DECISION NO. CABINET MINUTE
BRISBANE, t 6 I ro / 1 9
SUBJECT: Increased Grain Freight Rates.
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13 MR. UEAL 33
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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 Goondiwindi to permit the
operation of 90 tonne diesel electric locomotives
hauling large unit trains.
5. From the better information now available, Queensland 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 The most significant cost anomaly is in the area of hauling ~n grain over some of the outdated branch lines.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 Meandarra 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.