D.—2

IX

distance traffic can be carried on such sections is also so very short that high rates must of necessity be charged, and even then some of the lines cannot be made to pay more than bare working-expenses with the exercise of the most rigid economy. The increase in the cost of railway materials and of labour has had a very considerable effect upon the working-expenses for the past year, the increased expenditure under this head for the Maintenance Branch alone being £20,048 over last year. I am frequently urged to confine the importation of Australian hardwood sleepers to the narrowest limits, and, in some instances, to altogether discontinue the importation of such sleepers, in order that a larger number of New-Zealand-grown sleepers may be used, and at the same time I am urged to relax the conditions under which New Zealand sleepers are accepted with a view to the acceptance of numbers of such sleepers which are now condemned by the Inspectors appointed for the purpose. I may say in regard to this matter that the heavy engines now running in various parts of the colony, some of them weighing up to 64 tons, make it absolutely necessary that only the very strongest timber obtainable should be used for sleepers, as the stability of the line, the safety of the trains, and the lives of passengers carried daily are very largely dependent on the strength of the sleepers used in the track. While the Government is most anxious to obtain a regular supply of sleepers of suitable New Zealand timber, it is at the same time absolutely necessary that a proper margin of safety should exist in our lines, and this can only be obtained by the use of the very best class of material available. It is, moreover, an incontrovertible fact that, notwithstanding the efforts of the Government to obtain, and its willingness to pay an enhanced price for, a regular supply of suitable New Zealand sleepers, the demand remains unsatisfied, and the quality of the sleepers has deteriorated to such an extent that rigid inspection has had to be insisted on in the interests of public safety, and the inferior quality of the sleepers now offered is evidenced by the large number rejected by the Inspectors appointed to examine them. New-Zealand-grown sleepers are employed in every instance where they can be obtained and used without imperilling the safety of the line, and in order to increase the life of the sleeper the department has recently obtained two creosote plants for treating the sleepers prior to their being laid in the track. The visit to this colony of contingents of the Imperial and Indian troops led to a very large passenger traffic to the various centres visited by the troops; it also necessitated the conveyance of the troops from one end of the colony to the other by train on very short notice, and made very great demands on the railway staff. The difficulties were accentuated by the shortage of rolling-stock suitable for carrying passengers. I am, however, pleased to be able to place on record the fact that the whole of the arrangements were carried out in an entirely satisfactory manner, and reflected the greatest credit on the whole of the railway staff of the colony. In view of the reductions contemplated in fares and freights, I estimate the revenue for the year ending 31st March, 1902, at £1,760,000 and the expenditure at £1,152,000. The usual reports and returns are attached hereto.

ii—D. 2.