towards which the Lands Department has contributed £2,506. This is without charging any portion of the expenses of the main conduit and head works. Allowance is not made for bad debts now on the books. Those bad debts amount to something like £3,000.With regard to your question 7 "Comparison of rates charged here and in the Eastern States, and the departmental defence of local charges," in comparing the prices here with those charged in the East, it is necessary to consider the policies of the respective Governments the relative costs of supply and the nature of the services given. With the goldfields water supply the policy since the inception has been to conduct operations as a business, and in order that the commercial features of the management should not be obscured, it was arranged that industries requiring State assistance should be subsidised as occasion arose, not at the expense of the goldfields water supply trading account, but by grants from funds voted by Parliament for development of the several industries concerned. In this way the Land Department has granted subsidies amounting to £2,500 towards providing extensions which otherwise would not return the required percentage and the Mines Department has from time to time, made grants for the purpose of assisting mines otherwise not payable to obtain water below the standard prices. In South Australia, on the other hand, the reticulated water supplies in farming areas appear to be provided primarily as a direct aid to the development of agriculture. On the Beetaloo and Bundaleer systems costing over £2,000,000, the surplus over operating expenses in 1915-16 amounted to only 1.57 per cent. of the capital cost. On the Barossa system which cost £560,000 the surplus was 1.87 per cent. There is thus little more than 1½ per cent. to meet expenses of interest and depreciation. If these be taken at the moderate figure of 6 per cent. the loss for the year on these undertakings amounts to no less than £112,000, being more than double the loss in the same year on the whole of the goldfields water supply undertaking. Notwithstanding this heavy draw on the States general revenue, the rate per acre is 4d. as against our 4d. plus £5 per holding. The prices per thousand are 2s., 1s. 6d., and 1s. on the two big systems mentioned, but on the other system in South Australia the prices are higher. At Loxton the prices are 4s. and 2s., and at Yeldulkine, which by the way is a gravitation scheme, the price is 4s. throughout. Loxton serves 340,000 acres, and returns 2.7 per cent. towards interest and depreciation. Yeldulkine serves 298,000 acres, and returns less than 1 per cent. over actual operating costs. I was informed at the department in South Australia, in reply to an injury as to why the charges were not arranged to meet a larger portion of the rates were fixed in earlier years, and had not been increased since although the settlers generally are in comfortable circumstances; also that farmers not supplied had expresses willingness to pay as high as 8d. per acre, if they could get the system extended to their holdings.

8545. By the CHAIRMAN: Can you furnish any evidence that settlers and the Government were both warned by the Water Supply Department that water at 6s. and 8s. was extremely high priced for agricultural purposes? - There is perhaps some misunderstanding here. My department has at no time held that these prices are economically too high for the farmers to pay. I should like to make some statements and put in some evidence as to the investigations, representations and negotiations leading up to the fixing of the present charges as these may be of assistance to the Commission. A report of 17-7-08, by Mr W. C. Reynoldson, then Chief engineer of the Goldfildes Water Supply Administration, which I now put in, reviews generally the considerations in this matter on the information available at that early stage. It shows the tendency of an apparently low nominal price to unnecessarily increase the capital cost and consequently the annual charge. It gives an estimate of the probable requirements of farmers and considerations governing the capacity of mains. These considerations are enlarged on in a further report by the same engineer an12-3-10, page 8 of file 374/10. Here the engineer purports to show that under certain conditions a farmer may not be overburdened with a price of £1 per thousand gallons, and that a yearly water charge of £17 to a farmer cultivating 300 acres is equivalent to only 50 miles of railway haulage. In this connection I have been told that a farmer on a thousand acre farm, having 300 acres of wheat averaging 10 bushels would last season have paid for bags alone twice the amount of his water rate. Mr Reynoldson emphasised the necessity of considering as to whether cheaper local supplies cannot be procured, and pointed out that the principal consideration in designing extension is to keep the total yearly charge as low as possible, and that if this is done the rate per thousand may be ignored.

8545A. If the Government, for the purpose of an extreme call, provides water to meet that call so as to keep the man on the land, the cost per thousand acres then becomes immaterial so long as the charges for the service are not too great? - That is the line of Mr Reynoldson's argument. He says that the proper way is first to ascertain what quantity the farmer would require to carry him over the summer, and then, ascertained that, to design a scheme to give him that quality as cheaply as possible on the basis of the annual charge.

8546. A scheme has been designed to supply that sudden demand leaving the farmer to rely on Nature to supply him with water for the rest of the year? - I do not know whether that applies altogether. The considerations I have mentioned have been governing principal adopted by the engineers in designing these extensions. In relation to the suddenness of the draw, there has been reasonable allowance made for the farmer to draw the water over an extended period. In regard to the pressure brought to bear on the question of the reticulation of the districts being gone with, I would quote from a minute of 1/10/08 on file 5396/15, from the Minister for Agriculture to the Secretary of the Goldfields Water Supply relating to applications for extension. It is as follows:-

 Kindly deal with this matter and send me a copy of any letters to Mr Gallagher. The whole of the country east if Northam will require water during summer. He means that it will require to be reticulated with water. on the 22nd March, 1909, the late Mr James