DECISION NO. CABINET MINUTE

BRISBANE, t 6 I ro / 1 9

SUBJECT: Increased Grain Freight Rates.

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13 MR. UEAL 33

14 l'4R. CLAUSC :J 34 MR. BORBIC GE 15 35

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17 MR. COOPEB 37

18 MR. HARVEY 38

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C 0 N F I D E N T I A L

C A B I N E T M I N U T E

Brisbane, 10th October, 1988

Decision Noo 55267

Submission No. 49809 TITLE: Increased Grain Freight Rates.

CABINET decided:-

That further consideration of the contents of the Submission be deferred until the Meeting of Cabinet to be held on 17th October, 1988.

CIRCULATION: Department of Railways and copy to Minister. All other Ministers for perusal and return.

8--rrv<-~ Certified True Copy 0 •\ ( ~I 9 o\J i SECURITY CLASSIFICATION 'C' - CONFIDENTIAL 21 Submission No.

Copy No.

FOR CABINET

INCREASED GRAIN FREIGHT RATES.

1. The current Agreement covering the rail transport of grain

for export commenced on 1st October, 1987, and expires

on 30th September, 1990. That Agreement provides for

the renegotiation of freight rates to apply from 1st

October, 1988.

2. The last increase in grain frei9ht rates was an increase of

6% which applied as from 1st October, 1984. The

Railway Department has thus recognised in a very

tangible way the adverse economic circumstances

experienced by the indus ry as a result of poor seasons

and world market price fluctuations during that

intervening period.

3. Since 1st October, 1984, the Consumer Price Index has risen

by almost 34% and the cost of wages and services paid

for by the Railway Department has increased by a

slightly lesser amount. 2 .

4. During this period the Railway Department has sought to

contain its costs by improving efficiency and

productivity. In conjunction with the Grain Handling

Authorities, it has introduced cost effective operating

procedures and has expanded the use of large unit

trains. The Industry has been encouraged to co-operate

through a rebate system offered by the Railway

Department for unit train operations. In addition,

Queensland Railways has spent in excess of $lrn. in

improving the track near to permit the

operation of 90 tonne diesel electric locomotives

hauling large unit trains.

5. From the better information now available, c~ m Railways has been able to cost various segments of its ~ ~ traffic more accurately and has been able to pinpoint ~ ~ 0 ~ areas of excessive costs. ~ n ~ 0...... ,0 6. The most significant cost anomaly is in the area of hauling ~n grain over some of the outdated branch lines. Such 10 branch lines which are more or less in the same

condition as their original construction are

constructed of light rail, widely spaced sleepers,

little or no ballast, timber bridging, and are capable

of handling 60 tonne locomotives with restricted

payloads at low speeds. 3 .

7. As a typical example of the grossly disproportionate costs

involved, the cost of hauling grain over one grain

dedicated branch line is 41 cents per net tonne

kilometre compared with less than 3 cents per net tonne

kilometre for main line haulage.

8. Another major anomaly is the sharply decreasing taper of

freight rates at a distance of 432 kms., which gives

shippers beyond that point an excessive concession and

a very large advantage over other shippers nearer the

port. The direct cost to Queensland Railways of

transporting grain does not decrease with the increase

in the length of the haul.

9. Including the general freight increase of 10% which will

apply from 1st January, 1989, general freight rates

will have increased by 16% since 1st October, 1985.

Under normal circwnstances the Grain Industry could

expect a very substantial increase to apply from 1st

October, 1988 with a minimwn of 10% not being

unreasonable.

10. Instead of applying a general freight increase across the

board, Queensland Railways, with the co-operation of

the Grain Handling Authorities, sought to improve

further the cost effectiveness of large unit trains, 4 .

and to reduce c o sts generally; thus promoting the long

term viability of the rail transportation of grain.

The scheme involves some road hauling of small

quantities of grain over relatively short distances to

major receival depots, e.g. Bell to Dalby 8,300 tonnes,

Kaimkillenbun to Dalby 7,400 tonnes, Allara to Clifton

15,000 tonnes, Glenmorgan to 23,000 tonnes,

Noondoo to Thallon 24,000 tonnes. As this grain is

already transported by road to the first mentioned

depots, the quantities referred to will not necessarily

result in a total increase in road haulage.

11. After allowing for the cost of road transport to the

principal depots, it is estimated that approximately

$400,000 will be saved in Railway operating costs. The

expenditure of an equivalent amount on improving roads

in the areas concerned would afford greater benefit to

the communities and all road users in the area than the

continued expenditure of such money on obsolescent

branch lines.

12. As a result of these initiatives the overall increase to the

Grain Industry has been confined to approximately

4-1/2% over existing freight rates. This increase

includes some adjustment to the anomalies created in

the long haul traffic, the application of $1 per tonne

on grain conveyed from depots situated on branch lines with extremely poor cost recovery,. plus a general increase of approximately 3%. 5.

13. Details of the proposed rates and conditions have been

agreed to with representatives of the Grain Industry,

who have now received written confirmation of such

rates and conditions. Formal acceptance is awaited by

the Railway Department. It was agreed, as a part of

the negotiations, that it was the responsibility of the

various Grain Handling Authorities to inform the

growers and the various sections of the Grain Industry

and local interests concerned.

14. The foregoing is submitted for the information of Cabinet.

~ ~ · ...::r "'

(Ivan J. Gibbs)

Minister for Transport.

_...., Railway Department

Brisbane.

6th October, 1988.