A revitalised $274-million rail plan to shift tourists faster between Queenstown and Milford Sound has been mooted.

A proposal by MSLR to build a 15-kilometre vehicular drive-on-drive-off electric railway, passing through a 13.5km tunnel between Milford Sound and Queenstown, has been included in the submissions for the Queenstown Lakes District Council 10-year plan.

It is the third such plan to shortcut the 287km road trip.

Supplied The latest plan is the third such one to attempt to shortcut the 287km road trip.

The railway would link the Dart Valley and the Hollyford Valley and a railway terminal would be based 200 metres north of the Glenorchy, Kinloch Rd and Routeburn Rd intersection.

The Hollyford portal would be located near Gunns Camp.

READ MORE:

* DOC backs Fiordland monorail plan

* Locals welcome derailing of monorail

* Tunnel hearing starts

MSLR managing director Colin Jenner said it had included the submission in the 10-year plan so the council could consider it in future provisions.

"Sooner or later, someone is going to build a tunnel through there," he said

"It's the logical thing to do."

Up to 12 train trips would be able to operate per day and each train would contain 10 single railroad low bed wagons, each capable of transporting a large tourist coach up to 12.6m and 20 tonnes in weight, and 10 regular flat bed wagons catering for up to 30 light vehicles.

Annually, it could transport 700,000 passengers, over 3000 passengers a day.

In 2007/08, a feasibility study was conducted with "positive results" and a concession application to permit the construction and operation of the tunnel was accepted by the Conservation Department, albeit termed incomplete, Jenner said.

The concession application was halted in mid-2008 because of two other proposals with similar objections.

One of those was Riverstone Holdings, which wanted to develop a tourist trip using a catamaran from Queenstown to Mt Nicholas Station, an all-terrain vehicle drive to Kiwi Burn near the Mavora Lakes and then a monorail ride to Te Anau Downs

In May last year, the Government rejected the proposal, with Conservation Minister Nick Smith saying the $240 million plan "does not stack up either economically or environmentally".

The other, the Milford Dart Passage Project, was also declined citing "major environmental concerns".

MSLR's project was able to negate those concerns, which included disposing the material from building the tunnel at the Dart end and not Hollyford, Jenner said.

"The minister is very positive that he has not closed the door to alternative proposals that are able to solve the environmental issues created by the earlier declined projects, and at the same time present a sound financial model," he said.

The concept was drawn from the fact there was limited accommodation at Milford Sound for visitors and a lengthy day-trip of 10-12 hours only resulted in 2-3 hours at the sound.

As well as "removing the burden of lengthy travel", the project would increase tourism opportunities, Jenner said.

The plan operations would be modelled off the Lotschberg car transportation - Katndersteg to Goppenstein railway in Switzerland.

The proposal was "technically and financial feasible" and a study commissioned by Environment Southland cited the project as having the "best technical proposal".

Since the other applications had been declined, "the way is clear" for MSLR to progress its Conservation Department application, Jenner said.

To proceed, the project needed an updated environmental impact and feasibility study, resource consents from the Queenstown Lakes District Council and the Southland District Council and a "solid investor".

The project was proposed to be privately funded, with ownership eventually being passed to the Government.