OTTAWA -- Canadian National president and chief executive Paul Tellier called for the federal and provincial governments to give up railroad fuel tax revenues and offer tax credits to shippers who switch from trucks to rail, the Journal of Commerce Online reports.

In a speech to the Canadian Club, Paul Tellier proposed "a new Road Relief and Shipper Tax Credit to encourage shippers to take freight off the highways and put it on rail."

Under Tellier's plan, shippers would receive what he called "government diversion credits" from the C$160 million that CN and CP pay to the federal and provincial governments in fuel taxes each year,

"Producers and manufacturers could then be encouraged to re-engineer their processes to optimize the use of railroad transportation," he said.

The federal government collects about C$60 million ($38.7 million) and the provincial governments about C$100 million ($64.5 million) annually, he said.

In response to media questioning later, Tellier said the idea would not include credits for grain and other shippers who might include the Great Lakes-St. Lawrence Seaway system.

The marine shipping industry is pressing the federal government to alter current freight rate and other transportation policy so that the Lakes-Seaway system might charge shippers less and take trucks off highways in the industrial provinces of Ontario and Quebec. They say regulated grain freight rates in Western enable the railways to charge lower rates from the head of the Lakes eastward.

Tellier denied that. "We are charging what the market can bear," he said. "Rail transportation in this country is not subsidized to any extent whatsoever."

In his speech, Tellier said governments would lose no money, because they would save even more on highway maintenance and construction each year.

Tellier said his proposal could divert 100 million metric tons of freight from trucks every year, or "the equivalent of about three million truckloads."

"This proposal is not anti-truck," he insisted. Under distances of 600 miles, trucks would continue to provide the best service to shippers. Over 600 miles, trains would do better for shippers, and trucking companies should either piggyback on CN and CP trains or turn their containers over to the trains, he said.

Shippers would not only get tax credits for shifting, as well as "an immediate 10-15% reduction in freight rates that shows how much cheaper rail is over truck."

Rail in Canada is about 30% under-used, Tellier said, because trucking pays lower fuel taxes, has better capital cost allowances for equipment, and gets other government-provided advantages.