Pat Gallagher (Donegal South West, Fianna Fail)

I thank Deputy Ring for raising this issue and giving me an opportunity to outline what the Department is doing. The strategic rail review commissioned by my Department contained a comprehensive examination of the rail freight business and its realistic potential to support economic development and contribute to sustainable development.

Iarnród Éireann, in responding to the challenges contained in the review, developed a business plan with regard to freight. The company's goal is to return the rail freight business to profitability. To help achieve this turnaround, Iarnród Éireann recently withdrew from loss making groupage, palletised and single container rail transport. It continues to pursue a policy of growing its rail freight business where opportunities present.

Since 1999, larnród Éireann has invested more than €1.5 billion in rebuilding the railways with Government and EU support for the investment programme. This has delivered improvements in new trains, upgraded infrastructure and customer facilities. While such investment has primarily focused on improving passenger services, the investment in improving rail infrastructure also has a direct beneficial impact on freight activities.

Against this background, two recent developments — the closure of the sugar beet factory in Mallow and the loss of the Diageo contract — represent a setback to recent Iarnród Éireann's efforts to develop its freight business. Following the closure of the sugar factory last year, Iarnród Éireann increased its annual transport of sugar beet from approximately 150,000 tonnes to 313,000 tonnes in 2005. The demise of the sugar beet transport marks the regrettable end of a long and successful association.

Regarding the Diageo contract, larnród Éireann has informed me that Diageo carried out a tendering process last year for all of its logistics business and has decided that it will not be renewing the Iarnród Éireann contract for this business as it received an offer that is significantly lower than current rail freight rates by alternative road-based suppliers. Improvements in road infrastructure as well as a decline in the sale of draught beer have made the distribution of kegs by rail uncompetitive with road haulage.

Despite these setbacks, larnród Éireann will continue to pursue viable trainload traffic. The company has made progress in growing the rail freight business in areas where it holds a competitive advantage over road haulage, including mineral ore and pulpwood. For example, Iarnród Éireann has increased the trainload pulpwood business by modifying surplus wagons and providing additional services for Coillte between the west and the south east. It has recently altered rail schedules and is currently providing three additional trains per week for Tara Mines, with a potential to carry an extra 85,000 tonnes of lead and zinc between Navan and Dublin Port per annum. It has modified surplus platform wagons to provide a trainload service for containers between Ballina and Waterford Port. This new service, initially two trains per week, is due to commence on 21 April.

The position regarding competition in the rail freight market is that the Minister for Transporter, Deputy Cullen, introduced the European Communities (Access to Railway Infrastructure) (Amendment) Regulations 2005 (S.I. No. 780 of 2005), implementing EU Directive 2004/51 on the development of the Community's railways. These regulations allow for the opening of the rail freight market to competition from 1 January 2006 in the case of international freight, and from 1 January 2007 in the case of domestic freight operations. Under the regulations, the market is open to foreign operators. My Department has received a communication from a UK operator stating its intention to establish itself as a freight operator. The Department has been in touch with the operator but a formal application has not been received to date.

larnród Éireann has undertaken extensive engagement with industry and transporters around the country to try to identify long-term sustainable business opportunities. It has had genuine difficulty in identifying business opportunities that offer reasonable volumes of business on a regular basis. It is not feasible to run trains with one or two containers and larnród Éireann has not identified sufficient business to group a number of separate activities together to form a viable trainload. Most Irish industry is focused on "just in time" transport and as our road network continues to expand and improve across the country, the role of rail freight becomes more problematic because all rail journeys involve road movements at each end of the logistics chain. Furthermore, distances in Ireland are short. The experience across Europe is no different. Rail freight activities are most economic where distances are long, where there are large volumes to be transported and where the freight to be carried is not time sensitive.

The Minister is open to any views on how we can expand rail freight but the business environment is such that he has not seen any real opportunities identified. The market for rail freight will be fully liberalised in a matter of months and if there were opportunities, expressions of interest would be welcomed. The possibility of providing capital funding for sidings is often mentioned as a stimulus to rail freight but no firm proposals have been received.

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