MONTREAL — Ottawa will pay Canadian National Railway Co. $300 million to expand and upgrade the tracks between Montreal and Toronto, an overhaul that will largely benefit passenger carrier Via Rail, the two transporters announced Thursday.

The two-year program will add tracks at eight "pinch points" along the 539-kilometre stretch that has long been the source of bottlenecks and delays for Via Rail trains, and friction between Via Rail passenger trains and CN freight trains. The latter owns and operates the tracks, and its freight trains always take precedence.

At a ceremony in Toronto, Via chairman Donald Wright called the program "the dawn of a new era in safe, swift and sustainable passenger rail travel in Canada."

"Just as the opening of this rail line 153 years ago changed the whole concept of travel between the burgeoning cities of southern Ontario and Quebec, this project has the same transformational potential. It will decisively position the passenger train as the modern answer to highway gridlock and airport wing-lock."

He called the project "the largest-ever improvement and investment program in the 153-year history of passenger rail service between Montreal and Toronto."

Wright told reporters later that he expects the track improvements to boost Via's traffic by 40 per cent over the next five years. The rail operator carried 4.6 million passengers last year, the bulk of that between Canada's two largest cities, which federal Science and Technology Minister Gary Goodyear called "the heart of the Canadian passenger rail system."

The $300 million will come out of two infrastructure improvement programs totalling $923 million that have already been announced, said Via Rail spokesperson Malcolm Andrews.

The bulk of the $300 million — $230 million — will be drawn from the $407 million Ottawa earmarked for Via Rail in the infrastructure part of its economic stimulus package last fall. The other roughly $70 million will be part of an earlier $692-million program, of which $516 million was set aside for capital expenditures like the one announced Thursday.

The addition of a third track at eight strategic points will allow Via to add two trains per day in each direction, and should result in an average cut of "as much as 30 minutes" per Montreal-Toronto trip, said Andrews.

The upgrade will also streamline the Montreal-Ottawa and Toronto-Ottawa routes, since they run partly on tracks between Montreal and Toronto.

At an unveiling ceremony at Via Rail's maintenance facility in Montreal, Via president Paul Cote launched the first of 54 entirely refurbished F-40 diesel-electric locomotives. The $100-million-plus program announced in December 2007 for rebuilding the GM locomotives Via bought in 1986 was awarded to Lachine, Que.'s Global Railway Industries Ltd.

Goodyear did not rule out the possibility of a true high-speed rail system between Montreal and Toronto, but any such link would be at least "probably a decade out."