D—No. 1

49

prevent any interruption of the Service, undertaking to contribute their half of the expense beyond the £180,000 which might be incurred. I have, &c, (Signed) S. Laing. H. Merivale, Esq., C.8., &c, &c. Mil. ALLAN TO THE LORDS OP THE TREASURY. Peninsular and Oriental Steam Navigation Company's (! Offices, 122 Leadenhall Street, London, E. C. 4th Noyember, 1859. Mr Lords, — By order of the Board of Directors of this Company, I have the honor to make the following communication to your Lordships. Oh the sth October 1858, in consequence of an advertisement published by the Lords Commissioners ot the Admiralty, inviting Tenders from parties willing to perform the Ste;im Postal Service with Australia, the Directors on behalf of this Company made a Tender for the execution of that Service for the sum of £180,000 per annum. This sum was, they have since learned £7> ',000 per annum less than that demanded for the same Service by a computing Company (the Royal Mail Steam Company) who then also made a Tender for it. It was also £500 ) per annum less than the sum receive! by the former Contractors for the Service who in l'J months lost their whole capital of £400,000 and were involved in Bankruptcy by undertaking it. It wns also between £70,000 and ESO.OOC per annum less than the cost of the temporary execution jf the Service between the time of the failure of the former Contractors the commencement of it by this Company. The Directors ventured to undertake the Service on so comparatively low terms by combining it with the Postal Service to Mauritius (for which they had also contracted) establishing the route of the Australian Mails by that Island and thus by performing the two Services by means of one line of vessels, saving tlie cost of running two Steamers which would have been required to execute the Mauritius Service, separately. That cost would have amounted to about £55,000 annually, and by being so saved, enabled them to Tender for so much less for the Australian Service. The Directors now regret to have to state that the experience which they have had during the months that they have been carrying on the Service, is of such an unsatisfactory nature to the financial interest of tha Company that in justice to their Shareholders they will feel compelled to relinquish the Service under its present arrangement. At the same time they beg to point out the only means by which they can see a prospect of being able to maintain the Service without a loss to the Company. The chief source thoy would beg to observe from which the maintenance of their other lines of Postal Communication is derived is the freight and passenger traffic, the subsidy for the Postal Service bearing but a small proportion of the expense. On the Australian line the reverse is the case, —the freight and passenger traffic contribute in a very small proportion to the expenses of the Vessels, and the Directors after every effort made by them to obtain an increase of it, see no prospect of being able to do so. The probable means of augmenting this traffic to which the Directors advert is to change the route of the Australian Service to its former course via Galle, to which point by means of branch Steamers from India and China some additional freight and passenger traffic may be drawn to supplement the earnings of the Australian Main Line of Steamers. The Mauritius Service to be performed by a separate line of Steamers to and from Aden as originally agreed upon ; such an arrangement the Directors submit involves public advantages of an important nature, besides being in accordance with the now strongly expressed wishes of the Australian Colonists. These Colonists, and particularly the commercial classes of them, complain that the present route cuts them off from direct communication with India and China, which they consider of great importance as an extensive trade has recently been springing up with the latter countries. On the other hand the Mauritius Colonists are dissatisfied at their Postal Service being as they consider made subsidiary to the Australian Service and interest for the purpose of reducing the expense in favor of Australia. The Directors make these statements on what they consider reliable private sources of information, butthey believe a reference to official information at the Colonial Office will confirm them. The other objects of public importance embraced on the proposed arrangement are— Ist. An extra direct Postal Communication would be provided with Ceyion, and thence by the branch Steamer plying vn connection with the Main Line with India and China, such extra communication witb the latter Country in the present aspect of our relations with it, being, it is assumed, of considerable importance. 2nd, It would render the transit of the Australian Mails more secure from interruption as at Galle the Company would always have a Vessel to take forward the Mails either Outwards or Homewards in the event of the Mail Steamer being disabled from proceeding, which would not be the case at Mauritius.

Eneiosuie.)