No. 32

VICTORIA

VICTORIAN TRANSPORT STUDY

REPORT ON

TRANSPORT OF GRAIN

Ordered by the Legislative Assembly to be printed

F. D. ATKlNSON, GOVERNMENT PRINTER MELBOURNE

1980

VICTORIAN TRANSPORT STUDY

The Honourable R.R.C. Maclellan, M.L.A., Minister of Transport 570 Bourke Street MELBOURNE, Vie. 3000

Dear Mr. Maclellan,

I have the pleasure to submit herewith a report on Transport of Grain.

This is one of a series of reports being prepared to make known the results of the Victorian Transport Study.

Yours sincerely,

W.M. Lonie

CONTENTS

Summary

TRANSPORT OF GRAIN

1. Introduction

2. Submissions

3. The Australian Wheat Board's Submission

4. The Grain Elevators Board's Submission

5. The Victorian Railways Board's Submission

6. Other Submissions

7. Bureau of Transport Economics Report, 1978

8. The Transmark Study, 1980

9. Comment and Discussion

10. The Alternative - A Coordinated System

11. Conclusions

12. Recommendations

Appendices

SUMMARY

The total transport task of carriage of grain from farm to final customer is probably the most costly segment of the total grain business.

The transportation and handling of grain in Victoria is only part of the total transport task in carrying grain from the growing areas of Victoria and adjacent areas such as the Riverina region of New South Wales to the principal overseas markets,

The transportation of grain within Victoria and through Victoria is the most important freight task carried out by the Victorian Railways Board, both as to tonne kilometres hauled and as a proportion of avoidable costs involved in the railways operations.

Total costs involved in transporting grain by rail within Victoria and from the Riverina area of New South Wales are not being met from freight charges, the result being that the people of Victoria are subsidising the transport of grain, hauled on the Victorian Rail System, irrespective of origin or destination through the revenue supplement. Furthermore, as no provision is made in freight charges covering capital charges and depreciation factors, there is very little, if any contribution by the grain industry to overhead costs involved in maintaining the Victorian Railways system.

There is a continuing need for the provision of modern facilities for the transport of grain on the Victorian Railways system, and for investment in roads in the grain growing areas, in order to ensure that grain growers can continue to be competitive in international markets in the light of competition from other sources.

Because of volumes involved, grain appears to be the only bulk commodity of significance which could justify substantial expenditure on a modernisation program of transport and handling facilities within the State, by the State Authorities responsible, viz. The Victorian Railways Board and the Grain Elevators Board of Victoria.

Unless funds are made available to ensure that the Victorian Railways Board and Grain Elevators Board systems are modernised, the carriage of grain will largely transfer to road.

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1. INTRODUCTION

1.1 A number of studies have been made into economic aspects of grain transport within Victoria and Australia, by expert authorities, in particular aspects of the grain and transport industries,

1.2 Studies have also been made by a number of Government organisations, including the Bureau of Transport Economics of the Commonwealth Department of Transport which published a paper entitled "Transportation of the Australian i4heat Harvest", in 1978.

1,3 In its report, the Bureau suggested redirection of the wheat harvest to closest port irrespective of State of origin, which had the effect of directing of a large proportion of RiverinaN,S.\.J. grain to Geelong and Portland. The Bureau recognised that rail freight charges would need to cover "avoidable costs", and that there could be shifts in rail revenues and revenue supplements.

1.4 The most recent study of the Victorian grain transport task was commissioned by the Minister of Transport, and carried out by Transportation Systems and Market Research Limited of London (Transmark) in early 1980, to ascertain the costs incurred by the Victorian Railways Board, and the relationship between those costs and the freight charges made, in carrying out the task of transporting grain throughout Victoria.

1.5 The study concluded that the grain industry was not meeting the avoidable costs of carrying out the task of carriage of grain by rail.

1.6 The evolution of the grain industry in Victoria and adjacent States was closely connected with the radial development of the rail system from Melbourne, the Capital and the principal Port of the State, in the last two decades of the 19th Century. As a result, the familiar pattern of railway line development continued into the 1920s in the era of horse dravn harvesting methods and grain collection, and delivery by horse drawn wagon to rail sidings up to a maximum distance of the order of 20 to 25 km away.

1.7 In the late 1930s and thereafter, the location of storage and collection facilities of the Grain Elevators Board of Victoria at the 250+ rail sidings installed to cater for horse drawn traffic preserved all the problems relating to the scale of operations of the 19th Century labour intensive farming and transportation activities,

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1.8. Of particular relevance to the study of transport of grain in the 1980s is that, although the need for modernisation of farming methods and grain handling has been recognised by the farming community, the storage and handling authority, the Victorian Railways Board, 'and the many Government and semi-Government authorities directly and indirectly involved over the past 50 years, only certain aspects of these tasks have been the subject of capital investment and modernisation.

1.9 The overall concept of the handling and transportation task related to the grain industry still largely remains as in the 19th Century.

1.10 Very little farm storage is provided, the distance from farm to receival silo remains the same, the means of providing, shunting, loading and assembly of rail wagons for the line haul task remains unchanged, and the limitat~ons imposed upon the use of road transport reflect all the regulatory aspects of the control over road transportation instituted in the 1930s.

1.11 The area which is served by the Victorian transport system, extends far beyond the geographical boundaries of the State.

1.12 The distance from which grain is transported to markets within Victoria, and for export, is a somewhat artificial boundary, being based on the freight and handling charges which pertain to grain movement within the State.

1.13 At the present time, rail freight charges made for the transport of grain by rail do not cover the total costs involved in providing that service, a feature which tends to distort the nature of the transport and handling tasks, and the level of revenue supplement provided by the people of Victoria to maintain railway services.

1.14 The Board of Inquiry into the Victorian Land Transport System recommended that railway charges should be revised to cover total costs, and to include provisions for capital charges and allowances for depreciation, and that the Victorian Railways Board should concentrate on the tasks for which it is best suited in the matters of provision of capital and modernisation of its facilities.

1.15 However, this has not been done, and it is unlikely that the Victorian Railways Board could provide the necessary services in the grain transport task, at costs on a fully allocated basis, which would be competitive vith alternative transport methods now available within Australia.

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1.16 Some parts of the grain transport task, such as collection or gathering wheat from closely spaced lov capacity country silos, and delivery of small parcels of grain to local consumers by rail, are grossly inefficient, and should be replaced by road transport as soon as possible.

1.17 The marketing and growing conditions pertaining within the grain industry, and the resultant transport and handling tasks, are diverse, and subject to involvement of far too many authorities concerned with their own responsibilities, but with apparent less concern with the need for cooperative coordination in the interests of minimum costs of operation and maximum returns to the grower.

1.18 In other words, there is a need for coordinated commercial management of the total transport task, preferably independent of·the authorities basically concerned with variou~ statutory and administrative responsibilities relating to various parts of the task.

1.19 Advantages could accrue to the State through the re-development of the State's grain transport and handling facilities with the object of reducing the costs involved in those tasks, and consequential expansion of the area served, by a modernised cost effective State transportation and handling system.

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2. SUBMISSIONS

2.1 Principal submissions regarding the transport of grain have been received from the Australian Wheat Board, the Grain Elevators Board of Victoria, Victorian Railways Board, Farmers & Graziers Association groups, coordinating groups such as the Marmalake Zone Receival Committee and the Eastern Mallee Committee, and the Professional Transport Drivers' Association of Australia, Several other organisa­tions and individuals also made helpful submissions.

2.2 In addition, the Study Group has had detailed discussions with several of those who made submissions, and with other interested parties.

2.3 A list of those who made submissions and/or had discussions with the Study Group is included in Appendix 1.

2.4 Because of the significance of the submissions from the Australian Wheat Board, the Grain Elevators Board , and the Victorian R a i 1 Ill ay s Board, each of the m is discussed in some detail in the next three sections of this report. Discussion on the remaining submissions then follo111s.

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3. THE AUSTRALIAN WHEAT BOARD'S SUBMISSION

3.1 The Australian Wheat Board advised that it is "a body corporate established under the provisions of the Common111ealt.h IJheat Marketing Act 1979 (No.l66 of 1979) and complementary legislation extant in all States. The Board is responsible for administration of the provisions of that legislation, an important part of 111hich relates to the marketing of 111heat and the regulation of trade in wheat within Australia and in relation to export markets."

3.2 In exploring the functions of the Board, and the interests of the Board in transport, as perhaps the most important factor in the economic well be~ng of the grain industry in general, the Board had the follo111ing comments to offer:

"Under the provision of the Wheat r~arketing Act 1979 wheat may only be delivered by growers to Licensed Receivers of the Australian Wheat Board or 111ith the Board's express authority direct to the buyer. In the State of Victoria, virtually all wheat delivered by growers is received by the Grain Elevators Board of Victoria, that is, the Australian Wheat Board's Licensed Receiver. Only a very minor quantity of 111heat is delivered direct to buyers in this State. 11

'1he Grain Elevators Board of Victoria is the sole grain handling authority in the State of Victoria."

"The Board also receives, handles and stores wheat on behalf of the Australian Wheat Board at places on the Victorian railway system which extends into New South Wales, for example, at stations on the Balranald to Echuca, Deniliquin to Echuca, and Oaklands to Yarra111onga Lines. In addition, the Grain Elevators Board of Victoria receives, handles and stores wheat in the so called Buffer Zone (in the southern Riverina of New South Wales) by engaging privately owned premises, owned/operated by its Agents. The Grain Elevators Boards of Victoria and New South Wales also receive, handle and store wheat in facilities owned and operated by the New South Wales Authority which are situated in the Buffer Zone, under the provisions of an Agreement between these State Boards."

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"Transportation of 111heat 111ithin Australia has considerable influence on the marketability of the commodity, and therefore, on the marketing strategy 111hich the Board may adopt. The Board's interest in transport is essen­tially confined to the consideration of cost and service."

3,3 The Board did not make any submission as to ho111 transportation of 111heat might be reorganised or arranged to satisfy the Board's exclusive interest, vis a vis the rest of the people of Victoria (and adjacent States), or ho111 to achieve the evolution of the loll/est cost long term transport system needs of the industry.

3.4 The Board's submission includes comments on the effect of freight rates charged lirrespective of freight costs) on the industry generally, and particularly on-the traffic pattern of the land transport task in transporting grain from the farms to appropriate ports.

3.5 Because of the relatively limited size of the State of Victoria, and the relatively close proximity of the Victorian ports to the grain gro111ing areas of the Riverina area of Ne111 South Wales and to South Australia, the task incorporates considerable interstate movement of 111heat and other grains. The result is that the transport task can be altered depending on the actions and financial policies of Government in the various States, and the degree of influence 111hich those actions and policies have on the setting of the freight rates applicable to Government o111ned and operated transport facilities.

3.6 In commenting on this matter the Board said:

"Production potential for 111heat in the area of southern Ne111 South Wales, 111here receival stations for this grain are 'freight advantaged' to domestic users and seaboard terminals in Victoria, cannot be positively determined because of the indefinite boundaries of the area. The boundaries 111ill vary from year to year according to the comparative position bet111een freight costs from sending stations to Darling Harbour and Geelong."

"Furthermore, deliveries to stations in the southern Riverina lllhich are freight advantaged, to Geelong, are diminishing by gro111ers delivering direct into stores in Victoria and enhanced by deliveries from Ne111 South Wales production areas beyond the northern notional border of the Buffer Zone. The magnitude of

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freight savings obtainable will influence the extent of such migrations in relat1on to place of wheat delivery, another influential factor will be the magnitude of any differential between storage and handling charges applied by the Grain Elevators Boards of Victoria and New South Wales. For example, the storage and handling charges applicable for the Season 197Y/80 are as follows:-

New South ~Jales

Buffer Zone

Victoria

$12

$ 9

$ 7

per tonne

per tonne

per tonne"

"This is not a static relationship, however, the present state of relativity of the charges does show that delivery from New South Wales (i.e. areas contiguous with the Buffer Zone) into Buffer Zone or Victorian receival points is attractive if coupled with freight savings."

3./ In referring to the magnitude of the variations which could occur, the Board advised that deliveries from defined zones in the southern Riverina area of New South Wales during the "exceptionally good" harvest season of 1979/80 amounted to 683,218 tonnes.

3.8 The transport situation can be material~ affected by the vagaries of weather conditions even over limited areas as well as over growing zones and regions. Not only is the level of production likely to be affected, but crop recovery, grading and blending factors could effect the marketability of the crop.

3,9 The Board commented that qualitative and operational reasons such as these may well be more important economic factors than freight cost under certain circumstances. Indeed, some of the penalties applicable to certain grades of wheat presented in certain receival zones are higher than the freight rates between the silos and the ports.

3.10 The Board had the following comments to offer on the 'least cost' principle of transportation of wheat:

"The Australian t·Jheat Board holds a firm view that all wheat produced in Australia, irrespective of the State or Territory in which it is produced, should 'move' for export to the seaboard terminals indicated by least (relative) freight cost. For example, if the freight rate per tonne from a sending station (country store) in southern New South Wales to Darling Harbour, Sydney, is $17.96

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and the freight rate per tonne from the same sending station to Geelong is $16.45, then all wheat held at that station, surplus to domestic requirement, should be sent to Geelong for export. Indeed, this view was the basis on which the Buffer Zone was established in the southern Riverina of N.s.w.,the principle provides for review of the extent of any Buffer Zone should a change occur in the relationship between freight rates to the 'competing' terminal ports."

"The same arrangement should apply in all similar circumstances; for example, the position of sending stations in Western Vict~ria in relation to the alternative seaboard terminals at Port Adelaide, Portland or Geelong should be kept under constant appraisal. Indeed, the practic­ability of sending wheat from Victorian sending stations to Port Adelaide is distinctly superior in comparison vith movements from Nev South Wales to Geelong because of the common 'broad' gauge or rail lines employed in the Victorian and South Australian systems."

"In situations vhere interstate movement of wheat is undertaken by rail in both the sending and receiving States, it is not reasonable, indeed, perhaps not even Constitutional, to make separate tariff charges for each State leg of the journey. We consider that a rate should be struck incorporating a weighted average rate based on the weighted average of the tariff rates applicable in both States in regard to the overall distance to be covered between the country sending station and the terminal. Thus if the distance from a sending station in New South Wales to Geelong is 300 km, the distance from the sending station to the transfer point at Tocumwal is lOO km, the Public Transport Commission of N.S.W. rate for a 300 km haul is $12/tonne, and the VICRAIL rate for 300 km is $10/tonne, the charge should be -

tl2 X 100) + tl0 X 200) = $10.67 per tonne

300

In ca3es where wheat must be transferred from one rail gauge to another (e.g. N.S.W. to Victoria) there vould, of course, be justification for an additional shunt charge; however, where no transfer is necessary (e.g., Victoria to S.A.) no such additional charge would be justified."

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3.11 According to the Board, total regulation of wheat to the rail mode under the Transport Regulation Acts, and in the light of VicRail's objections to transport of grain by road, causes distortion in costs and the supply pattern, particularly in the task of delivery of grain to domestic millers, The Board said:

3.12

"The buyer's ability to choose the least costly and most convenient method of transporting wheat in these circumstances has a considerable inFluence on whether or not he will purchase wheat from a given storage position. Indeed, insistence by VICRAIL and the Transport Regulation Board on employment of rail transport to move wheat from country stores to nearest rail sidings to buyers' premises which are situated in offrail positions has in the past resulted in buyers either seeking to obtain wheat supplies by road from interstate sources or buying alternative substitute grains, such as sorghum, from interstate. The burden of extra costs and lost opportunities arising from the regulatory attitude which has generally prevailed in relation to intrastate transportatlon of wheat in Victoria has been borne by a comparatively small segment of the wheat using community, impairing their competitiveness and interfering with the Australian Wheat Board's ability to cater for their customers' needs in the most logical manner and to the best advantage of both buyer and seller."

The Board's submission also comments that

"The Australian Wheat Board considers that established rail transport facilities remain essential to the Wheat Industry - it would be quite impracticable and uneconomical to attempt to haul large quantities of wheat by road."

3.13 The Board recognises that some road movements are warranted, but only where the least cost is involved, as follows:-

"Road transport is only useful as an adjunct to rail where certain 'door to door' movements of wheat must be undertaken or where rail transport facilities are not available. Indeed, tne Board considers that the intention should be to minimise road trRnsportation of uheat, consistent with practicality and application of the 'least cost' principle (already discussed). All of the evidence available to us indicates that it would be prudent to retain, maintain and improve rail lines, rolling stock,

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locomotive power, and ancillary rail facilities to cater for future needs; it would be wrong to take a defensive view in relation to the lack of profitability of the existing rail system and encourage rationalisation to achieve readily perceivable but only short-term economies."

3.14 Of particular relevance to alternative possibilities and improvement to the efficiency of the task of trans­porting grain, the Board's submission said:

"The Australian \rJheat Board is not inclined to make its views public in relation to the abandonment of specific existing rail lines however, we consider that any such action contemplated should be researched with the utmost care with keen awareness of long-term implications to State development and the rural industries."

"In viel!l of the need for flexibility which would permit shipment of hard Mallee wheats through Portland, we most strongly suggest that an actual rail link be established between Litchfield and Minyip. The 'ghost freight' concession which currently exists in relation to that 'link', while being helpful to the Australian Wheat Board, is undesirable because it is artificial and merely results in savings to the Board being carried elsevhere."

"The Board is aware that some consideration has been given to the establishment of a standard gauge rail link between Tocumwal and Mangalore. We can see no merit in that proposal and view the previously mentioned Litchfield to Minyip link as being potentially more useful, On the other hand, the Australian Wheat Board does consider that the rail to rail transfer facilities for grain at Tocumwal should be improved, that the rail bridge over the River Murray at Tocumwal should be renovated to a suitable standard or replaced by a new structure, and that rail to rail transfer facilities for grain should be provided at Oaklands, N.S.W."

"Provision of more hopper-bottomed bulk grain wagons, particularly of the GJX/GJF type is urgently required in order to upgrade the VICRAIL grain wagon fleet to modern day standards."

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"Improvements designed to achieve better turn around of rail trucks in the grain traffic at seaboard terminals and sub-terminals are also urgently required."

3.15 In commenting on the wheat transport task generally, the Board said:

"Wheat is not a homogeneous commodity, it varies considerably from parcel to parcel in terms of inherent quality and physical condition. Wheats of various Classes and Grades must be stored, handled and transported as discrete parcels so that the market demand can be precisely satisfied. The range of farinaceous products manufactured from wheat by overseas customers is vast and the ability to meet raw material quality specifica­tions assists greatly in gaining and retaining market access. The domestic users of wheat in Victoria are a 1 so h i'g h 1 y q u a 1 it y conscious • "

"Any wheat transport system employed must be sympathetic to the need for quality 'segregation'. This does not, of course, mean that there is any need for segregation of parcels within individual bulk vehicles. The requirement is for positive identification of vehicles/trucks carrying specific Classes or Grades of wheat, and for an appreciation by any transport body/authority employed by the Board that the clearance of vheat stocks from country storages to export markets and domestic buyers must be undertaken in accordance with marketing requirements. This may, of course, impair the ability of the transport body to follow the most rational approach to 'storage system' clearance."

3.16 The Board also highlighted 'storage system' clearance, certain aspects of its submission to the Victorian Inquiry of March 1972 into bulk handling of all grains in the State, and the need for a single authority to handle all grains, in view of the importance of hygiene in transport and handling of grain.

3.17 No submission vas received from the Board regarding the effect of its marketing activities and policies regarding shipment of grain on the total transport costs involved in the international wheat trade. This aspect will be commented on further in this report.

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4. THE GRAIN ELEVATORS BOARD'S SUBMISSION

4.1 The Grain Elevators Board submission, like. that of the Australian Wheat Board, is a comprehensive document setting out the functions of the Board, describing the industry, and commenting on the future of the grain industry and its requirements for transport services.

4.2 The Board said:

"The Grain Elevators Board of Victoria is a statutory authority responsible for the receival, storage and despatch of bulk wheat, barley and oats, and also handles other bulk grains for export."

"The Board is responsible to the Government of Victoria, via the Minister of Agriculture. It operates facilities in the main cereal production area of Victoria and southern New South Wales, for receivals ex farm. Terminals at the seaboard for the loading of vessels for export are also ovned and operated by the Grain Elevators Board."

4.3 The Board sees itself as a service organisation with its principal objectives being to provide an efficient and economic service to producers, marketers and consumers of cereals. It sees itself as having to be efficient, not only in terms of costs, but in terms of operational efficiency as well, where timing of handling task, and the quality of products are important.

4.4 The Grain Elevators Board of Victoria was constituted as a statutory body in 1934 to handle the receival, storage and despatch of vheat. The Board explained:

"In 1957 the Grain Elevators (Border Railways) Act enabled the Board to consrruct storages along the railway lines operated by Victorian Railways in southern New South ~Jales."

"Barley was first handled in 1963/64. Although initially only 5 1 000 tonnes, it has grown so that in the last harvest (1978/79) barley receivals totalled more than 467,000 tonnes."

"The Act under which the Board operated was amended in 1977."

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"Under this amended legislation the Grain Elevators Board became responsible for the handling of all grains and oilseeds in Victoria as well as its commitments in southern New South Wales. The following year oats receivals began and amounted to almost 160,000 tonnes."

4,5 The Board also advised that "because of financial restrictions, capital works programs have been characterised by years of great activity followed by periods of apparent inertness. This ratchet-like approach has resulted in more than 15 types of storage units at over 250 sites, with 3.84 million tonnes capacity."

"Overall Board policy is defined by the Grain Elevators Act 1958 and amendments, which specify limits of authority and which, like any Act, can only be changed by Parliament."

4.6 The Board advised that it has country storage capacity capable of holding 2.42 million tonnes of grain in 659 units. In addition, the Board has developed sub­terminals at Dunolly and Murtoa of 231,600 and 176,100 tonnes capacity respectively in a "strategic position in the rail system". In describing the function of the sub­terminals, the Board explained "Their present function is the rapid receival of rail trucks from silos distant from the seaboard terminals during the harvest ~overflow) period". In commenting on the operation of the Dunolly and Murtoa sub-terminals, the Board complained about a stopover charge of $1.05 per tonne being levied by the Railways for all grain that moved into the sub-terminals from distant silos, and subsequently moved to another destination.

4.7 The Board's submission also included a description of the Sunshine Barley Terminal with a capacity of 64,000 tonnes, the Geelong shipping terminal with a storage capacity of 819,800 tonnes, and the Portland complex with a total capacity of 165,000 tonnes of storage.

4.8 Originally the Geelong terminal was constructed as an export terminal based on rail deliveries, but in recent years the Geelong terminal has become the State's largest receival point for barley delivered by road from farms.

4.9 Geelong was originally designed to accommodate ships of up to 12,000 tonnes displacement, but ships of up to 40,000 tonnes can now be loaded. Portland is fast becoming a major port for shipment of grain, and ships of the order of 50,000 tonnes can be loaded,

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4.10 A feature of both the Geelong and Portland terminals are receival and loading rates of the order of 400 to 600 tonnes per hour.

4.11 In describing the transport task and the facilities used in the transport of grain the Board made the following comments:-

"Traditionally GY wagons have been the back-bone of rolling stock available for grain movement. This type of wagon is a fixed wheeled open box, vith side mounted doors holding approximately 21 tonnes of vheat. Because they are open topped, tarpaulins are required to protect grain from the elements. These features make the use of GY wagons labour intensive, particularly in the unloading and cleaning operations."

"Trains with GYs are restricted to a maximum speed of 65 kilometres per hour, even on the main lines, causing more inefficiency."

"The introduction of specialized grain carrying hopper bottom GJF vehicles has radically altered the economics of rail transport. There are nov 379 of these vagons in use for grain transport within the Victor1an system.

These bogie type vehicles have the advantage of:

(a) holding up to 58 tonnes of wheat;

(b) train loads of GJFs can travel at lOO kph;

(c) self-emptying for faster and less labour intensive unloading;

(dJ more hygienic;

(e) less cleaning required;

(f) lower maintenance costs in both absolute and relative terms;

(g) intrinsically veather proofed."

"The third and latest addition to the grain fleet is 400 GH vagons. First introduced before the 1978/79 season, they are GY wagons vhich have been built up slightly, enclosed and a hopper bottom has been added. The result is a wagon with a capacity of 22 tonnes but, more importatly, a wagon vith almost all the benefits offered by GJF type vehicles."

"The primary concept in rail transport is the use of 'block' trains. This involves the use of trains made up of one type of rail wagon, carrying one type of

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grain, to a single destination. While the need for one type of grain is not absolute, a single destination is of prime importance. A block train operates by leaving empty wagons at four or five sites on the journey up the line then, on the return journey the train picks up the now loaded vehicles and continues on to the destination."

"The extent of road orientated resources, at this stage, is unknown. There are a number of operators experienced in the handling and trans­porting of grain but, because of the monopoly enjoyed by the Victorian Railways, the market has been suppressed. It is not inconceivable that if the demand for road transport existed, there would be little inertia in the develop­ment of the supply side of the operation."

4.12 The Board's submission describes the transport task in handling grain during the past two season, when record tonnages of the order of ~.1 - 4.3 million tonnes were involved, including the introduction of grain from the Riverina region of New South Wales, and changes in the grain industry. The tonnages handled in the past two seasons must be compared with the previous average of the order of 1.9 million tonnes to appreciate the magnitude of the task undertaken by the Board, VicRail and the port authorities.

4.13 The Board anticipates a reasonable average crop may be of the order of 3 million tonnes per annum within the immediate future, but in the long term they believe that production of all grains including oil seeds could reach a sustainable production rate of the order of 6.5 million tonnes per annum and a peak of 8.5 million tonnes.

4.14 A description of the Board's activities and the means of handling the grain crops is contained in Appendix 2. In view of the significance of the transport of grain from the Riverina area on the total flow of grain through Victoria, and the influence of the activities of the Grain Elevators Board in handling grain originating from outside the State on the amount of the rail freight recovered by VicRail and the revenue supplement to cover VicRail operating losses, the following extract from the Board's submission is considered relevant in the context of this section of the report.

"The Board no111 operates receival points beyond the traditional areas of the early 1970's. This move vas precipitated by the significant freight advantage to Geelong that much of the area of the Riverina and the Murrumbidgee irrigation area enjoys. In these areas the distance to Geelong is substantially less than the distance to Darling Harbor in Sydney (the nearest Ne111 South Wales export terminal). Secondly, this vas compounded by the introduction

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of State Accounting in November 1978. This involved each State Handling Authority charging their own handling rate rather than an Australia-~ide average charge being deducted from growers' returns. Because the Victorian system is relatively small geographically, has a well defined rail and road system, and is in a very sound position ~ith its storages, this Board announced a significantly lower handling charge than the New South Wales Handling Authority."

"As an illustration, Finley is 746 kilometres from Darling Harbor, but only 343 kilometres from Geelong.

The following freights were applicable at the time:

Rail freight to Darling Harbour Rail/rail to Geelong via Tocumwal Road/rail to Geelong via Tocumwal

- $16.14/tonne $13. 64/tonne $12.67/tonne."

"Combined with a $5.20 per tonne differential in handling charges in favour of deliveries into the Victorian system, it was clear that the cost advantages of the Victorian system would ensure large quantities of grain would be diverted from the New South Wales system into the Victorian land transport system."

"There was the possibility of an uncontrolled influx of grain into the Victorian system, to the detriment of both States. The Victorian system, under normal operating situations, would not be able to handle this increase in direct deliveries, and would be seriously embarrassed by the pressures which would develop. The added throughput would, however, serve to lower Victorian handling costs."

"After many months of negotiations the 'buffer zone' concept became a reality. This involves an area bet~een the two States where an intermediate handling charge is levied and the grain flows into the Victorian system. The end result is the leasing of ten storages of 221,5UO tonnes capacity from the Grain Elevators Board of New South Wales, plus an extensive array of leased private and Rice­growers' Co-operative storages in the transition area • "

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"There is no satisfactory method of determining the quantity of grain funnelled into the Victorian system because of this initiative. A conservative estimate would be 200,000 tonnes, whilst 350,0UO tonnes (i.e. 70% of the so-called 'black market' trade estimated by the Industries Assistance Commission) uould not be unreasonable. This would be a $3 million plus for the Victorian Transport system."

"The third feature of this rapid increase in tonnage handled is partly attributable to the handling of oats."

"On 1st July 1978, the Grain Elevators Board became the ouners of ex-Victorian Oatgrowers Pool storages at 56 different sites, after equitable compensation was paid to the Victorian Oatgrowers Pool and Marketing Cu. Ltd. This was the final step in the Board taking over the handling of oats in Victoria. Subsequently almost 160,000 tonnes of oats uas received at 120 sites during the 1918/79 season. Progressive receivals for this harvest stand at 110,000 tonnes."

4.15 The Board's submission refers to the rapid advance of agricultural technology, particularly as related to the stripping of the crop by advanced machinery, the changes in marketing brought about by diverse market requirements for products with specific properties, and the need for rigid quality control throughout the handling and transport task.

4.16 The Grain Elevators Board, the Australian Wheat Board and a number of farmers' organisations advised the Study Group that there is marked change taking place in farming practices, with an expansion of the grain crops into areas traditionally not cropped in recent years. As a result, changes are taking place in the nature of the handling and transport tasks expected of the Boards, including a requirement for flexibility not previously encountered. There is a commercial relationship between quality and pricing, and the transport task is not enhanced by quality/price relationships, the need for segregation or blending to achieve marketable products, and the size of marketable parcels of grain. Perhaps one feature of importance in the grain industry, which is not so obvious in other bulk products,is that the nature of the transport task can vary considerably as a result of physiological changes during the "grain filling" final period of the plant's life cycle, immediately prior to harvest and as a result of price or quality considerations related to those changes.

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4,1/ In commenting on the future, the Board anticipated a substantial increase in grain production in the traditional grain areas of Victoria and southern Nev South Wales, as vell as increases in the oilseed crops.

4.18 The Board recognises that the inherited system of handling and storage facilities is inadequate for expanded production, and has commissioned Consultants and carried out its ovn investigations into requirements of facilities to cater for the task, including such aspects as improved rate of receival, and delivery of both road and rail vagons, the size and location of additional storage facilities, including sub­terminals and terminals and the nature of the transport tasks in general.

4.19 In commenting on the transport task, and the part played by the Victorian Railways Board and its manag~ment, the Board appeared to highlight the railvays deficiencies, whilst avoiding acceptance of some degree of responsibility for some of the less palatable aspects of the recent task. However, the Board's comments are considered worthy of inclusion in viev of comments which will be made later:

"The primary aim of most train schedules appears to be divorced from the primary aim of the task -to shift grain as quickly and economically as possible. Trains arrive at destinations in a haphazard manner, or in clusters, causing extra costs at the terminals through the deployment of resources to cover the peaks. Naturally, in the trough these resources are under utilised. To this end tne Grain Elevators Board and the Victorian Railvays are forming a joint operations team, to oversee the workings of both organisations, in the near future."

"Similarly, at the other end of the train's journey, little thought is given to ensuring that maximum utilization of railway vehicles is obtained. It is not uncommon for a GJF train to drop off five or six GJFs at a stat1on, proceed a short way up the line and return vithin an hour and a half. As it is a two to two and a half hour job to load these wagons, the train returns with less than a full load."

"An extensive investigation is needed into the most profitable scheduling of trains using sophisticated techniques such as simulat1ons, PERT analysis, linear or quatric programming, etc. While there are many operat1onal and philosophical areas where improvements can be made, scheduling is of such prime importance to any transport system, large gains are potentially possible from even a small but well-orientated input."

19.

"Rolling stock improvements have al111ays been one of the areas of attention focused on by the grain. industry."

"There is no disagreement from any section of the industry that GJF 111agons are the most efficient method of transporting grain. The introduction of GH 111agons has certainly provided an improvement, but more of the larger hopper bottom 111agons are required over the next decade and beyond, But ho111 many? Suppose 111e accept an estimate of 6.5 million tonnes by the turn of the century as a plausible est~mate. This 111ould require 2900 GJFs per 111eek to clear the system over a ten month period. Because of geographical constraints, usage three times per 111eek 111ould be a reasonable ceiling level. Therefore, the grain industry 111ould require 970 GJF 111agons to accommodate the need."

"Compared to the present number of 379, it is obvious that a programme for the construction of more hopper bottom 111agons needs to be initiated no111,"

"Inter-System comparisons are often used to justify ~any claims and operations, e.g. stopover charges. The follo111ing is a comparisnn in ho111 the Victorian system compares to other State systems."

Percentace of Wagon tonnage available for bulk grain movement

State Hot:~er bottom Non-hoeeer

Victoria 20.54 79.46 Western Australia 34.78 65.22* South Australia*** 12.17 87.83 Ne111 South Wales 100.00 Queensland 63.80** 36.20

Australian average 41.45 58.15

* **

***

a large number of these 111agons are end t~pping

this includes 30 self-emptying A-frame 111agons

one-third of the South Australian crop is delivered direct to terminals ex farms."

bottom

20.

"These figures show that by comparison Victoria lags behind the other States in the provision of hopper bottom wagons. Also, the figures in Appendix 16 indicate that the tuo States which handle more grain and over a uider area than Victoria - Western Australia and Neu South Wales, do so with a less number of wagons."

"This evidence, plus the advantages of GJF wagons stated earlier, gives clear indication of the need for an increase in the GJF fleet."

"In line with the policy of the development of an exclusively hopper bottomed fleet, there is a need to provide more funds for track improvements. All lines should be able to accommodate GJF wagons. This, of course, is a long term requirement. Of more immediate concern is the need to upgrade the lines between the sub-terminals at Dunolly and Murtoa and the proposed north-eastern Victoria sub-term in a 1 , and the three terminals of Portland, Geelong and Sunshine. The rail lines running into Portland from Dunolly and Murtoa are of particular concern."

"While Portland can handle only 459 GY equivalents per day at present, moderniza­tion and structural development will mean that in the short term this facility will outstrip the ability of the rail system to supply rail wagons. The present difficulties may be overcome by a more rational approach to scheduling, but, for the intermediate and long term requirements of the grain industry, extensive track improvements are needed."

" f'1 u c h h a s b e e n sa i d a b o u t t h e fh n y i p t o Litchfield line over many years. While the provision of this line would give the Board more flexibility in its movement of grain, the single act of commissioning this line may have little consequence in itself. It should be part of an overall package which includes improvement of lines feeding from this new pathway and maximum utilization through more relevant and efficient scheduling practices."

"Integrated with these improvements is the provision of rail loops at the point of rail discharge. This would allow for a further refinement of the 'block' train

21.

concept. Trains of one grade could stay intact, with the engine never being unhooked. This would save vast amounts on the expensive shunting operations occurring at all rail discharge points, and would allow for a minimum stopover wagons at sidings. This development has been labelled the 'unit train' concept, for obvious reasons."

4.20 As a result of difficulties experienced in the management of the flush period of the 1979/80 wheat harvest, and, by design, road transport to supplement VicRail's task of collection and rail haul, has been used. The Grain Elevators Board's comments on the use of road transport is intersting and relevant to the total transport task and the work of the Study.

"One feature of this .harvest \llas the use of road transport, for the follo\lling reasons:

i. Off-rail storages:

i i.

Road direct to a terminal \llas usually more economical than a combined road/ rail movement. It is interesting to note that even \llhere direct road was clearly the lowest cost alternative, the Victorian Railways insisted on a combined road/rail movement. For example, the road freight from Navarre (near St. Arnaud) to Geelong would have been approximately $11.50 per tonne, but at the insistance of the Victorian Railways, the grain was moved to Dunolly by road then railed to Geelong at a freight deduction from gro\llers of $14.20 per tonne. A similar situation existed at Shelbourne, \llhere the logical approach was direct road deliveries to Geelong, but the grain \llas taken in the opposite direction by road to Dunolly for subsequent rail cartage. Hardly an economic practice~~~

In circumstances \llhere a silo is full and the receival rate is significantly greater than the rate at which rail can move the grain. For example, Robinvale filled early in the season, Because of logistics, only t\llo trains per day could be provided. Rail outloading could handle approximately 600 tonnes per day, but the potential receival rate \llas over 1000 tonnes per day. To supplement the rail service the Victorian Rail\llays arranged a road movement to Dunolly.

iii.

22.

Small quantities of grain in silo:

The third type of road movement involved small quantities of grain vhich were holding up relatively large amounts of storage space. and the use of rail trans­port would cause a disruption to efficient wagon utilization. During the harvest 848 tonnes of Clipper 1 barley spread over two sites was moved by road from the Panitya/Galah line to Sunshine. for this reason.

iv. Segregation:

Because of the segregation requirements of the marketers and some other factors. many bins fill to only a fraction of their capacity. To utilize all the space available. many short haul movements were organized to consolidate stocks. These movements were at the Board's expense. with 9058 tonnes being moved for this reason.

v. Discontinued rail services:

Where rail services have been dis-continued• either permanently or temporarily, the Victorian Railways arranged road contractors to transport to a sub-terminal. For example, five stations on the Bolangum/Jackson line, or to a terminal, e.g. three stations on the Balmoral line.

vi. Interstate movement:

The final area of use of road transport was for interstate movements where the cost of road cartage to Geelong was significantly lower than either rail/rail or road/rail movements.

The judicial use of road transport as an adjunct to rail. and that point should be stressed, enabled maximum utilization of facilities and an increased level of service to growers and consumers to be achieved."

4.21 In commenting on the changes ~hich the industry is facing. as a result of technological and agricultural developments in recent years, the Board indicated in certain areas, such as the Western District, it is likely that farmers will make decisions regarding the growing of grains which may tend to follow the relative prices between alternative enterprises, viz grain, wool, beef• etc •.

23.

The Board stated:

"In these areas of high elasticities, the Board is understandably hesitant to build large handling and storage complexes only tosee a change in world prices, from the present buoyant position, and find that such facilities are grossly under-utilised."

"In these areas handling and transport by a flexible and integrated system is more economical than the development of an extensive storage system. The advantage of these 'marginal' areas is their close proximity to final destinations, e.g. the Western District is close to Geelong and Portland, and Gippsland is close to a significant domestic stockfeed market. This geographical situation allows for rapid turnaround of rolliAg stock, giving an economical use of the transport system."

4.22 fprhaps these two paragraphs exemplify the attitude of the Grain Elevators Board and farmers organisations to the receival and storage of grain under conditions whereby they can identify with the capital cost involved in providing the facilities, and in the economic operation of them.

4.23 Unfortunately, there seems to be less understanding of the VicRail situation and the cost factors in the rail collection and line haul tasks associated with the working of the existing Grain Elevators Board's installations, and the need for revenue supplements to make up operating losses in the grain handling activities in the following statements:

"This Board is most adamant in its opposition to the levying of a stopover charge for grain moved to Dunolly and Murtoa. These two sub­terminals assist the Victorian Railways in achieving a better utilization of rail vehicles during the overflow period. The transport system's costs are lowered, but this saving is not passed back to the grolliers.

There is some claim that the use of Dunolly and Murtoa causes some increase in direct costs for the provision of a shunting engine and pilot, but surely not the $288,000 Victorian growers will be charged this season."

24.

"'Opportunity costs' are a concept that is an integral part of economic theory and practice. The man in the street certainly recognizes costs which are actual cash payments, but the economist realizes that some of the most important costs attributable to doing one thing rather than another, stem from the foregone opportunities which have to be sacrificed in doing this one thing. Similarly, by induction a concept of 'opportunity benefits' can be visualized as the benefits foregone by doing something one way rather than another. If the Board was to refuse to use Dunolly and Murtoa as an intermediate rail receival point, there may be a small decrease in the operating expenses for the yards concerned, a small loss in stop­over revenue, but these would pale into insignificance compared to the opportunity benefit of such an arrangement."

"\Vithout Dunolly and Murtoa an extra 51,310,000 tonne/kilometre of transport would have to be accommodated by the Victorian transport system. This would have meant slower turnaround of vehicles, cause an increase in the overflow period resulting in increases in direct costs for this Board and the Victorian Railways. Also, it would create pressure for substantial capital expenditure by both organizations."

"Dunolly and Mortoa must be used to maximize the grain handling operations of the industry. This Board envisages a system whereby these sub-terminals play an even greater part in grain transport, by moving grain to these points, consolidating into block train loads, if not already so, and then transporting by exclusive block trains to terminals. This Board believes that properly co-ord1nated, a greater utilization of resources can be achieved. It is essentially a funnel system with grain being brought to a centrally located point to be channelled down a few pipelines. In this case the pipelines are the primary grain shifting mode -block GJF train movements on high speed lines. Of course, it goes without saying that this situation would be impract1cal with a stopover charge."

"The Victorian Railways argue that the stopover charge of $1.05 per tonne is comparable to the $1.06 charged in New South Wales and less than the $1.20 charged in South Australia. But charges levied by overseas organizations allov one journey break during the trip as part of the service. If a charge is to be imposed it should be related to the costs involved and the benefits gained."

25.

"It is interesting to note that while the Victorian Railways charge for any additional expenditure, they decline to reverse the process and refund growers any savings made because of Grain Elevators Board initiated improvements."

"Another area of the Victorian Railways pricing policy which needs reviewing is the introduction of variable rates. At present charges are imposed regardless of the actual mode of move­ment, whether it be an exclusive block train from one station, or a train dropping off one wagon at forty silos. Each type of movement should be charged a rate which reflects its actual costs. The present system provides no financial incentives to improve the utilization of the existing systems. The Victorian Railways should be inviting improvements in transport efficiency throughout its whole operations, not just the grain sector, by adopting variable rates." ·

"Not only should their pricing structure be variable, but it should be flexible. An alternative method would be look at freight blocks rather than specific freight from specific stations. The Victorian Railways have partially adopted this approach with the Serviceton and Panitya lines in western Victoria. Similar to the rail freight advantages Geelong has over Darling Harbor in southern New South Wales, these lines had a freight advantage to Port Adelaide. To ensure the grain on these lines comes into the Victorian system, a line freight is charged in preference to individual station freight rates."

"Demurrage is a word no-one likes to encounter, but the Board is prepared to test its efficiency by accepting standard demurrage charges for wagons held for undue lengths of time if the Victorian Railways are prepared to accept costs accruing to the Board because of undue delays on the part of the Victorian Railways."

"The Board believes that the Victorian Railways should move on their pricing structure to ensure maximum benefits accrue to the growers."

4.24 The Grain Elevators Board submission is a quite comprehensive one generally, and its comments on the freight rates and conditions under which VicRail determines the method and means of transporting the grain crops submitted for transport by the Board, and the part played and likely to be played by road transport in future, at this stage appear to be contentious issues. They do, of course, have a considerable bearing on the development of a coordinated system which will be the subJect of later comments.

26.

4.25 However, the conclusions and recommendations of the Board are quite specific and are included here as a matter of record and later comment:

"The ideas and information presented in this submission serve as a guide to the complex nature of the grain industry, particularly the handling and transport sector."

"To gain some perspective, in 1977/78 the Victorian grain industry (excluding southern New South Wales) was valued at $199 million, The export earnings for the State of Victoria of 'cereal grains and their preparation' totalled $317 million, marginally below the wool and meat industries. If the value of all the ancilliary aspects of the grain industry were added to this figure, the true value of the industry could exceed $500 million. This year's figures would be well in excess of these statistics because of the changes that have occurred since then."

"The Grain Elevators Board is also the single largest user of the 'Victorian freight' category of the Victorian Railways' operations. There is also a substantial revenue contribu­tion to the 'intersystem freight' service category through the movement of grain from southern New South Wales through Tocumwal, Oaklands and Rutherglen. Therefore, the rational development of an economic and efficient transport system will not only be beneficial to this industry, but to the State as a whole."

"The future system should involve a grain fleet of at least BOO GJF type wagons running in high speed exclusive unit trains. The sub­terminals vill be fully utilized to cushion the effect of the overflow period, but their use will not necessarily be restricted to this period. Road transport will be used to augment the rail system by transporting small quantities of particular grades or in situations where road has a clear economic and/or operation advantage.

To this end it is recommended that:

l. More GJF type wagons be constructed as soon as possible.

2. Provision be made for loop lines at all rail discharge points.

3. Extensive track improvements be under­taken, particularly on the high volume lines feeding into the Terminals.

27.

4. Stopover charges be abolished.

5. Variable rates for different types of movements be introduced,

6, An investigation be made into alternative and more realistic pricing methods.

7. A greater use of road transport be made to create a totally integrated transport system.

8. An investigation be made into the scheduling practices of the Victorian Railvays."

"The Victorian Rail\1/ays should operate in such a manner that their total revenue at least covers operating costs and.makes some contribution to capital and depreciation charges. They should be run on a commercial basis and concentrate on areas for \1/hich they have an inherent advantage."

"It is the opinion of the Board that the \llhole question of the rail operation as related to grain movement should be examined and rationalized."

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5. THE VICTORIAN RAILWAYS BOARD'S SUBMISSION

!:1.1 In its submission entitled "Streamlining V'icRail' s Infrastructure and Operations to Meet the Transport Needs of the 1980's and Beyond", the Victorian Railways Board commented:

"There is great potential for improving the efficiency of grain handling and transportation but the extent of existing Grain Elevators Board infrastructure, the institutional factors involved, and extent of investment required to upgrade the system, mean that any changes will inevitably be fairly gradual. Our concept for the future involves the development of a number of regional storages at strategic locations which form the gravity points for substantial grain production. These terminals would be located on routes capable of handling main-line locomotives and fully-loaded hopper wagons and would be designed with sufficient throughput capacity to quickly load complete blocks of up to 25 wagons (1,400 tonnes of grain). As far as possible, all rail movement during the overflow period ~ould be concentrated on the sub-terminals and no overflow grain would be accommodated at smaller storages, These storages would be cleared on a programmed basis after the harvest per1od until completed, Taken in conjunction with proposals to significantly upgrade rail discharge capacity at North Geelong and Portland, it is envisaged that 24 hour cycle times for wagons between sub­terminals and seaboard would become feasible thus allowing an overflow movement of up to 2,000,000 tonnes of grain to be potentially accomplished by l,OUO bogie hopper wagons in 36 days. rhis compares with the deployment of around 5,000 four-wheel and bogie wagons to cope with an equivalent movement at present. The upgraded movement would also involve a substantial increase in average train sizes with very large potential for cost reduction."

5.2 The Board also stated that "it is the Board's view that railway services should exist only for commercial purposes with the qualification that this definition includes both:

(i) Services which are profitable in the normal business sense, i.e., the charges paid by users cover all relevant costs, and

29.

(ii) services for which, by deliberate Government policy, charges are made that do not recover full costs from users, the remainder being made up by way of a deferred Treasury subsidy or 'revenue supplement'."

5.3 In referring to the future role which the Railways should play, the Board quoted Section 14.4 of the report of the 1972 Board of Inquiry into the Victorian Land Trans­port System, namely:

"As this Board sees it, the Railways role is to perform that part of the total transport task for which they have inherent advantages over the other mode in relation to a system tailored, regardless of historical circumstances, to permit the Railways to maxi se those inherent advantages and thus to meet, in conjunction with road transport, the requirements of the State's economy and people. Those advantages are unlikely to exist where labour intensive handling is involved; are less likely to exist in the case of short haul traffic unless it be containers or bulk, mechanically loaded and unloaded, be from siding to siding or be in train loads moving from point to point; and are likely to exist where traffic is long haul, and particularly where it is of the character just noted or it involves large blocks of traffic requiring quick absorption in the transport system, e.g., peak hour commuters, the output of a steelworks, or without compensating backloading. These advantages will be greater if the traffic is concentrated on those lines that enable maximum use of existing facilities. Volume, of itself, gives no assurance of inherent advantage and may even be counter-productive."

"It is frequently said that the Raillllays are best fitted to handle the lllholesale side of the trans­portation business or to provide the equivalent of a mass production service and that conversely they run into financial problems when they engage in the retaining side or attempt to provide a tailor­made service."

"This is far too broad a generalisation though it has germ of good sense. The fact is that no clear cut predetermined division of traffic between road and rail modes is feasible. Some short haul traffic can better be handled by rail, e.g., mechanically loaded and unloaded bulk items like ores and grains. Some long haul traffic can better be handled by road, e.g. lllhere terminal

30.

charges are heavy; where special packing is necessary; where transfer between modes at terminals carries risk of damage and involves unacceptable time delays, and so on. However, subject to some necessary qualifications including that both transport modes are efficient and that neither enjoys an advantage over the other in the form of hidden community subsidies, in the long run, such diversion of traffic between rail and road as does occur should, generally, be the outcome of the choices made by the thousands of users of trans­port having freedom to choose the transport mode that best suits their goods and needs. And those choices could be greatly influenced by the wisdom of the decisions the Railways take about investments and operations directed to a achieving optimum efficiency."

5.4 In reviewing charges in the rail system during the 1970s, VicRail advised that "many changes have taken place in order to improve rail's efficiency and competitiveness". Amongst the changes specifically related to grain transport were included the following:

"Considerable development of the block train concept, in the transport of grain", and

"Reduction of the total wagon fleet s~ze from 23,009 as at 30.6.1910 to 13,987 as at 30.6.1979 while the traffic task over the period remained fairly constant".

5.5 In reviewing potential for network rationalisation in the near future, VicRail advised that the future of certain lightly trafficked routes used primarily for the carriage of bulk grain should be seriously considered, in view of the fact that they are in relatively poor condition, and will require relaying and upgrading at an estimated cost of $7 million in the near future, unless alternative prov~sion can be made, VicRail indicated that road services operating to silos or sub-terminals on adjacent lines might be able to provide equal or better service at less cost. In making these comments VieRail pointed out that the quantity of grain and other bulk commodities on the follow~ng lines barely produce sufficient total revenue to cover the basic costs of maintaining the track and structures, e.g.

Pittong-Skipton (12 Km)

Hopetoun-Patchevollock (43 Km)

Moulamein-Balranald (65 Km)

Elmore-Diggora 1-Jes t (19 Km)

Dookie-Katamatite

Numurkah-Picola

31.

(27 Km)

(33 Km)

5.6 VicRail also suggested consideration of elimination of two other lines should be undertaken after examination of the economics of alternat1ves.

5,7 During the progress of the study, VicRail produced a further paper on the possibilities of making improvements to the rail system, in the context of development of the most efficient transport arrangements for the carriage of grains. This is attached as Appendix 3.

5,8 Highlights of the Victor1an Railways Board concepts include the possibilities of:

(a) Construction of additional special purpose wagons specifically for the grain transport task.

(b) Wider use of block train movement of grain.

(c) Reduction in the number of country receival points and storages, including closure of some sections of line.

(d) Improvement of rail loading and discharge rates at sub-terminals and the port terminals at Geelong and Portland.

(e; Construction and operation of rail loops at the ports to drastically improve train and truck turn-around time.

(f) Increased train sizes.

(g) Improvements to track standards and train control.

(h) Construction of a rail link between Minyip and Litchfield.

ti) Construction of standard gauge track between Tocumwal and Mangalore,

(j) Upgrading the Ararat Portland line.

(kJ Wider use of road transportation where relevant to the efficiency of the transport of the bulk of the grain crop by rail.

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5.9 As stated by VicRail, the emphasis of the strategies outlined in their paper "is to progressively move to~ards the undertaking of grain transportation more in line ~ith current practices, ~idely adopted for bulk commodities (typified by the movement of grain in other countries and bulk iron ore and coal in Australia)".

33.

6. OTHER SUBMISSIONS

Members of Parliament

6.1 The following Members of Parliament representing the people of the grain growing areas and the regions traversed by grain traffic have had discussions with the Study Group:

The Hon. D.G. Crozier, MLC Minister for Local Government, Member for Western Province,

The Hon. B.A. Chamberlain, MLC Member for Western Province.

The Hon. K.I. Wright, MLC Member for North Western Province.

Mr. E.J. Hann, MLA Member for Rodney.

Mr. W.D. McGrath, MLA Member for Lowan.

Mr. D.K. McKellar, MLA Member for Portland.

6.2 The Hon. K.I. Wright, MLC, and Messrs Hann, MLA, and McGrath, MLA, also kindly arranged meetings with local groups and organisations in their electorates. Matters relating to the transport of grain were discussed at several of these meetings.

6.3 A meeting was also held with Mr. P. Ross-Edwards, MLA, and other members of the National Party, at which general trans­port matters pertaining to the grain industry were discussed.

6.4 The discussions with the Members of Parliament revealed a high degree of involvement in the activities relating to growing, handling, transport and shipment of the various grains, and with the people of the related industries in their areas.

6.5 Limitations in the systems, and the importance of service and minimum costs of handling and transport of grain, and other local problems which have been the subject of formal submissions to the Study were discussed,

6.6 The need for coordination of rail and road traffic, and the need for improvement in the facilities operated by the various Authorities to handle both types of traffic, were a subject of discussion. Of particular relevance to those electorates adjacent to the borders of the State are:

34.

The possibilities of expansion of shipments through the port of Portland.

The opportunities which are likely to exist in the long term in the carriage of grain from growing areas in adjacent States.

The need for roads of improved standard to cater for increasing road transport.

Expansion of grain handling facilities, and

Modernization of the rail system, including the provision of additional hopper type grain wagons and appropriate crossing loops capable of handling long block trains.

Victorian Farmers and Graziers Association (Transport and Communicat~ons Sub-Committee)

6.7 The Victorian Farmers & Graziers Association sub-mission prepared by its Transport and Communications Sub­Committee is an important document, covering the involvement of participants and principal customers in the grain haulage task in Victoria.

6.8 The submission nominates quality of service and costs as problem areas insofar as the grain industry is concerned, and states a need for "an efficient, flexible and reliable rail service capable of meeting the require­ments of its users".

6.~ Of particular relevance to the country areas and the country people is their reference to the possible effect of deregulation of road transport in the following words:

"There is a fear that the implementation of the superficially attractive proposition of deregulation and freedom of choice of transport modes - except in the case of long-haul, bulk commodities, e.g., grains- could result in VicRail neglecting the traditional services it has provided to country dwellers and lead to increased transport charges."

6.10 The Association, both in its formal submission and in discussions during the Study, highlighted the urgent need for modernisation of the rail transportation system for grain involving a "greater injection of funds to allow it to carry out urgently required capital works needed to meet the challenges of the future". In addition, in recognition of an increasing part being played by road transport in conjunction with and complementary to the rail transport task, the Association

35.

pressed the need for additional funds for road development through the Country Roads Board and local government authorities.

6.11 The Association pointed to a deterioration in economic and operating performance by VicRail in spite of efforts by its management to improve the quality of its service and reduce its deficit. It nominated increasing fuel costs, excessive manning scales, slow wagon turn­round, falling wagon utilisation, and lower productivity as being the apparent causes of increasing deficits, and stated that Government has an obligation to ensure that performance improves.

6.12 The Associat2on suggested the establishment of a public transport authority to give ''the Minister a total overview of transport requirements in Victoria in order that a higher degree of coordination might be achieved".

6.13 In referring to the balanced development of the State, the Association reiterated its comments regarding the need for a greater injection of capital funds particularly into the railways and road systems to meet the future needs of the State. It pointed to the State government, as well as Federal government, taxing policies relating to transport fuels and the need for balanced views in allocation of funds to road construction.

6.14 The Association also referred to the inherent conflict between the provision of transport services to the Victorian community at less than cost as opposed to a requirement that the organisations operate as commercial undertakings. It claimed that, as a result of objectives being poorly defined in the past and anomalous pricing practices as between different rail users, "grain growers or those transporting fertilisers have been forced to make greater relative contributions to Vicrail's costs than, say, suburban and country passengers".

6.15 In this regard, the Association said that "it is vital that the community is aware of those services provided by Vicrail at less than cost and the reasons for such action, or because of its common carrier responsibilities."

6.16 The Association also said:-

"Because of Vicrail's dependence on public funding it follows that it should be required to reveal far more information in its public accounts than is presently the case. This is a vitally important issue which needs to be pursued vigorously in order that commercial

36.

users may be assured they are not being forced to subsidise uneconomical services - especially those users such as grain gro~ers ~ha have no alternative system of transport,"

6.17 The Association supported the concept of establish-ment "of grain handling authorities to raise funds via the Loan Council"t and the expenditure of "urgently required capital to rectify some of the more glaring deficiencies in the system especially at the seaboard terminals".

6.18 A steady gro~th in grain gro~ing is envisaged, including the development of alternative "coarse grains".

6.19 Critical aspects of transport insofar as the grain industry is concerned include:-

"A need for much greater cooperation bet~een Vicrailt the grain handling authorities and marketing boards to assist in the more efficient utilisation of available resources."

A need for "an urgent on-going construction programme to upgrade the Vicrail grains ~agon fleet to modern day standards ~ith hopper bottomed bulk grain ~agons".

"All grain should be shipped through its natural port irrespective of State boundaries".

"Continuing sharp increases in rail freight rates could be a limiting factor in expansion of the gra1n industry as they ~ill reduce the competitiveness of grain gro~ers in the market place.

The contentious issue of stopover charges imposed by Vicrail on grain transhipped from local silos into sub-terminals on the grounds that transhipment "facilitates a faster turn­round of its rolling stock and enables it to move the harvest more quickly than ~ould other ~ise be the case through avoiding congestion do~n the lines closer to the seaboard terminals". In further commentingt the Association said "It is considered iniquitous, therefore for Vicrail to import stopover charges on the G.E.B. (~hich are ultimately paid by the grain gro~ers)".

The Victorian Farmers and Graziers Associat1on (Gra1ns Council)

6.20 The Victorian Farmers & Graziers Association Grains Council, through the Chairman, kindly supplied to the Study information relating to a survey carried out by the Bulk Handling Subcommittee of the Council in 1979 ~hich is of very real relevance to consideration of the

37.

overall transport task relating to the grain industry.

6,21 This information includes comments on the operations of the receiving silos, and opinions of the branches of the Association surveyed on the transport task, the need for and financing of additional storage capacity, and various other aspects which will no doubt be closely studied by the Grain Elevators Board and the Victorian Railways Board in formulating their plans for future developments.

6.22 Most of the replies indicated that, whilst there is an apparent need for additional storage and handling capacity at nearly 60% of the silo installations, for various reasons, there is a general consensus of opinion that silo operations are conducted in a satisfactory manner at the present time. Most growers would prefer to see the additional storage in local areas rather than at sub-terminals, notwithstanding that delays at local silos could be for considerable periods during the harvest season. Some areas report little or no delay during average harvests but delays of up to 2, 3 and 4 hours are common under above average harvest conditions in the same areas.

6.23 Even during average harvests, however, a large proportion of the Branches reported delays of the order of 1 to 2 hours, and up to 4 hours as a maximum. Whilst it would be difficult to nominate an average for the industry in view of the wide range in the estimates, a delay of 2 - 3 hours is apparently tolerated by the industry in general as being not abnormal.

6.24 Of relevance to comments made later in this report are the comments in reply to the question "\vhat is a reasonable distance for a grower to transport his own grain".

6.25 Whilst the answers ranged from 1~ - 5U km as being usual distances, the average appeared to be of the order of 20 km, and a general reluctance to travel more than about 30 km was evident. On-farm storage appears to be of the order of 20 to 40 tonnes maximum, so that the transport task is concentrated in the harvest period, and is related to the rate at which the crop is harvested.

6.26 The above information has basically been supplied to the Study Group in response to the question as to how far would a farmer be prepared to carry grain to achieve the lowest transport cost to the grower.

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6,27 The Study Group ~as advised that the time taken to deliver grain to the silos is a major factor in determining the length of the harvest. As a result, the decision as to the distance ~hich ~ill be voluntarily travelled ~ill be influenced principally by the delays incurred at the silos,

6,28 A study ~as undertaken for the Grain Handling Section of the Association into the options ~hich farmers could have as a result of construction of sub­terminals equipped to receive grain at rates ~hich ~ould avoid such costly delays, i.e., delivery to either local or sub-terminal.

6.29 The study sho~s that the application of results of it to actual practice ~ill depend on the value placed on the individuars time ~hilst not involved in the actual harvesting operation (being employed in eithe~ driving or ~aiting at the silos), benefits ~hich can be attributed to reduction in harvest time, (for example in changeable ~eather conditions), and the difference in rail freight costs out of local and sub-terminal facilities.

6,30 The study also sho~s that travel distances up to 50 km radius, involving a maximum of 15 minutes delay before discharging, could ~ell prove to be less costly to the farmer faced ~ith an average delay of the order of 3 hours at local silos. This conclusion ~as arrived at even after placing an extremely lo~ value on farmers' time, and if labour ~as employed for the task, even large travel distances may prove to be more economical.

The Victorian Farmers and Graziers Association (~almoral Branch)

6,31 The Balmoral Branch of the Association requested reconsideration of the closure of the Hamilton-Noradjuha tBalmoral) rail~ay line "as circumstances have altered dramatically since the Report (of the Board of Inquiry into the Victorian Land Transport System) ~as published. The Branch suggested that a revie~ of the costs of rebuilding the line and the costs of rebuilding and maintaining alternative roads suitable for grain transport. The Branch also commented on the potential of Portland as a major grain shipping port.

The Eastern Mallee Silo Zone Committee

6.32 The Eastern Mallee Silo Zone Committee's submission included the follo~ing statements, ~hich are quite self­explanatory and typical of comments by a number of representa­tive organisations and individuals:

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"We stress at the outset that 111e consider the 111hole grain industry from production to marketing as a totally interrelated system. Ideally, 111e 111ould like to see the various consecutive components of the system- production, delivery, storage, handling, transport and marketing - as an integrated process 111ith a coordinated manage­ment."

"Given that economic efficiency is the ultimate criterion for measuring the success of the 111hole system and by implication, the basis for future development strategies, 111e are concerned that individual components of that system are being extracted from the 111hole and considered in isolation. Thus 111e question the decision to consider trans­port alone 111ith its ~nterrelations 111ith the handling and stotage components."

"As an example of the sort of difficulty that can arise by this myopic vie111 of the industry is a conflict bet111een grain storage facility location and VicRail development. Traditionally, VicRail has tended to spread the 111heat trans­port task over a full year bet111een harvests, no doubt arguing that this maximises the use of locos, personnel and trucks, and minimises the need to upgrade lines."

"The result of this policy is that storages have to be constructed at the points of delivery to hold as much of the harvest as possible -at high cost to the G.E.B. and, ultimately, the gro111ers. In contrast it may be more efficient to centralise storage and use the rail transport more intensively during harvest to convey the grain immediately a111ay from local silos, 111hich are then mainly throughput handling facilities rather than long-term storages. The question to 111hich management must address itselt is: Which system is the best? The appropriate develop­ment strategy thus follous logically. The whole question of line quality, loco sizes, loading and speed of travel vould need to be considered as part ot this analysis."

"At present, the location of G.E.B. storages and VicRail improvement seems to be based on short term ad hoc decisions and not part of a coordinated plan of development for the 1990's. Fragmentation of management decisions does not help this trend."

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6.33 Amongst factors which the Committee believes should be taken into account in consideration of the long term development of the industry, and in developing appropriate transport facilities, are:

"Farm efficiency, particularly harvesting, will increase, resulting in a more rapid delivery of grain, in larger individual loads, than at present."

"Total harvests are likely to increase, with the normal seasonal fluctuation, coupled with a greater variety of grains to be handled, as farmers intensify rotations by inclusion of grain legumes."

"The massive development ot coal exports from N.S.W. could divert much southern N.S.W. grain through Victoria, placing greater stress on Geelong and Portland shipping terminals."

6.34 In addition, the Committee emphas1ses that "there is a strong case for the development of a more flexible attitude to the incorporation of road transport into the grain movement system" and recommends the replacement of the Balranald line with road transport to the nearest main line terminal, and divers1on of the funds needed to rehabilitate and maintain that line to roads.

6.3J The Eastern Mallee Silo Zone Committee also comments on stopover charges at sub-terminals, and the need to take a broad view of the costs of grain movement in order to ensure minimum cost to the customers.

The Marmalake Receival Zone Committee

6.36 The Marmalake Receival Zone Committee provided information on the wheat industry, and likely future develop­ments which are likely to change the requirements for handling and transportation. The Committee is of the opinion that the most economical way to move grain is by a planned and orderly movement from local storage to end user or shipping terminal over the year, rather than in an almost panic during the "overflow" period.

6.37 The Committee believes however,that there is a need to achieve a workable balance between the alternatives such as increased local storage, sub-terminals and overflow trucking to ensure opt1mum capital and operating charges in the long germ. The principal concern is that substantial capital investments could well mean continuing financial imposts to growers in periods of low production. The Committee also presented strong arguments that any major changes should be justified by reduction or containment of freight costs to growers and that some minor changes could be justified at

41.

minimum cost to growers in improving efficiency of the grain handling task.

The Professional Transport Drivers Association of Australia

6.38 The Association claims nine hundred members throughout the State, the majority of whom are owner drivers. The Association's submission covers all aspects of road and rail transportation, and commends rationali­sation of freight services between rail and road trans­port, taking into account service, efficiency and costs with particular emphasis on the costs incurred by duplica­tion of services and under-utilisatlon of equipment.

6.39 The Association commented on advancing technology in materials handling, i.e., in loading and discharging of vehicles, and identified "the antiquated methods employed in uploading the majority. of VicRail's grain carrying wagons at the Grain Elevators Board installations", where wagons are still physically unloaded by a gang of men using hand scrapers and brooms.

6.40 The Association commented that a 25 tonne road transport vehicle can be unloaded in 3 man minutes, whereas the task of unloading a 22 tonne GY grain wagon requires 60 man minutes to unload, and advised that equivalent labour costs would be of the order of 1.05 cents per tonne in the case of the road vehicle, compared with 18.18 cents per tonne for the discharge of a GY wagon. (Whilst the Study Group is unable to confirm the figures, it has little doubt regarding the likely order of magnitude comparison).

6.41 The following extract from the Assoclation's submission relating to advancing technology in the grain industry is relevant to the Association's proposals regarding a coordinated grain transport system.

"Today harvesting techniques have taken an enormous step forward with the advent of the overseas harvesting machinery."

"loli th the importation of sophisticated machines from overseas we saw farmers being able to increase their harvesting capacity by up to 300%, this also forced them to update their farm-to-silo delivery vehicles."

"The Victorian grain intake system was then placed under pressure, as whilst we saw enormous changes in the harvesting and trans­portation of grain from the farms to the silos, there was little development in the receiving system from the original design of the mid-thirties."

42.

"At this juncture \Jle IJJish to reiterate that the short summary of the development of the bulk grain handling system in Victoria above is necessary for an appreciation of some of the points that \Jle IJJill put for\Jlard."

"bJhilst the G.E.B. \Jlas responsible for the receival and storage of bulk grain it IJJas the responsibility of the Victorian Rail\Jlays, (V.R.) to transport the grain from the regional silos to either the sub­terminals or the seaboard."

"Initially this did not pose a serious problem as the original planning of the silo system took into consideration the capacity of the railiJJays to move \Jlhat we IJJill call the harvest 'overflow'."

"This 'overflow' is the amount of grain that is surplus to the capacity of the hinterland storages and IJJhich therefore must be carried to the seaboard during the harvest period."

11 Research sho\JJs that Australia and in particular Victoria is unique in as much as the Victorian Rail\JJays have accepted this responsibility of moving an overflow of a seasonal commodity - grain - from the hinterland to the seaboard in the same time as the intake period."

"\·Je repeated that this is a unique ct1allenge. It has been satlsfactorily met until two seasons ago. It is debatable if it should be the philosophy of V.R. to endeavour to continue to meet this challenge·"

"It certainly suggests that criticism of V.R. was unfounded over the past t\JJO seasons. Nevertheless, it is the responsibility of the government to oversee this situation so we IJJill advance our proposal kno\Jling that in all probability there may be circumstances IJJhich will influence decision-making that may not be logical."

6. 2 The Association then put forward the following plan involving road transport as \Jlell as rail.

43.

"VicRail should be responsible for all movement of grain, but it has a responsibility to the community to plan and develop a trans­port system taking account of all options available including road transport can play an integral role in future operations."

"The G.E.B. cannot expect the Government to provide facilities (at the taxpayers' expense) unless these facilities are utilised to their utmost."

"On this basis \lie advance the follo111ing proposals:

ta) There is an immediate need for tlllo more grain subterminals in Victoria - at Ouyen and at S111an Hill.

tb) Road transp~rt should be used to relieve "hot spot" areas; that is, the transfer of grain from congested regional silos to Subterminals, no distance greater than 60 kilometres.

(c) VicRail must concentrate on using "Block Trains" of hopper type 111agons rather than the present "higgle-piggle" train confrontation."

(d) G.E.B. must develop receival facilities at seaboard terminals to allo111 minimal turn-around delays for grain 111agons.

(e) Planning for future harvest movements to be the responsibility of a board, comprising of VicRail, G.E.B., Road Transport and Farmer organisations and Government."

6.43 In addition, the Association's comments on the need for additional sub-terminals are as follo111s:-

"This is an absolute necessity. There is no possible 111ay that VicRail, 111ith its present antiquated equipment can compete lllith the advanced technolgoy that is available to the farmer of today. It 111ould be irresponsible for a government instru­mentality to endeavour to keep pace with private enterprise by the provision of modern equipment to move overflo111 grain to the seaboard during the short and decreasing harvest intake period."

44.

"It is going to continue to be shortened. This is going to place increasing pressure on the rail system to match performance."

"This is neither desirable or economically justifiable as it would certainly add enorm~us costs to the railways capital expenditure for equipment uhich uill not have optimum usage. The proposal to build two additional hinter­land subterminals and to use a coordinated road transport system will alleviate much of this problem without causing embarrassment to the handling and transport authorities."

"The placing of these two terminals in the North West of the State is essential. This is the broad-acre area of the State that is able, with today's technology, to produce enormous additional volumes of grain. It is an area that has an · enormous potential to producie grain. We believe it is this influx of grain that has embarrassed the present system, nevertheless, it is a developing area and it must be acknouledged as such."

"The siting of tl!lo additional subterminals each of ~ a million tonnes in the North West of the State of Ouyen and Swan Hill will provide suffici­ent storage for the foreseeable development of this growth area."

6.44 The Association believes that a relatively small fleet of bulk road transport vehicles could provide a flexible transport service between critical silos to sub­terminals providing a capac1ly of transferring 15,000 tonnes from one point to another, over a sixty kilometre lead each 24 hours. Such a movement would be the equivalent of rail transfer involving 680 GY rail uagons under the existing rail system, and the Association said:

"Considering that during the peak of this harvest there were a total of approximately 700 wagons unloaded at all seaboard terminals daily, a small fleet of road vehicles could materially assist in the orderly intake of the harvest."

6.45 The Associat1on sees that an essential part of the coordinated system is the operation of block train movements from the sub-terminals direct to the seaboard and commented on their proposal, as folious:

45.

"Whilst this is only a very brief appraisal of the grain movement we feel that it is very obvious that there is enormous scope to develop a fast, efficient grain transport system which will not necessarily financially disadvantage the community, It nevertheless suggests that there must be a complete review of the system with decisions being made that, as we said, are not influenced by political pressure. This policy will certainly need to evaluate all the known factors as well as considering future predictions,"

6.46 The Associat1on also advised the Study Group as to likely changes which could apply to contract cartage of grain over various distances to sub-terminals equipped for rapid discharge of vehicles, and demonstrated that considerable savings in time and money could be effected by the use of contracted road transport, at distances of up to sixty kilometres complementing existing rail facilities, as well as resulting in improved efficiency overall.

Municipal Councils

6.47 The Shires of Arapiles, Kaniva, Kowree, Dunmunkle, Dundas, Wannon, Portland, Mount Rouse, separately and as groups with particular interests, made representations in the form of written submissions, most of which were enlarged upon in discussion, regarding the longer term trends in grain developments and the need for adequate grain transport systems to cater for the changes arising from the increasing importance of Portland as a grain shipping port. The possibilities of extension of grain growing areas to the south of the Wimmera and Mallee regions as a result of new developments in agriculture were explained to the Study Group.

6.48 Of main concern to the Shires is the possibility that the increasing use of heavy road transport units will result in serious damage to the roads within the Shires. Existing roads are generally of light construction having been developed mainly to handle traffic to and from farms and without thought that they could become of increasing importance as the benefits of Portland as a principal grain port become obvious, and as the costs of road transport become more competitive with rail.

6.49 Very little evidence of increased traffic as a result of haulage of grain from northern areas through the Shires to date could be produced, Nevertheless, the Shires did make the point that substantial sums should be spent on improving road standards, if heavy traffic does use the north-south road system to Portland,

46.

6.50 Road haulage units up to the ~eight already approved by Governments throughout Australia could be particularly damaging. Whilst some roads are not constructed to main road standards, the road transport industry has a habit of assuming that they are, or treating them as such, if convenient from the point of vie~ of elapsed time, or shortest distance bet~een origin and destination.

6.51 The need for improved standards of roads in conjunction ~ith road haulage of grain has been recognised in the past by the Government by allocation of special impact funding for the further development of the Natimuk-Hamilton Road,

6.~2 The problems created by present day road traffic using roads lightly constructed many years ago are high­lighted in the submission to the Study Group, prepared jointly by the Shires of Arapiles, Dundas, Ko~ree and Wannon on the Natimuk-Hamilton Road. This report clearly indicates the ~ork required, and the cost to bring the Natimuk-Hamilton Road up to a standard to satisfactorily cater for present day, and likely future traffic, It also points out that ''the example of the Natimuk-Hamilton Road has indicated that large amounts of capital are required to upgrade a road system to necessary high~ay standards".

6.53 A number of submissions also contained references to the re-opening of the Hamilton-Noradjuha Line (The Balmoral Line), in the light of:

The increasing importance of Portland as a grain port.

The anticipated increase in traffic from the grain gro~ing areas.

The anticipated future fuel situation, and

The potential advantages of a modern rail system, in the line haul task.

6.54 The Balmoral Line and the likely outcome of the examinatlon of it, ~ere discussed at length ~ith representa­tives of the Shires in meetlngs. The results of the investigation and recommendations are contained in a separate report on the subject,

6.55 One of the Shires made comments about possible disadvantages arising out of the proximity of the State border in allocation of road funds for grain traffic, and

47.

the alternatives offered by the Victorian and South Australian rail systems for the carriage of grain.

6.56 The Shire of Dunmunkle made reference to the reconstruction and re-opening of the Lubeck-Bolangum rail111ay line and the Shire of Mount Rouse to the Hamilton­Koroit Line, as other examples of community concern about closure of rail111ay tracks, and the effect of diversion of rail traffic to lightly constructed roads.

6.57 The Shire of Dunmunkle also supported the construction of the Minyip-Litchfield line, as a means of securing lo111er line haul costs in grain destined for Portland. Perhaps the general attitude of the Shires regarding rail closures can be summed up in the follo111ing extract from the Shire of Dunmunkle submission:

"A general comment 111e 111ould like to make 111ith regard to the closure of rail111ay lines is that in the past 111hen lines have been closed these decisions have been based on the economics of the lines themselves 111ithout sufficient regard to the impact of the closures on the road system. We therefore submit that in future 111hen the economics of closing a rail111ay line are being studied, it is vital that a full appraisal of the cost of strengthening the road system to take the additional heavy traffic should be included."

6.58 The Shire of Wannon made available results of an earlier study of transport 111ithin and immediately adjacent to the boundary of the Shire. Whilst recogms~ng the availability of Special Impact funding, it considered that there is a need for additional funding to assist in maintenance and reconstruction of roads 111ithin the Shire on a long term basis, to meet specifications suit­able for road haulage of grain to Portland via the north­south roads through the Shire.

6.59 The Shire pointed out that resources available 111ith1n the Shire are limited, and that it 111ould be inequitable to expect the Shire to meet the costs involved in reconstructing roads for the use of traffic originating outside the Shire.

6.60 The Council commented that Government had permitted increased truck loadings, prior to upgrading lightly constructed roads on 111hich the trucks are operating, and suggested that compensating funds be made available to permit upgrading of feeder roads to the port areas.

48.

6.61 The Shire of Wannon discussed a submission to the Minister of Transport, via the Western District Municipal Association, related to increased standards of road construction required for the revised Vehicle Load Limits, and a claim for compensation payments for damage created. This matter ~as mentioned by other Shires.

6.62 The Shire ot Kowree, one of the largest municipalities in the State, suggested that the people of the Shire are disadvantaged through lack of railway facilities in the Shire. Because the Shire is dependent almost completely on roads, it is concerned that increased grain traffic could result in damage to the roads within the Shire. It is concerned that appropria e special impact funds may not be forthcoming to enable the Shire to maintain and develop roads to the standard required to handle grain trucks, in the 1 term.

The Shire also commented that it considered itself to be adversely affected due to different State policies on each side of the border.

6.63 The Ccuncil of the Sh1re of Kaniva "is of the opinion that VicRail handled the 1~79;80 harvest quite satisfactorily".

6.64 The Shire of 1-'ortland believes "tnere are excellent reasons for maximising cotn the potential of the rail~ system and the port of Portland in order to integrate he transporting of grain from producer to seaboard. However , Council recognise the necessity to investigate the problems associated with grain handling and the development ol rail and port facilities with the broad control at transport systems". The Shire considered that a vital issue in the essential problem of allocating scarce resources is the efficient move­ment of grain ana heavy treights. The ~hire occupies a strategic posi ion in the grain traffic to Portland and suggested upgrading of the Ararat-Portland railway line capacity ana construction o Lhe Minyip-Litchtield railway line.

6.65 lhe Council of the Ci y of lchuca considers the construction of the new bridge for road traffic at lchuca should receive high priority. Tne bridge currently in use is lOO years old and restricts both rail and road transport. At present rail transport us1ng the bridge is restricted in its load capacity which reduces tne efficiency of the transport of goods from N.S.W. particul rly. The ma1n reference to this restriction is the movement ot wheat rrom New South wales. lhe Council believes that road transport snould be given the opportunity to compete with rail, but any substantial shift to road will require provision of stronger arterial roads.

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Other Submissions

6.b6 The Western Victorian Transport Committee presented to State and Federal Parllaments a report on the need to view the border areas of Victorla and South Australia and the port or Portland as a transport region, and a copy was made available to the ~tudy Group. Following discussions related to the potential for development of an efficient rail system, and the presentation of a further paper on the subject, the Committee favoured the redevelopment of the Hamilton ~almoral-Noradjuha railway line as a key factor in the evolution of a Portland centred transport system, the decentralisation of railway activities associated witn grain traffic, and tile improvement of grain handling facilities in the Portland area,

b.67 The Portland Development Committee and representatives of tne Portland Town & Portland Shire Counclls and the Portland Harbour Trust made appropriate representations to tne Study Group regardlng the further development of Portland as a grain port. The groups representing Portland discussed the graln industry ana related rail transport facilities which are being developed and are optimistic regardlng the future grain industry. The limitatlons of the single railway track between Portland and Ararat were discussed and additlonal expenditure as road and rail developments recommended. The groups believe that the expenditure needed to cater for through traffic is beyond the capacity of the municipallties to finance the development needed.

Advice from the Uepartmen~ of Agriculture

6.68 lhe Study Group sought advice from the Department of Agriculture on likely future levels of grain production in Victoria,

6.69 Mr. J.W. Mullaly, Chief, Division of Plant Industries of the Department of Agriculture, advised that the possiole future level at sustainable grain productlon ln Victoria is a matter of judgement, as actual levels will depend on variable situations in different parts of the State which may result from meteorologlcal, techno­logical and economic factors.

6.70 On a Statewide basis however, it is anticlpated that in the next decade technology advances will have a greater impact on increasing production, the extension of the area sown to grain.

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6.71 The maximum wheat crop anticipated vitnin the foreseeable future could be of the order of 3.2 million tonnes (1.8 million hectares x 1.75 tonnes/hectare; to 4.0 million tonnes (2.0 million hectares x L.O tonnes per hectare), with the most likely sustainable level being of the order of 3.2 to 3,5 million tonnes in the next decade,

6.72 Mr. Mullaly also indicated that barley and oats could remain somewhat static at current levels of tne order of )00,00U and 300,000 tonnes respectively.

6.73 It is possible that new developments in grain production could result trom grain legume crops, and In the foreseeable future the tonnage produced could be of the order of 250,uOO tonnes, even though only limited quantities are produced at the present time.

6.74 The total estimated sustainable grain crop e n v i s a g e d i n t h e n e x t d e c a d e , i n c 1 u d i n g a ll g r o w i n g, i s thus expected to be of the order of 4.8 - 5.U million tonnes per annum.

6,75 The amount of grain likely to be transferred from New South Wales in continuation of tne current system linclucling the buffer zone) is "dependent on the relative ditferencesin handling costs betveen the Victorian and ~ev South Wales systems (currently in f vour of Victoria) and the ability or the Victorian transport sys em to move surplus grain from New Soutn ~,!ales", as well as technological developments.

6.76 In discussing technological developments, a p a p e r e n t i t 1 e d " \:J h e a t V a r i e t i e s o f t h e F u t u r e " , g i v e n b y Mr. R. Komoll, Principal Agronomist Winter Cereals, ~.S.lJ. Departmunt of Agriculture, at the symposium " G r a i n a n d i t s F u t u r e " i n lJ u b b o , r1 a r c h 2 l , l ;18 0 , v a s dravn to the attention of the Study Group.

6.77 The possibilities ot transfer from New South Wales could actively vary bcLveen the somewhat conservat­ive estimate of prouuction by the Australian Wheat Board in the "Victorian Zone" of N.S.\1, and the Grain Elevators Board estimate which includes Nev South Wales grain on transfer from the "buffer zone".

..

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7. BUREAU 0~ TRANSPORT ECONOMICS REPORT, 1978

7.1 The Study Group has examined the report on "Transportation of the Australian Wheat Harvest" prepared by the Bureau of Transport Economics in 1978.

7.2 lhe tollowing comments, although referring principally to the period 1968/69 to 1972/63 have relev­ance to the transport task for grain (wheat) in 1980.

7.3 "The results of this analysis indicate that changes in the present flow. patterns of wheat would be advantageous to the wheat growers through an increase in net income resulting from a reduction in the rail freight bill. However, since wheat traffic contributes significantly to the overhead costs of railway operations, the reduction of wheat fl~ws would be less than the loss in revenue incurred, and so the overall railway deficit would be increased. In practice the Victorian and South Australian Kailways would probably obtain a net gain from the change with the increase in deficit falling upon the NSW PTC who would be the maJor loser of traffic."

7.4 "On balance it would appear that a more efficient allocation ot national transport resources would be achieved through better utilisation of intersystem rail facilities for the transport of the wheat harvest. However, the potential savings are comparatively small once the impact on rail revenues is taken into account and so a more detailed analysis, covering a wider range of issues, would be needed before any major change in operations was considered.

7.5 "An interstate comparison of the estimated costs of transportation showed that there were signiticant variations among the States, The maJor reasons for the cost differentials within pools were the variations in the size of the crop harvested in each State, the interrelationship in each State between rail freight rates and the distances over which wheat was hauled and the strategies of growers in delivering wheat to the AWB. In addition to the variation in seasonal fluctuations in harvest among the states, a major cause of the discrepancy in costs over the five pools was the difterence in the pricing policies of each bulk handling authority and State railway system,"

7.6 "Under the terms of reference for the study the BTE was requested to assess the effects of marketing requirements on transport costs. The analysis was confined to the effects of the policy of the AWB to market wheat by grades, As a result of this marketing strategy growers delivering Wheat to storage facilities accepting a variety of grades incur increased costs due to the increase in the turnaround time of vehicles, Furthermore, additional storage and handling costs may also arise. On the evidence available to the Bureau the premium payments

52..

for quali y wheats more than offset the increase in delivery costs. However, because of the pooling arrange­ments for storage and handllng costs, any additional storage costs hat may arise from the necessity to segregate the various grades of wheat would be borne by all growers marketing wheat through the AWB, not only those producing premium grades,"

7.7 ''In general for road transport it was found that freight rates approximated the long run average cost or providing he services. The exception occurring ~here excess capacity existed in the commerclal road haulage industry for short haul movements from the farm to the local silo. In this situallon prices reflected the short run voidable cos s of providlng the services."

7.8 ''Because of the problem associated with the allocation of costs common to the various traftics transported by the railways, the analysis of the relationship between rall freight rates and costs was aimed al eslimallng the revenue contrlbutions from wheat traffic to the overhead costs of the railway systems. The general conclusion was that in most States lr1e income from the carriage ot wheat contributed significantly to tne overall costs of railway operaLions. However, with the amount of information available, lt is not possible for Lhe Bureau lo delerrnine whether or not the contribution by the wheat lratfic to common system costs is su1 ricienl, bearing in mind the obJective of rnalong total system revenue equal to total cost."

7.9 "The major change in lne flow patterns ot ~c~hea suggested by the analysis was to redirect vheat produced in tne Riverina region of NSU through Geelong rather than the Sydney terminal. Other changes in flows included redirecting wheat from north-vestern Victoria to SA and Lhe grealer use of Portland as an outlet For Victorian production."

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8. THE TRANSMARK STUDY 19HO

8.1 The Transmark Study, carried out in the early part of 19HO, was basically concerned with analysing ~he cost of transporting grain by rail, in the context of the existing system ~hich includes marketing and shipment of grains by the Australian Wheat Board, the handling, grading, weighing, loading, discharging, storage and shiploading activ1ties at the Grain Elevators Board ot Victoria, and the carriage of the grain by the VicKail transport system between country depots and seaboard terminalling facilities.

8.2 The basis for the Transmark study was an assessment ot the "avoidable cost" of carrying out the business of handling grain, and the conclus1on bas1ca1ly reached by the study is that VicRa1l is incurring losses, even on afi "avoidable cost" basis. As a result, the Transmark study suggests that, it the carriage of grain by VicRail is to be cor.sidered or viewed by normal commercial standards in the transport task, it would be necessary to rev1ew the rates charged, the methods of arriv1ng at the freight rates appl1cable to tne transport ot grain, and the ways in which the grain is handled,

H.3 The Transmark report points out that the costs of moving grain and other commodities by ra1l have always been controversial, because so many factors have to be taken 1nto account, some of which have historical or future connotations.

8.4 Costs cannot be related to the "simple" factors concerned w1th running a train, when a whole network is geared to the task, and when, as in the case at the harvest, bus1ness is sacriticed by VicRa1l in order to carry out the task at carrying gra1n. In choosing the "avoidable cost" concept to test whether the gra1n freight rates were 1n fact covering the "costs" involved in the transport task, lransmark measured tne llkely cost if a dec1sion was made on purely business terms to withdraw from carrying grain altogether, i.e. what costs operat1ng and capital would be avoided if VicRail were to change its bus1ness in that way, and what would be the effect on VicRa1l's revenue. lCare must be exercised in interpreting the results or the study however, because gra1n represents such a large proportion of VicRail's business that other aspects ot its business would be seriously affected if any such dec1sion was made. Unoer these conditions of course losses would be substantially greater).

8.~ The Transmark study also involved an assessment of whicn possiole alternative methods of transport could be utilised, in order to assess whether VicRa1l 'costs' are likely to be competit1ve, ano as a corollary whether any change to the freignt rates applicable to hauling grain

54.

would result in increased or decreased losses,

8,6 The Transmark study resulted in an estimate that the 'avoidable' yearly cost of carrying grain is of the order of ~36 million compared with revenues of the order of ~26 million per annum, indicating a recovery of about 73~~ of the 'avoidable' costs under normal circumstances. After reviewing the expenditure involved in the current method of handling such a large proportion of the harvest under peak loading conditions during harvest time, Transmark estimated that the revenues during the harvest period only covered about 54% of the ''avoidable costs" involved in handling grain.

8.7 Transmark indicated that between 1~71;72 and 1978/8u harvest periods, railway 'costs' rose by 171% in current prices, whilst the freight rates rose by only 76%, notwithstanding that there has been some variations in the relationship of freights and costs during that period,

8.8 Transmark indicated tnat if long term trends continue in a similar manner, and unless something is done, the "losses' or margin between costs and revenues will widen, with ever Increasing amounts being needed in the form of revenue supplements if VicRail is to continue to do the business of hauling grain,

u.9 From the farmer~ point of view, rail treight rates are important factors in his return on grain sold, and whilst it is emphasised by Transmark that payments to VicRail have represented a reducing proportion of the growers receipts from wheat, nevertheless, tne grower is consc1ous that the day is not too far away when alternative methods of transport could be justified on simple comparative economics of hiring road transport to replace the rail mode.

8.10 Tne question which is then raised, is whether the freight rates charged by VicRail should continue to increase, taking into account government policies whether to subsidise railway operations or not, beyond the point where there are cheaper alternatives. Transmark have reported upon this aspect of grain transport.

8.11 The industry of course is somewhat critical of the fact that the proportion of subsidy in the form of "revenue supplement" 1111th respect to VicHail's grain handling task is lower than in other segments of VicHail's total business, and the corollary, as pointed out by Transmark is that there must be other commodities being hauled at substantially lower fre1ght rates than they should be,

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8.12 Transmark pointed out that rail transport costs are approacning those of road costs, but any shitt from rail to road would represent a drastlc change in policies and practices amongst the authorities concerned, and no douot result in substantial increases ln capital to support this drastlc cnange.

tl.l3 On the other hand, as pointed out by Transmark, there are otner ways in which tne revenue - cost relations could be lmproved. These include of course concentratlon on modifying the total process of transport of graln from tarm to customer, whilst maintaining rail as the principal method of line haul, i.e., the long distance aspects of the transport tasK. Tran~mark indicated that a "cost" of some $6 million a year could be saved if blocK train operatlon was extended Wlth the use of appropr1ate wagons suitable ror the task. A large proportion of this sav1ng could be achieved through better utilisat1on of the railway equipment and reductlon in the need ror addltional wagons.

8.14 Transmark considered that it will be necessary to completely review the transport system, including storage and handling activit1es 1 and a change in the total concepts involved in the methods whereby the estimated costs and freight rates are determined, if rail is to remain in the task of hauling grain ln tne foreseeable future. This of course Wlll require agree­ment as to long term investment, freight rates and other commercial arrangements between farmers, A.W.B., G.E.B., VicRail and the port authorities.

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9. COMMENTS A~D DISCUSSIONS

9.1 The transport of grain is one of the most important as cts of the Study of freight movements within Victoria and o and from Victoria,

9.2 It has been a key factor in the development of the rail system in Victoria, and will be a major factor in the continuing requirement for a rail system, given the transient nature of fixed rail transport in longer term considerations of the total transport tasks required by modern civilisations.

9.3 As indicated on the Transmark Report, the level of revenue obtained as a result of transporting grain bv rail in the year 1978/79 was $26.21 million, but the estimated 'avoidable costs' for the same period were of the order of $36 million 'during the same period.

9.4 On an 'avoidable cost' basis, the carriage of grain represents some 23.4% of the total 'avoidable cost' of all freight operations, As a result, any losses incurred by VicRail in handling grain became important identifiable factors in the amount of revenue supplement needed to support the activities of the Victorian Rail­ways Board, and are a measure of the amount of one form of subsidy afforded grain growers by the people of Victoria.

9.5 On the other hand, the transport costs associated with the carriage of grain is one of the most important factors in the economic well-being of the farming community.

9.6 As the Australian Wheat Board said:

"Transportation of wheat within Australia has considerable influence on the marketability of the commodity and therefore on the marketing strategy which the A.lv.B. may adopt."

9.7 On the other hand, the marketing strategy which the A.W.B. may adopt, including the Board's approach to the handling and shipment of grain to international markets from Australia, i.e., the international transport task, could well be a more important factor in the ability of the Board to sell grain than local transport costs within Victoria.

9.8 Furthermore, the activities of the Grain Elevators Board in Victoria in arranging transport in response to the Australian Wheat Board's marketing

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policies, and the costs involved, could also be of equal significance in the marketability of grain from Australia.

9.9 The Australian Wheat Board's submission was confined to considerations of cost and service provided by VicRail, under current circumstances. It did not take into account the limitations and problems created by:

9.10

Arrangements for loading at Geelong and Portland

The nature and characteristics of the shipping programme

Ship sizes and shipping costs

Demurrage factors

Blending needs

Limitations in receival capacity in terminals associated with port facilities, and

The part played by the Grain Elevators Board in slow turn around of rail wagons.

Whilst the Grain Elevators Board and the Victorian Railways Board each made representations regarding aspects of the transport task which affected their individual responsibilities, neither commented to any extent on difficulties and limitations imposed on the transport task within and to and from Victoria by export market and shipping requirements imposed by the Australian Wheat Board on the handling and transport system.

9.11 Both organisations mentioned problems encountered in the transport of grain by rail for local consumption as a result of:

Limitations in receival and discharging capacity at local mills

Quality considerations, and

Alternative transport and lower cost possibilities.

9.12 Farmers' representatives are generally concerned with the need for improvements in the physical capacity of:

Local silo installations, and

Current limitations imposed by the nature of the total transport system.

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9.13 Such is the convenience of the receival and handling systems in the main grain growing areas of Victoria and adjacent States, it is doubtful that the average farmer gives much thought to the costs involved in carting grain from farm to receival centre. During harvest time, the urgency is in the harvesting task, and the task of transporting grain to the local silo is a. subsidiary operation, to be carried out as quickly as possible, to ensure that the harvesting task is not unduly delayed or interrupted. Under such conditions, cost of transport actually becomes an almost immaterial consideration, if the crop is at risk. On-farm storage is rarely considered an alternative to cartage to the nearby G.E.B. silos.

9.14 When the system fails to perform, i.e., to permit the rapid turn around of the farmers vehicles, then the limitations of the grain handling system begin to reveal themselves and a high level of frustration emerges, and manifests itself in inordinate demands on the rail system and a high degree of political activity by farmers groups.

9.15 It is not generally recognised in the industry that VicRail carries out several tasks in handling the grain crops in Victoria and adjacent States. The principal tasks involve:

The gathering or collection of various parcels of grain from various silos in rail~ay wagons and assembling them into a transportable unit, and

The line haul task of shifting grain from the grain growing areas to its destination, viz., either a port installation or to a number of local customers.

9.16 The task of gathering or collection by rail is inefficient and costly in its use of railway equipment and people, and is a relic of the pre-motor truck era.

9.17 The report of the Board of Inquiry into Land Transport in Victoria, contained a commentary concerning the management costs involved in the 15 minute task of dropping or picking up a wagon at a railway siding (Section 8.28) and estimated that cost to be of the order of 92 cents to $1.38 in 1971. Taking into account the level of hourly hire charges for heavy diesel powered equipment in industry generally, a more realistic operating cost (including overhead charges)

59.

per quarter hour for diesel locomotives employed in such tasks could be at least 30 times that figure, possibly of the order of $27.41 in 1980.

9.18 ~o one doubts that the task can be carried out expeditiously and economically by motor truck, and that the task could be even more efficient if carried out in conjunction with the transport of the grain from farm without going through the intermediate phase of handling grain through local silos.

9.19 Indeed, the whole concept of licensing under the Transport Regulation Act recognises the advantages of direct road transport over rail or rail/road haulage for relatively short distances through the 'E' licensing system which permits 'as of right' licences up to 80 km radius from the centre of Melbourne. The fact that at least 99.5% of all freight carried within the Metropolitan area is handled by road transport is simple commercial proof of the efficiency of road transport within that radius.

9.20 The need for the high degree of railways involvement dictated by the characteristics of the total system of receival, storage, gathering, assembly, line haul and discharge, and a high level of consequent expenditure by VicRail in carrying out all those activities, is obviously not recognised by the industry. Nor is the fact that the limitations imposed by physical constraints within the G.E.B. system, such as size of silo, rate of receival and discharge, the distance between silos, etc., are the cause of high levels of expenditure (or costs) by VicRail in utilisa­tion of equipment and low productivity of the labour force.

9.21 The management of the system is also a difficult task, rendered more difficult by the direct involvement of growers who believe themselves dis­advantaged, a large number of representative farmers organisations, nine p~blic authorities, two govern­ments, a multitude of government organisations including government departments, politicians and the press in the grain handling and transportation activities during the harvest.

9.22 The result of all these actively involved groups could well mean management time being utilised in handling the public relations aspects of the activities rather than managing the operations.

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9.23 That the farmers can save themselves money by proper consideration of the nature of the costs involved in haulage from farm to the most appropriate receival point, principally as a result of time saving, is shown in the paper by the Grain Council of the Victorian Farmers and Graziers Association. Financial savings could also be reali'sed as a result of wider development of "on farm" storage of grain and subsequent time saving during the harvest period,

9.24 The Transmark Study was commissioned because the grain growers considered that they were being overcharged by VicRail compared with other sectors of VicRail business, This Study Group can only conclude, as a result of discussion with the various groups involved, that the industry were well aware that the freight rates charged at the time were not even meetinQ the costs involved in carrying grain, and the campaign was basically directed to ensure that grain received an appropriate share of the "subsidy" of VicRail operations represented by the Revenue Supplement. Nevertheless, a consider­able degree of unwarranted resentment was built up against VicRail on suspicion of possible unfair treatment vis a vis subsidies relating to other aspects of VicRail business.

9.25 Of critical importance in consideration of the task of transporting grain within Victoria and to and from Victoria, has been the rapid expansion of the area served by the transport and shipping facilities located within Victoria and the strains placed on the rail system in particular, particularly during the past two years.

9.26 The task of transporting grain has changed, almost out of recognition, as a result of trends in agriculture, and as a result of various initiatives taken by the Australian Wheat Board and the Grain Elevators Board of Victoria, and other grain authorities in creating the so called "Buffer Zone" in the Riverina district of Neu South Wales.

9.27 This development is described in detail in the summary of the Grain Elevators Board submission earlier in this report, because the actions taken have a critical bearing on the nature of the transport task within and to and from Victoria and the level of revenue supplement now provided by the people of Victoria.

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9.28 The Study Group notes that the physical effect of uncontrolled influx of grain into the Victorian system resulting from the lower cost freight and handling charges which pertained within Victoria was in fact recognised, and became the subject of "months of negotiation" in order to establish the "buffer zone". The Study Group notes that this problem was recognised in the following terms:

"The Victorian System (presumably the grain handling system) under normal operating situations would not be able to handle this increase in direct deliveries, and would be seriously embarrassed by the pressures which would develop. The added throughput would however, serve to lower Victorian handling costs."

9.29 However, scant attention appears to have been given to the pressures on the transport system, or the costs involved in carrying out the expanded transpprt tasks involved, notwithstanding the Grain Elevators Board submission did comment as follows:-

"There is no satisfactory method of determining the quantity of grain funnelled into the Victorian system because of this initiative. A conservative estimate would be 200,000 tonnes whilst 350,000 tonnes ..... would not be unreasonable. \his would be a $3 million plus for the Victorian transport system."

9.30 The last sentence, together with other comments contained in the Grain Elevators Board submission regarding VicRail freight charges, show either a lack of understanding of the costs involved in moving grain at the Board's behest or a cavalier attitude to the fact that the people of Victoria are making up the losses incurred in carrying grain on the Victorian rail system in the light of the current freight rates vis a vis the cost of transportation.

9.31 The current grain handling facilities evolved from a rail based grain handling situation that existed prior to the motor truck and the introduction of bulk handling. Evolution of the bulk handling system developed in a manner that minimised distance of cartage from farm to silo, but resulted in over 250 silos, all served by rail transport being constructed.

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9.32 As a result, the dispersed nature of the gathering task performed by rail in handling grain from those 250 silos imposes consequential cost penalties in storage and rail transport by virtue of the limited scale of operations at each location, which are difficult to identify, and which can be conveniently ignored if it suits the purpose.

9.33 The Grain Elevators Board and at least one of the farmers organisations referred to the 'iniquitous stopover charges at sub-terminals'. Whilst they admit that these charges may represent the actual cost of carrying out the task, they cannot recognise that those costs are incurred as a result of the shortcomings of the Board's grain handling facilities.

9.34 The Transmark St~dy shoved that operating losses in handling grain are of the order of 27% of the cost of carrying out the task under current circumstances, i.e., the difference between marginal operating and capital costs of $36 million and revenue of the order of $26.2 million. In peak periods, because of the complicated nature of the gathering, as well as the line freight, revenues only cover 53?~ of the "avoidable" costs of carrying out the total grain handling task.

9.35 In discussing this matter, Transmark advised that the level of charges made for carrying out the transport task by VicRail as a consequence of the nature of the task are not significantly less than the cost of transporting grain by road, As a result, they warned against substantial increases in freight charges as the means of ensuring commercial viability of the rail task as this would militate against retention of the business of tran orting grain by VicRail in competition with alterna ive modes in the long term.

9.36 In the context of this discussion, Transmark saw the price charged by road operators as the price ceiling for rail freight charges as does VicRail. The latter see road transport as a threat to this most important segment of railways freight business. VicRail also recognises that the prices charged by road operators are closely related to costs, and use the arguments regarding comparative costs of providing the railway track on one hand, and roads on the other as justifying additional charges on road transport, so that carriage of grain by VicRail can be fully competitive.

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9.37 The Victorian Railways Board recognises that there is potential to improve the efficiency of the total system of grain handling, and thus to reduce the costs to the consumers and the public.

9.38 In commenting on rail freight charges the Victorian Railways Board said:

"The determination of the price for a particular freight movement should be made with reference to the costs, but should never be directly related to the costs. The use of an arbitrary cost plus approach to prices in a competitive situation is not only indefensible on any logical grounds but is also unrelated to the real factors that should determine prices."

9.39 In discussing the situation which currently pertains, particularly to the bulk commodities, the VicRail Board also had the following to say:

"Hhere regulation exists the "pure competition" concept (even in its more practical form) is not relevant. Theoretically, where there is regulation the railways have a monopoly and could therefore make "monopoly profits" from such traffic. This will not happen in practice due to:

(i) Government oversight of railway freight rates, and

(ii) Where rail prices in regulated areas are too high the option remains for road operators to profitably indulqe in "border hopping", thus introducing strong competition into an erstwhile monopoly situation."

"An important change is taking place in regard to railway prices and railway costs. The conventional wisdom from the early 1900's was that railway costs were fixed, (i.e. insensitive to changes in output) and therefore the path to profitability was through (gross) revenue maximisation."

"Under the prevailing monopoly conditions this may have been quite appropriate. However, in a period when the price of rail freight services is (or soon will be) 'fixed by competitive market forces, the railway has to regard its costs as variable in order to meet its financial

64.

objectives, Obviously many railway costs are not variable in the short term but there will always be a range of options open which will allow for the identification of a "least cost" method of handling any particular traffic. In the long run there is a substantial ability to "cut the cloth to match the suit" in terms of matching resource inputs to expected financial returns. The emphasis therefore must be on revenue rather than gross revenue as of o

9.40 It is difficult to see where the application of these principles is feasible except by re-organising the railways operations to make best use of rail's potential through better utilisation of railway resources to enable provision of service at lower cost than the road alternative.

9.41 Furthermore, road operators could not "profitably indulge" in "border hopping" if rail's costs and charges are lower than the road based alternative.

9.42 Whilst the use of avoidable costs is a logical basis for determination of price floor, it is important that there be a sound understanding of the market situa tion and competitors' costs if nett revenue is to be maximised.

9.43 The Board of Inquiry into the Victorian Land Transport System commented at some length on the means whereby VicRail costed its activities and drew attention to the need for a different approach in the following terms:

"7.33 It is doubtless a product of the Railways monopoly days when they had a captive market, and when it was known, as lamentably continues to be the case, that come what may, the Treasury would foot the final bill, that a detailed costing of each operation and a proper apportionment of overheads and charges used by more than one type of srvice have been considered to be neither practicable or warranted. The very complexity and diversity of the Railways system and activities were seen to reinforce this. If there were ever any justification for this attitude, and it is not the unique possession of the Victorian Railways, there is absolutely none today."

65.

"7.35 Indeed, as is n01u clear, had the Railways known the relevant costs before the advent of this Inquiry, they would have discovered that the carriage of high rates general merchandise, which over the years, they have jealously fought to hold and whose loss to road competitors they, and so many others have constantly proclaimed to be the cause of the Railways financial predicament was, in fact, often unprofitable and especially in the case of short hauls."

This comment was made about 10 years ago, and the position has now changed to the extent that VicRail nou has a far greater understanding of the relevant costs.

9.44 However, a typical example of loss amplification is the reduced freight charges on Northern Mallee grain diverted through Victorian ports rather than through the closer port of Adelaide. These lower charges merely mean that the higher operating losses on the grain hauled from that area are offset by increased revenue supplements by the Victorian taxpayer.

9.45 This is not to say that rail will not be replaced in the basic task of transporting grain in due course, if rail fails to meet the challenge of doing that part of the haulage task that it can do more efficiently and cheaper than the alternative mode, by streamlining its operations and reducing its costs in carrying out its part in the grain transport task.

9.46 In this regard, not only VicRail, but the Grain Elevators Board, the Australian Wheat Board and the Farmers must recognise that VicRail can no longer compete with alternative methods of gathering and assembling the grain crops into sub-terminals, especially designed and located so as to achieve maxi­mum efficiency at minimum cost by long distance block train movement. Indeed, VicRail are already using cheaper road transport haulage to carry out the collection or gathering task, on a minor scale in areas where they have been able to close down branch lines.

9.47 Whilst the grain industry has inherited the investments of the past in grain handling and trans­portation without substantially contributing to modernisation, the net result is that the overall costs involved in freight and handling are higher than need be in the context of a modern system, uhilst lou throughput rates, and collection by an obsolete rail system pertains.

66.

9.48 The need for rail freight charges to contain appropriate provisions for capital charges and moderni­sation programs was pointed out by the Board of Inquiry into the Victorian Land Transport System in 1971, as well as the consequences of not doing so, In commenting on this matter the Board said:

"19.36 The Railways should be required, as a matt~r of Government policy, to operate in such a way that their total revenues cover their total costs, including capital charges and proper provision for depreciation".

"19.37 The Railways should function primarily as a commercial undertaking. Subject to vhat follows, they should determine their fares and freight rates and the services they will provide, curtail or terminate, responding flexibility to deman. They should have access to capital funds to permit them to develop services, facilities and equipment appropriate to their future role, subject always to proper investment analysis."

9.49 The fact that the system now involves high costs has been camouflaged, to some considerable extent, by the failure of the freight rates payable to the Victorian Railways to increase at a rate commensurate with cost increases and consequentially by the substan­tial subsidies paid to offset the cash losses incurred by VicRail in its grain business since the early 1970s. Unrealistic freight rates and operating losses have also camouflaged inefficiencies in the handling system operated by the Grain Elevators Board vhich have such a marked effect on the costs of operating a rail based collection and haulage system.

9.50 It is interesting to note that the Grain Elevators Board does not have the constraints placed on its handling charges that are placed on the VicRail freight rates, and their charges include interest and depreciation factors related to the capital costs of the installations under their control as well as current operating costs. Not­withstanding that such charges are a significant proportion of the total freight bill, there appears to have been little comment or question as to whether the Board's charges are in fact reasonable in the circum­stances and whether the nature of their installation prevents improvement in efficiency of the trail transport task.

6 7.

9.51 As rightly pointed out by the Australian Wheat Board, the prices for grain are influenced by the market place, and that in terms of pool returns, the good years should not be taken as justification for increases in freight rates.

9.52 At the same time, this is hardly justification for the Australian Wheat Board or the growers to demand subsidies in the form of freight rates at less than cost, and consequential revenue supplements on all grain carried through the Victorian system, at cost to the Victorian taxpayer.

9.5J On the other hand, the Board has indicated its belief that the rail transport of wheeled vehicles will continue to be the principal mode for transport of grain in the long term, and notwithstanding potential "fuel" problems it is committed to the rail system as the principal transport mode, in vieu of the volumes_ involved, and in view of the economies of scale which can be effected with an improved rail system.

9.54 Whilst being somevhat non-committal on the matter of making specific recommendations regarding modifications to the existing rail system, the Board has recognised the fact that the development of a modern and cost efficient rail based system is highly desirable.

9.55 The Study Group believes that equal critical attention should be given to the activities of the other authorities in the system including those of the Board itself in the shipping and marketing areas, and the Grain Elevators Board of Victoria in its handling system.

9.56 The Australian Wheat Board is the statutory custodian of all funds related to the transportation of wheat delivered by gravers to the Australian Wheat Board's licensed receiver which in Victoria is the Grain Elevators Board of Victoria. The Board in its submission hold "a firm view that all wheat produced in Australia, irr spective of the State or Territory in which it is produced should move for export to the seaboard terminals indicated at least (relative) freight costs".

9.57 Whilst it is in the national interest that grain should be handled by the most efficient and least cost method, a major problem of some particular concern to the Study Group is the apparent concept that the State transport authorities are obliged to haul al] grain presented to them because of VicRail's common carrier obligations.

68.

~.58 Under this concept it appears that VicRail is responsible for all transport from silos operated by the Grain Elevators Board of Victoria adjacent to rail.

9.59 VicRail is paid for the transport of wheat according to the total freight handled by the Victorian Railways Board irrespective of State origin.

9.60 On occasions, VicRail engages road transport, on a sub-contract basis, to avoid undue delays when there is lack of rail capacity to meet the demand. The decision to employ road transport is apparently made in conjunction with, and any necessary permits are issued by, the Transport Regulation Board. During the record harvests of 1978/79 and 1979/80 this involved the employ­ment of road transport on a fairly large scale to supple­ment rail haulage activities.

9.61 As far as can be ascertained, no contract between the A.W.B., G.E.B. and VicRail exists, whereby VicRail guarantees to haul grain to the order of A.W.B., or where the obligations of the G.E.B. to pay VicRail for the services provided are set out.

9.62 It is assumed that the Australian Wheat Board recovers the total costs of all its operations relating to the marketing of the grain and that the Board or the customers pay the shippers the full cost of trans­porting grain from Australia to the markets. The Grain Elevators Board and port authorities obviously cover the costs that they incur in handling grain and the charges passed on to the Australian Wheat Board obviously include capital charges and various other charges which would be considered normal in other types of business.

9.63 Of major concern to this Study Group is the apparent attitude of the authorities and the industry to the costs incurred by VicRail in carrying out the transport task demanded of it, and the concept that the operating losses should be made up by the Government and the Victorian people, whilst, at the same time, the industry and the authorities are operating under normal commercial conditions.

•

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10. THE ALTERNATIVE A COORDI~ATED SYSTEM

10.1 Whilst rail transport can be an efficient and low cost mode for the movement of bulk commodities, such as grain, over long distances, the nature of the grain haulage operations in Victoria and adjacent areas is such that many of potential advantages including low costs, which rail can offer, cannot be realised under existing conditions.

10.2 By contrast the large scale movement of bulk mineral commodities over similar distances in Western Australia and Queensland, where trains of 5,000 to 15,000 tonnes capacity operate from automated loading facilities to automated discharging facilities, loading and discharging at commensurate rates, without any need for shunting operations, is resulting in maximum utilisation of equipment and crews at operating line haul costs which are substantially less than the identified cost of handling grain in Victoria.

10.3 Providing that the A.W.B., G.E.B., and VicRail facilities are upgraded to standards commensurate with modern concepts such as those employed in production, handling and shipment of Australia's mineral products, there is every prospect that the cost of transporting and handling grain in Victoria, and to and from Victoria to local and overseas markets, could be substantially reduced. Because the average distance is smaller, the cost of transporting grain could be stabilised at lower levels than th transport costs of the principal grain exporters, U.S.A. and Canada.

10.4 Such systems should involve maximum and efficient utilisation of road based farm, or contract, equipment to haul grain from farm to large sub-terminals over the distances up to 60 km, large block train move­ments to terminals of adequate capacity to cater for substantially larger ships than currently employed, and development of deeper of deeper water port facilities than currently exist.

10.5 The rail transport task should be confined to those parts of the task which can be bested handled by rail and where necessary or economically justified road movement should be employed. Because of limitations imposed on the receival of block train quantities of grain at local milling or packinging plants, it appears that most grain movements to local consumers could be more efficient and less costly if carried out by road transport.

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10.6 Similarly, a large proportion of the collection task could be more economically carried out by road transport to larger receival and sub-terminalling facilities, providing of course that the road system can stand the additional loadings and providing quality considerations would lend themselves to the evolution of such activities, Possibilities along these lines are described in the Victorian Railways Board submission, but modifications would no doubt be necessary to meet G.E.B. and A.W.B. requirements.

10.7 There is the prospect that any large scale developments necessary for the evolution of a modern export system could, to a large degree be self­financing, providing that commitments are entered into on the basis of long term contractual arrangements between principals such as the Victorian Railways Board and the Australian Wheat Board, the Australian Wheat Board and Port Authoritiis, and the Australian Wheat Board and principal customers, in a manner similar to the concepts which enabled the mineral industry to undertake large scale developments in port, terminalling and railway haulage facilities in the 1960s and 1970s in conjunction with mine developments,

(Any attempt at improving the total handling system could be completely frustrated by conditions pertaining to shipping arrangements to overseas markets. It is important that this segment of the total transport task be well understood and properly handled.)

10.8 The introduction of such schemes needs overall industry involvement. However, it is doubtful whether the differing and limited responsibilities of the various authorities currently involved in the grain industry, would permit the evolution of such an industry wide revolution in handling technology if all were to become involved in making decisions as to the various elements in the concept. The task of designing, analysing and determining the financial viability of the best alternatives should be carried out by an independent, competent and experienced professional organisation.

10.9 Modernisation of grain transport facilities is already being undertaken in other countries. Indeed Canada, after nearly 50 years of government control of freight rates, lack of investment in haulage facilities, and general neglect of grain transportation, is now proposing very substantial investments in the transport and handling sectors of the industry. Their proposals include modernisation of terminalling and shipping facilities and reduction in the number of grain receival centres to ensure maximum block train movement as the principal means of reducing transport costs.

7 1·

10.10 These developments are being designed to allow Canadian grain products to expand grain production by 30 million tonnes per year, and to compete in Far Eastern markets in particular, obviously in competition with the Australian grain trade. The introduction of modern concepts, including:

The construction of major sub-terminal installations in the grain growing areas.

The construction of major neu terminals at ports and the development of modern shiploading facilities.

The construction of new railvay equipment including uagons and locomotives suitable for low cost large volume block grain movements,

is likely to take several years to come to fruition but it is essential that a start be made in order to ensure that grain growing in Victoria and adjacent States wil be commercially possible by the turn of the century.

10.11 The Study Group believes that very little advantage would flow to the industry in either the short or long term by maintenance of regulation of all grain traffic to rail, uhich would merely result in denying the farmers and customers advantages which would accrue from the use of road transport in situations uhere the costs are lower than by rail, e.g., delivery to local customers, and in the collection task.

10.12 The Study Group is of the opinion that the concept of bureaucratic regulation of grain has outlived its usefulness, and that the transport of grain for export should henceforth be the subject of long term contracts between the Australian Wheat Board, (and its receival agent the Grain Elevators Board), and VicRail as the authority responsible for the rail haul, and with road haulage organisations for the off-rail activities.

10.13 The Australian Wheat Board has stated its preference for the rail mode, and the concept that rail will continue to be the principal mode of transport within the foreseeable future in the following terms:

''The Australian Wheat Board considers that the established rail transport facilities remain essential to the Wheat Industry - it would be quite impracticable and uneconomical to attempt to haul large quantities by road.

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"Road transport is only useful as an adjunct to rail where certain 'door to door' movements of wheat must be undertaken or where rail transport facilities are not available. Indeed, the Board considers that the intention should be to minimise road transportation of wheat, consistent with practicality and application of the 'least cost' principle., •• ,"

10.14 Under these circumstances, and given an appropriate willingness on the part of both authorities to achieve a solution, in appropriate commercial terms, a contract arrangement should preserve the bulk of the grain transport tasks to the VicRail system, and at the same time ensure an improvement in efficiency in the total transport task.

10.15 The terms of the contract concerned with the rail transport task should set out clearly the task which the grain industry required VicRail to carry out, the freight charges (including escalation factors) applicable, a guaranteed minimum total freight payment, freight rates for excess tonnages, shunting charges, etc., and appropriate conditions recognising that the grain industry must pay its way, and that VicRail must perform in an economic and efficient manner.

10.16 As far as road transport activities are concerned, the Study Group believes that there will be little change as a result of deregulation in the transport of grain for export, if the Australian Wheat Board lives up to its statement about the use of the rail mode, and if it is prepared to negotiate a long term contract with the Victorian Railways Board in good faith.

10.17 However, there could be a shift towards road transport in the local scene, in view of the costs pertaining to the complicated and costly methods of delivery to sub-terminals and to local customers.

10.18 The Study Group believes that it would be contrary to the best interests of the people of Victoria, and the grain growers, for the Australian Wheat Board the Grain Elevators Board, or Victorian Railways Board to become involved in the ownership and operation of road fleets, where road transport may become the accepted mode for particular transport tasks.

10.19 Such concepts should be avoided at all costs as any capital and operating funds available to those authorities should be earmarked for redevelopment of the facilities which are the subject of their current responsibilities, and not to the purchase and operation of equipment vhich can and vill be provided by the road transport industry at no capital outlay to the authorities, or the people of Victoria.

10.20 A need for Government to retain some watching brief over these activities, through the Ministry of Transport for example, has been examined. Some such brief may be needed in order to protect the public investment in country roads and in the rail transportation system in the early years of deregulation. At the present time, neither the road system nor the rail trans portation system are suitable for large scale changes in transport of grain, It vill probably be necessary to establish priorities for expenditure and a gradual introduction of changes in both systems, as well as in the handling and terminalling facilities in any modernisation plan undertaken.

10.21 Of particular concern to the Shires in the western part of Victoria are the possible consequences of substantially greater road transport haulage of grain over roads not designed for heavy traffic. It is under­stood that Local Government has power to bar traffic likely to result in damags to roads, under Section 540 of the Local Government Act, and that such powers are also extended to the Country Roads Board on declared roads under the Country Roads Act.

10.22 However, this option could present administrative difficulties, and could be unpalatable to grain growers during the harvest rush, and there may be some need for Ministerial oversight or regulation of traffic in view of the need for funds likely to arise, as a result of road damage.

10.23 Whatever decisions are taken in connection with an overall scheme of modernisation of the grain handling systems, there is an urgent need for certain actions to be taken promptly if VicRail is to continue in the business of handling grain, and if the escalating cost of handling grain is to be contained.

10.24

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These include:

Clarification of the role of the various authorities involved in the handling and transportation of grain within Victoria and to and from Victoria. In this regard it should be noted that G.E.B. arranges some road transport tasks whilst VicRail handles others. If G.E.B. are to have a coordinating role, VicRail should confine their activities to handling the rail haul task only. The operating role of VicRail in connection with rail matters only should be confirmed. The responsibility of G.E.B. to negotiate and pay freight rates applicable to road contracts should also be confirmed.

Establishment of rail freight rates on a commercial basis,. including capital charges and appropriate depreciation provisions to ensure that costs incurred are recovered by the Victorian Railways Board. This includes the costs involved in carriage of grain from the Riverina area of New South Wales and the Northern Mallee region, notwithstanding that such action could result in grain moving to interstate port. The concept that the people of Victoria should subsidise the carriage of grain irrespective of volume and source, through revenue supplement is no longer tenable.

Negotiation of contracts between the Australian Wheat Board (and the Grain Elevators Board) and the Victorian Railways Board as to the volume of grain to be transported by VicRail, including:

The locations from which the grain is to be transported, the freight charges, and

the general conditions pertaining to the efficiency of the VicRail activities, including demurrage, etc.

(A number of contracts may need to be negotiated for specific aspects of the total task.)

Elimination of regulation of grain destined for local consumption immediately, and on successful conclusion of negotiations between the Australian Wheat Board, the Grain Elevators Board and the Victorian Railways Board as to

75.

the nature of the grain transport task required of the VicRail system and the completion of contracts, with respect to grain destined for export.

Local customers should have the ability to choose the least cost method of transport, and VicRail objections to transport of grain by road to local customers should cease forthwith.

Modernisation of the Grain Elevators Board handling systems as quickly as possible to provide for efficient turn_ round and maximum rail wagon utilisa tion, by the operation of block trains. It is suggested that action be taken to reduce the number of block train loading locations to a realistic minimum, and by improved practices in receival of grain from farmers trucks, etc., extend the feasible distance for farm truck haulage.

Encouragement of increased "on farm" storage of grain in order to reduce the impact of peak loading on transport of grain during the harvest period. Various alternatives might be considered, including the possibility of application of different methods of payment, such as future payments on grain delivered to farm storage, or a "one off" subsidy for the construction of appropriate facilities. These could be cheaper than continuing subsidy through revenue supplement of the costs involved in peak harvest periods.

Progressive elimination of branch lines being maintained solely for grain haulage, by redesign of the grain haulage system in conjunction with redevelopment of the Grain Elevators Board system and extension of "on farm" storage. It is envisaged that the long term requirements for modern handling and transportation facilities would see the development of 5 or 6 major sub-terminals capable of accepting grain from within a 50 to 60 km radius, within the main grain growing areas. These terminals should be so located as to involve the minimum number of rail tracks to be kept main­tained, and should be equipped to eliminate waiting delays involved in receipt of grain from farm trucks.

76.

The location of the major sub-terminal for grain receival and loading in the north­east of Victoria be established on the basis of continued use of large scale block train movement, over the maximum distance possible, commensurate with a need to provide for the most efficient gathering system to transport grain from farm to sub-terminal. This concept is somewhat at variance with current plans of the Grain Elevators Board to site a terminal further to the south than considered desirable if rail is to continue to play a major part in the grain haulage task.

The construction of additional GJF type hopper wagons for grain transport as quickly as possible at an estimated cost of the order of $24 million over say 4 years.

Extension of the judicious use of road transport in the grain collection activity, and the elimination of as much of the collec­tion task by rail as is possible, where cost savings can be so effected.

Ensure that the design of improved terminalling facilities at Geelong and Portland, and that crossing loops within the rail system, have sufficient capacity to handle rapid movement and turn-around of substantially larger block trains than are currently employed.

Complete the Minyip-Litchfield link to ensure that the development of deep water grain loading facilities is notinhibited by access problems between the grain areas and the ports.

Substantial improvement in the rates of discharge of farm trucks and loading and discharging of grain hopper wagons at sub­terminals and port terminals so as to achieve maximum utilisation of ~rm and railway equipment. In the short term, in a number of areas this merely means improved management of the handling facilities, including elimination of delays to receival during meal breaks and ensuring that facilities remain open round the clock during the harvest period. In this latter regard substantially improved efficiency and cost saving could be effected by reduction in the peak harvest demand for trans­port facilities, and spreading the transport task throughout the year. It is recognised

77.

that currently some quality considerations require that grain be handled expeditiously. However, it is understood that likely solutions to quality problems are possible through appropriate and properly directed scientific research into the physiological problems which have been mentioned by the Authorities as being critical to the grain handling activity.

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11. CONCLUSIONS

11.1 Grain appears to be the only major bulk commodity originating in Victoria (and adjacent areas) which can lend itself to the evolution of a modern and efficient handling and transport system, with similar characteristics to the facilities used by the mineral industry in other States, for the handling of minerals destined for export.

11.2 The present characteristics of the Victorian Railways Board collection and line haul systems for grain, and associated grain receival, storage and loading facilities of the Grain Elevators Board, together with the current system of regulation of the grain traffic to rail, militate against the achievement of the productivity needed to ensure minimum cost transport for the grain industry.

11.3 Indeed, the costg involved in handling grain within the current system, even after substantial government support by regulation and revenue supplement, are hardly competitive vith the freight rates which can be offered by road transport organisations to carry out the collection and line haul tasks.

11.4 If freight rates were adjusted to reflect the full costs incurred in the various tasks involved in the transport of grain to ports for export and to diverse local markets, it is doubtful whether VicRail would be able to survive in the grain haul business, in the light of the limitations imposed on the system by the nature of the receival and handling system and the rail collection task.

11.5 An important factor in the determination of the freight rates applicable to grain transported from various centres, is the concept of the Authorities involved of maximising gross revenue through maximum volume throughput, irrespective of the costs involved

11.6 A number of organisations involved in the grain industry are of the opinion that the government (i.e. and the people of Victoria) should continue to subsidise the transport of grain by revenue supplement i.e. offsetting the operational losses, and that there is little need to change the current method of operation, including the concept of all grain transport as being prerogative to VicRail, and being subject to transport regulation.

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11.7 The markets for Australian grains are quite diverse, with the result that the total transport task is in itself a dispersed and diverse task. The task is complicated when distortion of freight rates, occurs as a result of government or authority actions or policies aimed at ensuring delivery of grain to Victorian ports, when it would be cheaper on a true freight and handling cost basis to carry the grain to other intersmte ports.

11.8 This type of thinking merely leads to the people of Victoria accepting increasing responsibilities for meeting the difference between operating costs and freight revenue, on all grains hauled through Victoria, whether originating in Victoria or not, and irrespective of the efficiency or inefficiencies of the Authorities and the systems for which they are responsible.

11.9 The alternative offered by road transport groups is free and open competition with rail, without any form of regulation for the business of haulage of grain from farm to port or final local destination. This proposal, which would no doubt ensure that the farmers would achieve the minimum cost freight for their products, would require a commercial approach to the task by VicRail, so that the people of Victoria would not be called upon to make up operating losses usually from unrealistic freight pricing merely to retain the business.

11.10 According to the Transmark Study, road transport by contract is already an economically viable alternative over relatively short to medium distances, based on quotes for road haulage of grain, and the time could be fast approaching when road transport may be economically competitive over the whole range of transport tasks connected with grain in Victoria, even if the government continues to offer subsidy or revenue supplement to VicRail.

11.11 Objections to increased road transport haulage of grain were lodged by VicRail, using the untenable argument that the test of competitiveness required that road transport should be seen to be responsible for costs as a consequence of the use of the road system, as an offset to the need for VicRail to be responsible for costs involved in provision of fixed rail system. The tests of competitiveness as far as the customer is concerned, are the freight costs he has to pay. The rail and road systems are public assets.

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11.12 Objections were also voiced by the Country Roads Board to any rapid increase in road transport of grain because of likely damage to roads of light construction. These objections were also strongly supported by representatives of Local Government, who could find themselves in the position of maintaining roads used for the haulage of grain originating from areas outside their shires throughout the northern and western parts of the State. Any major shift to road transport would take place on main roads and highways rather than on the country roads which are already being used by farm vehicles in delivery of grain to local silos.

11.13 The Australian Wheat Board has indicated its belief that the rail transport or wheeled vehicles will continue to be the principal modes for transport of grain in the long term, and notwithstanding potential "fuel" problems., are committed to the rail system as the principal transport mode, in view of volume considerations and in view of the economies of scale which can be effected with an improved combined road and rail system.

11.14 Whilst the objections by those organisations responsible for the road system must be heeded, it is very doubtful that the system of regulation currently has any effect at all on the choice of mode of transport, and the use of country roads and/or main roads for road transport as an alternative to rail transport.

11.15 The grain industry uses the rail based system of handling and transport because it is there, and because the system currently offers the lowest cost means of getting grain to the market.

11.16 The industry is not concerned with the comparative costs involved in providing the handling and transport service, being simply concerned with the freight rates and transport conditions as they pertain to the grain handling tasks.

11.17 The industry is also not concerned that the people of Victoria are subsidising the transport of grain through payment of revenue supplement to the Victorian Railways Board to make up the shortfall between the costs involved in carrying out the task of moving and the revenue obtained. Rather, the industry has taken advantage of the situation to include the transport of grain from the Riverina as part of the VicRail grain handling task.

81.

11.18 Given freedom of choice the industry auto-matically seeks the lowest cost alternative, as illustrated by the increasing use of road transport by the Grain Elevators Board, where road transpo~t is more economical, particularly in handling grains from northern Victoria, and the expressed preference by the Board's officers for the use of road transport.

11.19 In situations where regulation is effected as a result of VicRail objection to the carriage of grain, or in conformity with TRB policy in favour of rail against lower cost road transport, such as supply of grain for local consumption, the disabilities involved have resulted in little more than substantially increased costs to the producer, marketer, consumer.

11.20 The limitations imposed by the facilities available for handling small parcels of grain to dispersed destinations by rail, merely inhibits efficient operation by VicRail, with consequential operating losses and revenue supplements being covered by the Victorian public.

11.21 Regulation has also resulted in lost opportunities for intrastate producers in favour of interstate producers transport grain under the protection of Section 92 of the Constitution into Victorian markets.

11.22 As a result of these considerations there appears to be no reason why regulation of road transport of grain should continue, if it merely means that present inefficiencies in the grain transport system are preserved, at a substantial cost to the Victorian taxpayer.

11.23 The Australian Wheat Board has pointed out that deregulation of wheat and grain tran ort does not necessarily mean that rail will lose siness (or lose money) providing that appropriate policies vis a vis freight charges and quality of service are adopted.

11.24 The Board has also confirmed its attitudes to rail transport, as outlined previously.

11.25 The Study Group is of the firm opinion that the relationship between the grain industry and the Victorian Railways Board should be the subject of realistic commercial arrangements, and not on the basis of "regulation" or "common carrier" obligations, neither of which form any basis for the evolution of the most cost effective and efficient system for transport of grain.

82.

11.26 If the grain industry and the railways give serious attention to the long term requirements of the industry, and establish modern cost efficient grain handling facilities within Victoria, the opportunity for expanding business to cater for the needs of growers in other States appears very bright indeed.

11.27 Whilst being somewhat non-commital on the matter of making specific recommendations regarding modifications to the existing rail system, the Board recognised the fact that the development of a modern and cost efficient rail based system is highly desirable.

11.28 The Study Group believes that substantial advantages could arise out of a complete relook at the needs of the grain industry for efficient handling and shipping facilities as well as an improved rail trans­portation system in order to achieve the economies desired in providing the lowest cost transport service to the grain industry.

11.29 The evolution of a system which provides for modern, fast discharging and loading storage systems capable of handling grain at rates of the order of thousands of tonnes per hour at costs substantially less than those currently pertaining is technically and economically feasible. A number of organisations within the grain industry are already reviewing possibilities, and whilst there is considerable expertise within VicRail and the Grain Elevators Board, their current ideas may not be compatible with the evolution of the most efficient system overall, because of their natural tendency to be partial to their own ideas rather than those of others.

11.30 In the long term it is believed that it will be necessary to ensure construction of a number of large sub-terminal facilities in the grain growing areas and at the ports to achieve economies of scale within the transport system for grain destined for export.

11.31 There will also be a need for the upgrading of rail and port facilities to handle trains and ships of low cost economic capabilities in the competitive world scene, e.g. train loads of 5,000 tonnes capacity and ships of 150,000 tonnes.

11.32 The collection task may be best left to road transport over distances up to say, 60 km by farmers or contracted road organisations to sub-terminals from which the rail system would operate on a year round block train basis, and in those areas where rail haulage cannot be provided on an economic basis.

83.

11.33 Developments of this magnitude are not so different to developments in iron ore and coal produc­tion for export in Western Australia and Queensland in recent years, and as a result the possibilitie~ of self-financing a grain haulage system do not appear remote.

11.34 The possibilities of further development of Portland as a major deep water grain port, and the shipment of a large proportion of grain originating in other States, could be key factors in the evolution of a major grain handling system, and incidentally, in the future of the grain industry as a whole.

11.35 It is recognised that there are market quality considerations to be taken into account in the design and operation of high capacity bulk handling installa~ Lions. This is not an insurmountable engineering problem, but the financial aspects involved as a result could be quite substantial, and it may be necessary to review grading/price relationships in order to achieve the most desirable financial result for the industry as a whole.

11.36 The evolution of a coordinated and efficient grain transport system will not occur overnight, and should only be undertaken on a carefully planned basis by the industry as a whole, taking into account, operational and financial factors, as well as the growing and marketing aspects of the grain industry.

11.37 Of critical importance is the very real concern of the road authorities for the security of the road system in the event of any substantial change in road transport activities associated with the grain industry. This concern applies to both short term and long term considerations, and whilst the Country Roads Board and Local Government Authori­ties have suggested that regulation under the Transport Regulation Act should remain, the Study Croup sees road protection as insufficient reason for denying producers and customers choice of mode based on costs to them in the longer term. However, in the short term, in order to permit the imposition of "avoidable cost" freight rates for next season, and to ensure that the Authorities concerned have sufficient opportunity to make substantial improve­ments to the overall grain handling system, control over the road transport of grain should be exercised through the Minister of Transport (or alternatively his nominee, e.g., the Transport Regulation Board) by virtue of modifications to the Commercial Goods Vehicles Act.

84.

11.38 It is envisaged that modifications to the Commercial Goods Vehicles Act would permit the Governor in Council, on the recommendation of the Minister of Transport, by proclamation to declare that the transport of prescribed goods be restricted or prohibited under specified conditions or be no longer restricted or prohibited, in order to protect roads and bridges and the interests of the Victorian Railway Board in grain transport until satisfactory long term contracts relating to the movement of grain to seaboard terminals are completed by the relevant government authorities.

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12. RECOMMENDATIONS

The principal recommendations rising out .of the study of the transport of grain and the submissions and discussions vith people from the various aspects of the industry are:

1. The establishment of commercial freight rates covering the carriage of grain within Victoria and through Victoria be undertaken as soon as possible. The Victorian Railways Board, in conjunction with the Australian Wheat Board and the Grain Elevators Board should establish a procedure to set freight rates to:

At least cover avoidable costs as from the beginning of the next grain season.

As soon as practicable to cover the total absorption of all costs involved.

2. The three Authorities should negotiate long term contractual arrangements for rail haulage of grain by block train movem~t from nominated Victorian and Riverina locations, on the basis that:-

The Authorities will undertake the develop­ment of appropriate sub-terminal arrange­ments by the 1984/1985 seasons.

The contractual arrangements will be designed to ensure that freight rates, and conditions pertaining to the haulage of grain, including variations from standard conditions will be on fully commercial terms covering total absorption of costs involved.

That the contractual arrangements will be agreed within a reasonable period to permit modernisation of facilities to be completed by grain season 1984/1985.

3. That control over road transport of grain should be exercised by virtue of amendment to the Commercial Goods Vehicles Act to enabl~ the Governor in Council, on the recommendation of the Minister of Transport, by proclamation to declare that on or after a specified date the carriage of prescribed goods by road transport may be restricted or prohibited under specified conditions, or that such restriction or prohibition may be lifted.

86.

To ensure that the Authorities concerned have sufficient opportunity to make substantial improvements to the grain handling system without immediate distortion of the existing grain haulage arrangements.

As a means of protecting the roads and bridges.

To protect the export grain haulage business of Victorian Railways Board until satisfactory long term contracts relating to the movement of grain to seaboard terminals be completed by the relevant public Authorities.

To permit the evolution of road based grain collection in the grain growing areas in place of ineffi~ient and costly rail move­ment on a freedom of choice basis.

To permit freedom of choice of transport mode for grain haulage to other than the sea-ports of Geelong and Portland.

4. That the current system of regulation of grain traffic by virtue of the provisions of the Commercial Goods Vehicles Act be abandoned, and that appropriate amending legislation to give effect to recommendation 3 be introduced.

5. Subject to suitable arrangements with the Victorian Railways Board regarding its participation in the rail haulage task, the Australian Wheat Board and/or the Grain Elevators Board should be responsible for all arrangements pertaining to the use of motor vehicles for the carriage of grain direct to consumer or to rail receival terminals on the basis that:

The Victorian Railways Board be no longer involved in the carriage of grain by motor vehicles, neither as a party to contracts, nor with responsibilities for contract payments.

The Victorian Railways Board responsibilities extend to rail haulage of grain only.

None of the Authorities to be involved in the ownership and/or operation of truck haulage fleets.

8 7.

6. That the concepts outlined in this report relating to the broad objective of improving facilities for the handling, storage, and transport of grain from farm to market place be adopted.

Under these concepts it is proposed that:

Additional major sub-terminals should be constructed to reduce the number of rail receival points.

The upgrading of selected rail tracks and associated equipment and the closure of rail tracks and rail facilities rendered obsolete as a result of the modernisation program should proceed immediately.

Further upgrading of storage and handling facilities and particularly rail receival facilities designed for rapid turn­around of block trains be undertaken.

Long term contractual arrangements between the A.W.B. and/or G.E.B. and VicRail providing for the establishment of proper commercial relationships for handling and haulage of grain is an essential feature of the modernisation program proposed, and as a possible basis for financing.

7. That a Steering Committee be established, representative of interested parties to oversee the redevelopment of the grain handling and transport ta ks on the basis that:

A Task Force or Consultant be engaged to examine and develop concepts and alternative detailed schemes for the storage, handling and transport of grain by fast turn-around block train movement between sub-terminals and ports, on the basis of:

*

*

*

Submitting proposals for implementation of the alternative schemes.

Submitting capital and operating cost estimates.

Implementation of the proposals so that the system will be operational within say 3 years.

The Hon.

The Hon.

t1 r • E • J •

Mr. ~J. D.

Mr. D.K.

LIST OF I~DIVIDUALS A~D ORGANISATIONS MAKING SUBMISSIONS AND/OR HAVING

DISCUSSIONS DEALING WITH, OR RELATED TO TRANSPORT OF GRAIN

B .A. Chamberlain, MLC t1embe r for l·Jestern

D. G. Crozier, t1L C thnister for Local t1ember for ~Jest ern

Hann, t1LA t1embe r for Rodney

~lcGrath, MLA Member for Low an

McKellar, MLA Member for Portland

Province

Government Province

The Hon. K. I • ~Jright, MLC t1ember for North \~est ern Province

Australian Industries Development Association

The Australian Wheat Board

Calder Highway Committee

Country Roads Board

City of Echuca

Department of State Development, Decentralisation and Tourism

Eastern Mallee Silo Zone Committee

Grain Elevators Board of Victoria

Marmalake Receival Zone Committee

Northern Transport Regional Consultative Committee

Portland Development Committee

Portland Shire Council

Portland Town Council

Professional Transport Drivers Association

Professional Transport Drivers Association (f'1ildura Branch)

Shire of Arapiles

Shire of Dundas

Shire of Dunmunkle

Shire of Kaniva

Shire of Kowree

Shire of t'1ount. House

Shire of Portland

Shire of l~annon

2.

To111n of Portland

Transport Regulation Board

Victorian Farmers & Graziers Association

Victorian Farmers & Graziers Association Balmoral Branch

Victorian Farmers & Graziers Association Transport and Communications Sub Committee

Victorian Farmers & Graziers Association Wimmera District Commodity Council

Victorian Rail111ays Board

Western Transport Regional Consultative Committee

Western Victoria Transport Committee

Brief reference 111as made to the transport of grain in several other submissions and discussions.

APPENDIX 2

EXTRACT FROM THE GRAIN ELEVATORS BOARD'S SUBMISSION

Until 1978/79 an average harvest to this Board ~as approximately 1.9 million tonnes. Since then the Victorian system has handled:

1978/79

1979/80

4.1 million tonnes

4.2 million tonnes ·<incomplete - See Appendix 6)

The industry must re-assess its concepts of 'average'. Perhaps the l~st t~o years have given a timely insight into ~hat looms for the future. Certainly, with the present trends in agriculture and the initiatives of the Board, 3 million tonnes is a reasonable estimate of an 'average crop' in the immediate future.

The mercurial transition can be traced to four features:

1. the biological and technological develop­ments of modern agriculture, e.g. intro­duction of new cereal varieties, minimum tillage practices, etc.;

2. the development of the 'buffer zone';

3. the handling of oats;

4. relatively buoyant returns to cereal production.

The first of these features is well documented in any recent agricultural science textbook. This precise topic was extensively revie~ed by D.A. Barber in his paper "The Impact of Technology on Agricultural Systems in the Cereal Zone of South Eastern Australia" at a recent Australian Institute of Agricultural Science Conference entitled "Agricultural Systems and Advances in Technology".

detail.

Similarly, the last point is also well documented.

Let us consider the remaining two in more

2.

The 'Buffer Zone'

The Board now operates receival points beyond the traditional areas of the early 1970's. This move was precipitated by the significant freight advantage to Geelong that much of the area of the Riverina and the Murrumbidgee Irrigation area enjoys. In these areas the distance to Geelong is substantially less than the distance to Darling Harbor in Sydney (the nearest New South Wales export terminal). Secondly, this was compounded by the introduction of State Accounting in November 1978. This involved each State Handling Authority charging their own handling rate rather than an Australia-wide average charge being deducted from growers' returns. Because the Victorian system is relatively small geographically , has a well defined rail and road system, and is in a very sound position wit~ its storages, this Board announced a significantly lower handling charge than the New South Wales Handling Authority.

As an illustration, Finley is 746 kilometres from Darling Harbor, but only 343 kilometres from Geelong.

time The following freights were applicable at the

Rail freight to Darling Harbor $16.14/tonne Rail/rail to Geelong via Tocumwal: $13.64/tonne Road/rail to Geelong via Tocumwab $12.67/tonne

Combined with a $52.0 per tonne differential in handling charges in favour of deliveries into the Victorian system, it was clear that the cost advantages of the Victorian system would ensure large quantities of grain would be diverted from the New South Wales system into the Victorian land transport system.

There was the possibility of an uncontrolled influx of grain into the Victorian system, to the detri­ment of both States. The Victorian system, under normal operating situations, would not be able to handle this increase in direct deliveries, and would be seriously embarrassed by the pressures which would develop. The added throughput would, however, serve to lover Victorian handling costs.

After many months of negotiations the 'buffer zone' concept became a reality. This involves an area between the two States where an intermediate handling charge is levied and the grain flows into the Victorian system. The end result is the leasing of ten storages of 221,500 tonnes capacity from the Grain Elevators Board of New South Wales, plus an extensive array of leased private and Ricegrowers' Co-operative storages in the transition area.

3.

There is no satisfactory method of determining the quantity of grain funnelled into the Victorian system because of this initiative. A conservative estimate vould be 200,000 tonnes, vhilst 350,000 tonnes (i.e. 70% of the so-called 'black market' trade estimated by the Industries Assistance Commission) vould not be unreasonable. This would be a $3 million plus for the Victorian transport system.

The third feature of this rapid increase in tonnage handled is partly attributable to the handling of oats.

On lst July 1978, the Grain Elevators Board became the ovners of ex-Victorian Oatgrovers Pool storages at 56 different sites, after equitable compensa­tion was paid to the Victorian Oatgrowers Pool and Marketing Co. Ltd. This was the final step in the Board taking over the handling of oats in Victoria. Sub­sequently almost 160,000 tonnes of oats was received at 120 sites during the 1978/79 season. Progressive receivals for this harvest stand at 110,000 tonnes.

Let us now turn our attention to the events of the harvest in chronological order, to give an insight into the task facing the handling and transport systems.

Harvests last for about two months. As soon as one overflow period ends the Board begins a process of self-examination to find the major constraints during the harvest. Planning begins immediately to overcome these obstacles for the following season.

There is considerable administrative work required before a harvest. Growers have to be registered to ensure swift and correct payments are made. Production estimates have to be collated. Market requirements must be incorporated in harvest planning strategies. Extensive and lengthy consultations under­taken with Victorian Railways officials on transport strategies. In essence, it takes a full ten months to prepare adequately for a harvest.

During the harvest grain is presented for delivery to the Board. It is inspected, graded to pre-determined criteria established by the marketers, weighed, sprayed with pesticide to ensure its protection against infestation during storage, and then stored by its specific type - usually at the receival point. Where this is not possible it is trucked (usually by rail) to other storages where more capacity is available or direct to an export terminal or domestic user.

4.

Post-harvest sees the transportation of grain from country silos to terminals or home markets at a rate determined by user demand, transport capacity and terminal storage availability.

The country system to be empty by September each year, is the ultimate goal of the Board. This allows for essential maintenance to be carried out, hygiene of storages ensured and allows for comprehensive preparedness for the next harvest. It also allous the Victorian Railways to carry out rolling stock and engine maintenance, grain proofing, etc. for the oncoming harvest. An early clearance of storages, most importantly, allows the full resources of the storage and transport systems to be devoted entirely to new seasons' grain This latter situation was a constraint this harvest. Because the rail system was directed towards moving old season's grain in November and the new harvest was seven to ten days early, the 1979/80-overflow programme started poorly and the problems compounded as the harvest proceeded.

To give the study some idea of the task of shifting grain, let us investigate the present harvest.

Receivals have passed the 4.2 million tonnes and will probably finish at approximately 4.3 million tonnes. To transport this quantity of grain requires 250,000 GY uagons or their equivalent. Assuming -

(a) a constant rate of trucking

(b) ten months to clear the storages in the country, and

(c) 100,000 tonnes will be moved by road,

almost 800 GY equivalents or 18 block trains must be supplied six days a week to achieve total clearance.

At the beginning of February there were 3.34 million tonnes of grain requiring transport. For clearance by September, 795 GY equivalents per day will be required. Add to this 500,000 tonnes of Neu South Wales wheat plus 100,000 tonnes of barley which is expected to be channelled through the Victorian system, the task increases to 940 GY equivalents per day six days a week.

A 15% shortfall of these requirements will extend the clearance by more than six weeks. This is into the second week of November, and does not allow for any contingencies such as strikes, breakdowns, etc.

With the amount of distribution of grain the Board has handled this season, new initiatives have had to be undertaken to tackle the task.

5.

To supplement existing storages, private and Ricegrower Co-operative storages were leased. Storages ranged from horizontal sheds of 1,000 tonnes, to a 20,000 tonne shed at a disused feedlot at Peechelba, near ~~angaratta,

The second type of supplementary storage used was earthen wall bunkers. Constructed to C.S.I.R.O. specifications, sizes were generally 10,000 tonnes, but several reached 20,000 capacity, Because of the exacting methods of sealing in the grain, storage may be three to four years without any deterioration in quality. Almost 400,000 tonnes were received into bunkers during the 1979/80 harvest.

One feature of this harvest was the use of road transport, for the following reasons:

(i) Off-rail Storages

( i i )

Road direct to a terminal was usually more economical than a combined road/rail movement. It is interesting to note that even where direct road was clearly the lowest cos alternative, the Victorian Railways insisted on a combined road/rail movement. For example, the road freight from Navarre (near St. Arnaud) to Geelong would have been approxi­mately $11.50 per tonne, but at the insistence of the Victorian Railways, the grain was moved to Dunolly by road then railed to Geelong at a freight deduction from growers of $14.20 per tonne. A similar situation existed at Shelbourne, where the logical approach was direct road deliveries to Geelong, but the grain vas taken in the opposite direction by road to Dunolly for subsequent rail cartage. Hardly an economic practice;~;

Silo full

In circumstances where a silo is full and the receival rate is significantly greater than the rate at which rail can move the grain. for example, Robinvale filled early in the season. Because of logistics, only two trains per day could be provided. Rail out­loading could handle approximately 600 tonnes per day, but the potential receival rate was over 1,000 tonnes per day. to supplement the rail service the Victorian Railways arranged a road movement to Dunolly.

(iii)

(iv)

6.

Small guantities of grain in silo

The third type of road movement involved small quantities of grain which were holding up relatively lar e amounts of storage spaqe, and the use o rail transport would cause a disruption to efficient wagon utilization. During the harvest 848 tonnes of Clipper 1 barley spread over two sites was moved by road from the Panitya/Galah line to Sunshine, for this reason.

Segregation

Because of the segregation requirements of the marketers and some other factors, many bins fill to only a fraction of their capacity. To utilize all the space availabe, many sho~t

haul movements were organized to consolidate stocks. These movements were at the Board's expense, with 9058 tonnes being moved for this reason.

(v) Discontinued rail services

(vi)

Where rail services have been discontinued, either permanently or temporarily, the Victorian Railways arranged road contractors to transport to a sub-terminal. For example, five stations on the Bolangum/Jackson line, or to a terminal, e.g. three stations on the Balmoral line.

The final area of use of road transport was for interstate movements where the cost of road cartage to Geelong was significantly lower than either rail/rail or road/rail movements.

The judicial use of road transport as an adjunct to rail, and that point should be stressed, enabled maximum utilization of facilities and an increased level of service to growers and consumers to be achieved.

APPENDIX 3

FUTURE STRATEGIES FOR THE RAIL TRANSPORTATION OF GRAIN

(PAPER PREPARED BY THE VICTORIAN RAILWAYS BOARD)

1. INTRODUCTION

The rail network developed to handle the Victorian grain harvest is a legacy of the past when road trans­port was not a viable alternative for line haul trans­portation and the need to provide rail facilities in close proximity to most farms was seen as paramount. However, today the parameters which govern the costs of transport and improvem~nts in technology which have occurred suggest that changes could be made to improve the efficiency of the total transport task.

Indeed in recent years some significant improvements in railway operations have occurred and are continuing.

These have included:

Construction of bogie hopper wagons (commencing in the mid 1960's). These wagons have higher net to gross ratios, can be run at higher speeds and have greatly improved discharge rates over conventional four-wheel wagons. Unfortunately they have been limited in reaching their full potential by limitations in rail discharge rcltes at the four major terminals; restriction from use on some lines and reduced loadings of wagons on others where light rail restricts permissible axle limits. There are currently 379 of these wagons in service.

In addition in 1979 conversion of four-wheel general purpose wagons to a bottom discharge hopper configuration was commenced to achieve the advantages of bottom discharge at moderate extra cost. To date 400 have been converted with immediate plans to convert a further 400. Ultimately the year round base load grain transportation task should be operated exclusively with special purpose hopper wagons with general purpose ("GY") wagons providing some peak load capacity only. Operations could even perhaps eventually follow practices in some other rail systems where special purpose wagons also provide the peak load capactiy and are therefore stored when not in use for the remainder of the year. However, should this be proven to be a preferred strategy, it is many years away.

2.

Widespread use of the block train concept. Loading discharge limitations aside, the turnaround time for wagons is the critical factor in determining rail capacity. The operation of trains conveying grain only and corresponding empty return loading ensures minimal marshalling and shunting activities and a quick return of wagons for further loading. Problems are however created by the need for segregation of different grains and varying grades for each grain producing a far from homogeneous product with resulting extra shunting requirements. Nevertheless dedicating trains to grain traffic provides the most efficient means of moving the considerable tonnages involved. The general adoption of this concept has not yet eliminated some movement of grain in mixed train loads.

Train Formation. In order to achieve the desired turnaround of wagons, every effort is now made to ensure that, on grain lines, empty wagons detached at storage~ are picked up full when that train returns. If not then the time interval before next pick up significantly adds to turnaround and consequently reduces rail capacity. However this is not an easy goal to meet because of the large number of country storages which have to be serviced and limited loading rates at most of these storages.

These improvements have had their greatest impact on the rail element of the total transport task, the efficiency of which is of course determined not only by rail transport but also farm to silo transport, loading and unloading rates and shipping patterns. However, there exists other avenues for potential improvement which often have more widespread impact on grain transport, the importance of which has recently been accentuated by:

Very large harvests in the last two seasons which, while not always to be expected at these levels, could be indicative of a significant increase in the underlying base level of production.

Resistance to rail rate increases.

Other options and their trade-offs are discussed in the following sections although it must be appreciated that, in the absence of thorough, detailed investigations, definitive solutions cannot be given. To resolve these issues, the many authorities involved in grain trans­portation, handling and marketing should ideally form a group ("Task Force") to determine the preferred course of action.

3.

It would be all too easy for the separate authorities working in relative isolation to undertake actions which fail to take into account the detrimental effects on other parties involved.

The subject of future strategies is discussed under the following headings.

Number of country receival points and storages

Rail loading and discharge rates

Train Operations

Track Standards

Other Proposals

lhese subjects are often not independent of each other in their effects and needs.

2. NUMBER OF COUNTRY STORAGES

It is well known that railways are relatively more efficient in undertaking tasks which involve large quantities to few destinations from few origins. Grain is ideally suited to rail in respect of the first two criteria but, with approximately 230 country storages to collect from, is disadvantaged in the third. This disadvantage is represented in the form of -

Costly maintenance of lines used almost solely for grain.

Delays in train operation. Time delays in detaching and picking up wagons would average a combined total of approxi­mately 3/4 hr. per station.

Difficulty in providing widespread improvements in loading rates because of the number of such improvements which would be required,

From a railway perspective this problem could be eased in a number of ways (which could be used in combination):

(a) Develop a system of sub-terminals through which all over-flow gra1n would be handled for part1cular areas As a consequence, other storages in the

4.

area, once filled, would not be cleared until after the harvest. Choice of location would take account of the need for ready access by road and restriction of road distances to nearest storages. Extra road costs to the farmer could be compensated by lower rail rates from sub-terminals than from most local small silos in the general vicinity. During harvesting, time is crucial for the farmer and time taken for transportation to terminals would need examination although this would be compensated by improved road discharge rates and correspondingly reduced waiting times for farmers which is often considerable. It may be to the farmers' advantage to organise co-operative road services although such a proposal would need detailed study.

Other characteristics of sub-terminals would include:

ability to handle complete block trains with loading rates of at least 1,000 tonnes/hour.

standing room for at least 25 bogie hopper wagons either side of the loading point, viz. approx. 400 metres, i.e. total siding length of 800 metres. (Ultimately two such blocks off each line would be combined into a 50 bogie wagon train of 3,825 tonnes gross).

natural gravity point for the receival of substantial quantities of overflow grain.

Some potential locations in north-east Victoria have already been examined in connection with the establishment of Grain Handling Improvements Authority responsible for that area. Choice of locations throughout the State would need to trade-off the necessity for a significantquantity of grain to flow through sub-terminals to achieve maximum benefit of fast loading rates and large train loads against the need for some limit on farm to terminal distances.

(b)

(c)

5.

use y armers, gra n ram some smaller storages could be tr nsported by road to other rail-based storages after the overflow period under contract to rail. This would eliminate the ne d for rail to service these locations at any time during the year. While benefits and costs have not been examined this could possibly be a econd stage to (a) above.

In some e a na ura consequence of

adopting A number of possibilities would present themselves for investigation. For example, two of either the Kulwin, Robinvale or Kooloonong lines where the three run parallel and with the Mildura line provide four lines rarely more than 3a kms. apart; Hopetoun to Patchewollock which also parallels the Mildura line and a number of short branch lines which could include the Picola, Bolangum, Wedderburn and Peechelba East lines.

Of the three alternatives, the fi1st probably offers the best returns and is in any case a pre­requisite for the others. llowever, this must be slated in the absence of knowledge concerning consequent changes in Grain Elevator Board costs, farmers' costs, or road construction and maintenance costs.

3. LOADING AND DISCHARGE RATES

In the future it is clear that significantly improved rates of loading and discharge are required to handle increasing production and improved rail productivity. Currently the cost Jf inadequate facilities is largely borne by the ailways through a requirement to use significantly more wagons than should be necessary. Development of country sub­terminals with improved loading rates would help solve one end of Lhe problem. In the short t rm there i no prospect for very large increases in rates of grain discharge from rail at either Geelong or Portland although these terminals are currently under active investigation. Occasionally th capacity of Portl nd to store grain is reached, resulting in further delays. The unpredictability of shipping movements is a prime cause of this situation.

6.

A basic discharge rate of about 22,500 tonnes per day is seen as a goal for which to aim. This is more than double current rates. Capacity at Portland also needs to be increased to a level where the vagaries of shipping movements do not cause violent changes to train scheduling - a particularly difficult and costly procedure.

4. TRAIN OPERATIO~S

Earlier sections discussed the progressive changes in the uagon fleet and changes in operational procedures which have taken place. Other strategies involve:

(a) The introduction of a rail loop at Geelong to reduce shunting activities and to preserve the integrity of the block train concept. Construction will commence during the current year. This loop will also allow continuous discharge of wagons given upgrading of receival capacity. This would have a quite dramatic effect on train turnaround times.

(b) Increase in train sizes. Preliminary studies have proved the benefit to be gained from increased train sizes and reduced frequencies. Ultimately train loads of 50 bogie wagons (3,900 gross tonnes) could be operated from intermediate and sub-terminals. Together with a continuous discharge facility at Geelong an extremely efficient rail operation would result.

(c) Train Control systems. Centralised train control is currently being introduced between Ararat and Serviceton and will be operational by 1984. Improvements are also envisaged for the Ararat Portland line.

These changes (and potential for similar upgrading on other routes) will significantly improve the efficiency of train operations.

5. TRACK STANDARDS

Low weight rail on sections of some lines results in

inability to use hopper wagons or only to allou limited loading of them.

costly maintenance uhere mechanised maintenance systems are not suitable.

7 •

inability to use heavier and more powerful mainline locomotives.

reduction in maximum speeds o as low as 10-20 mph in some areas.

About 800 kms. of route in grain areas still has 600 lb. rail where hopper wagons cannot operate. Some of the sections are progressively being relayed with heavier rail at a rate of about 60-70 kms. per year.

The following routes which have light 60 lb. rail are regarded s having high priority for relaying and upgrading:

Horsham-Carpolac ( 8 3 km. )

Woorinen-KoolQonon (58 km.)

Caldwell-Moulamein (75 km.)

Lubeck-Bol ngum (51 km. )

Jeparit-Yanac (51 km. )

Hop oun-!'at he~JCdlock (4 k rn. )

The total stim~led

is $14.4 million. ost of these project

Any decision to close some sections of line would of course reduce the amounl of track wh eh requ res upgrading. lh servicing of some branch lines only af·ter the overflow period, s vould b Lhe se if sub-· t er rn in a 1 be c a rne s L.1 ~j li H h L cJ , v o u] d a 1 so r t: d u cc the rest~i Live nature of these inf lor truck sl&ndards.

Bolh the chuca and Tocumwal bridges have weight restrictions which limit loading of hopp r wagons to about 60% of capacity and therefore provide significant bottlenecks in th transport of grain from southern N.S.W. lh se urgently need attention.

In association with C.T.C. nev and lengthened crossing loops are being introduced between Arar t and Serviceton and are being planned on the Ararat to Portl nd line. With progressive increases in train sizes, lengthened crossing loops will be required elsewhere.

8.

6. OTHER PROPOSALS

Strategies which have also been raised as having some potential include:

(a) Construction of a rail link between Minyip and Litchfield (about 30 kms.) to provide a shorter distance between the Mildura line and Portland Although improvements in train control and track capacity are currently being introduced between Ararat and Murtoa, it is one of the most heavily trafficked lines in the system. To justify the additional traffic on this line section as a result of the link would require commitment to include grain from Mildura line areas in Portland's grain receivals at the expense of Geelong.

(b) Construction of a standard gauge track between Tocumwal and Mangalore to permit direct cartage of grain from southern N.S.W. stations. The benefit of such a proposal could not be achieved without standardisation of the Melbourne­Geelong line. Capital costs are high and, with the future of southern N.S.W. grain movement to Victorian ports uncertain, it would appear a proposal that is, at best, a long term proposi­tion.

(c) Re-opening of the Balmoral line. It is presently judged to be preferable from VicRail's viewpoint to concentrate on improvements to one line to Portland to maximise capacity and minimize costs. With upgrading being planned between Ararat and Portland and improvements currently underway between Ararat and Serviceton this is likely to remain the situation.

(d) Road Line Haul Movements. There are circumstances where road operations provide an ability to over­come short term problems in peak harvests. Contracting of road services to rail has been undertaken in the last two years. Rail would wish to have an ability to maintain flexibility in this regard and, as the authority responsible for grain transportation, to be able to choose the most efficient means of transportation for particular conditions, Road transport has or could be used to:

9.

occasion lly clear some small quantities of grain from small country silos.

to convey grain from off-rail loading points.

to convey some grain to receival points with poor rail unloading facilities ( • mills).

fhis allows rail to concentrate its efforts on the major bulk movement without allocating a dis­proportionate amount of resources (in terms of locomotives, wagons and manpower) to moving minor quantitities which the C.E.B. sometimes requires. lhis would neve involve road transport in anything other than a very minor role in terms of the total transport task.

7.

The emphasi of strat gies outlined in this paper is to progre sively move towards Lhe unde laking of gn1in Lransporta .ion rnor in .line with current pracl.ices uidely adopleu 1 o bulk cornmodili s ( t y p .i. f led I y t h c rn o v C' r~ c n l o g r <d n l n o the r c o u n L r i. e ~; 8 n cl b 1 k i r on o r c 8 n (I u ;J l i r1 p, u s t r 8 J i 8 ) • I n t h .i s

r g a r u l h c ~;I r n t CJ i e s ;H e p r i n c i p D 11 y ; Li me d a t :

improving JoadinrJ and d schLJ gc rates

reducing the number of loCJdin points

obtaining the most stock to handle th

ffici. nl rolling COI'HnorLi t y.

With the imp ov ments envisaged, one day turn­around of wagons could be achi ved in tra.ins of up to 3,800 tonnes. This would en8ble most overflow associated with the grain harvest to be cleared in 36 days with a fleet of 1,000 bogie hopper wagons instead of the current 379 bogie and 6,000 odd Four-wheel wagons. Equally important is the reduction in costs that will be potentiCJlly achieved through such operations. However considerable initial capital expenditure is required to achieve these objectives which is likely Lo ensure that it is a gradual process over some years.