Government proposals to reform the bus and rail sectors include plans to allow Dublin Bus and Bus Éireann to move outside their usual franchise areas.

In a move which could also clear the way for greater private sector involvement in the bus market, the two State companies will have historical "constraints" on where they operate lifted.

At present Dublin Bus is not allowed operate routes which primarily serve areas outside the county, while Bus Éireann is not allowed operate routes within the Dublin county boundaries.

The idea is included in a draft version of a new bill designed to liberalise the bus and rail markets and to set up a public transport commission.

Civil servants in the Department of Transport have discussed the proposals with trade unions and other stakeholders, but the Minister for Transport Mr Cullen has yet to bring the ideas to Cabinet.

It is understood the proposals do not propose the break-up of the CIÉ Group, although each company will retain a separate board of directors. Workers' directors will also remain centrally involved in CIÉ.

The idea of a public transport commission is in addition to plans disclosed this week to set up a single umbrella body for public transport in Dublin.

While Mr Cullen has not been as vocal as former Minister Seamus Brennan on the issue of private sector involvement in the bus market, this week he said he wanted to see some progress on the issue.

The idea of removing constraints on the two State-owned bus companies could prove controversial. Both companies could end up competing with each other for individual routes which are likely to be allocated by the new public transport commission.

This body is also expected to have a role in approving fares on bus and rail services.

At present the Minister for Transport has ultimate responsibility for approving fares and allocating licences for bus and rail routes. This week the Mr Cullen indicated he no longer thought this was necessary.

He told The Irish Times he believed a regulator should take on these duties in future. "Clearly you need a structure like a regulator to deliver it. I don't think the Department issuing licences in future is the way to do it. You need an independent body to do it," he said.

The new commission is likely to also take on the role of regulating the taxi industry, though this has not been decided formally at this stage.

The Public Transport Commission is likely to have three senior members, but with a staff of between 50 and 60. Many of these are likely to be taken from the Department itself and other State agencies.