route is to be relieved of the New Zealand coastal service, which has proved so dangerous and impracticable to their large ships, but which can be performed satisfactorily by local steamers under the control of owners on the spot —a supervision and responsibility which the Contractors in New York could not efficiently undertake. The third alternative proposes to relieve the Contractors from the coastal service at a reduction of £5,000 from £75,000 if" Auckland be made the port of call, or £10,000 from £75,000 if the Bay of Islands be made the port of call, so that in the former case the Contractors would thus receive a net subsidy of £70,000, and in the latter case a net subsidy of £65,000. We are at a loss to understand why the sum of £75,000 is named, as the offer made by the Contractors to run the proposed new service via Auckland or Bay of Islands, omitting Fiji and Honolulu, the latter at their option, and being relieved of all expenses and responsibility of the New Zealand coastal service, is £80,000 per annum; and we respectfully snbmit that it would be unreasonable to expect them to come to the terms named, seeing that in the one case they amount to a reduction of £25,000 per annum, and in the other £20,000 per annum, on the present subsidy under the contract. The comparative rates for calling at Bay of Islands or Auckland named by the New Zealand Government appear to us out of all proportion, seeing that the two ports are only about 120 miles apart, and the same rate of subsidy is named by the Contractors for delivering the mails at either of the two ; but as they do not express any prference for either, it remains for this Government and New Zealand to decide which they prefer, and we are of opinion that the calling at Auckland would be much more advantageous to New Zealand passengers, aud conduce greatly to the increase of trade between New Zealand and this colony, as well as afford other advantages which will more than compensate for the short additional time in postal service. The Bay of Islands, though well situated and a good harbour, has no wharfage accommodation, and there are no lights on that part of the coast. The population is limited to some 150 souls, so that all supplies in the way of meat, vegetables, &c, would have to be brought from Auckland, and as there is no white labour available, any help required in the way of discharging or loading cargo would also havo to be imported from Auckland, as the Natives are of no use. Moreover, we understand that a coastal service from Bay of Islands would be more expensive, as the East Coast trade of the North Island has always been unremunerative, while from Auckland the mails can be economically and speedily distributed from the Manukau ; and as the New Zealand Government share the subsidy, it appears but equitable that one of their leading cities should be a port of call for the steamers, to afford some fair equivalent for the advantages this colony derives from the trade the mail service opens up with America. The comparative distances are as follows : —-From Sydney via Bay of Islands to San Francisco, 7,000 miles ; from Sydney, via Auckland to San Francisco 7,201 miles ; or a difference in time of about seventeen hours at eleven knots; but in view of the delay attending the calling at Bay of Islands from the disadvantages already set forth, the additional facilities and despatch the vessels would obtain in Auckland would in a great measure compensate for the time lost by the detour; and as communication by wire is now-a-days so general, regularity with our mail service and comfort of passengers are of more importance to the community than a few hours' saving in time. AYe, therefore, respectfully venture to hope that early permission may be granted to change the route to a direct voyage via Auckland, and that the Governments may arrange to accept the offer of the Contractors to perform the service at a reduction of £10,000 per annum on the present rate, or £80,000 per annum. AYe have, &c, Gilcheist, Watt, and Co., General Agents for the Contractors, San Francisco Mail Service. The Hon. the Colonial Secretary, Sydney.

No. 120. The Hon. J. Robeetson to the Hon. the Colonial Seceetaey, Wellington. Sir,— Sydney, New South Wales, 29th November, 1876. I have the honor to enclose, for the consideration of your Government, copies of two letters from Messrs. Gilchrist, Watt, and Co., agents for the Contractors, on the subject of the Pacific Mail Service.