The PDs have called for a "fundamental restructuring" of CIE, including the possibility of privatising Dublin Bus and Bus Eireann.
The proposals are contained in a draft policy on public transport which Senator Helen Keogh will bring for approval to a meeting of the PD General Council early next month.
The document says that CIE's poor trading performance understates the company's true commercial value. However, its extensive property portfolio "could make the CIE companies very attractive as privatisation prospects".
The PDs believe privatisation would be a more realistic option for the bus companies than for Iarnrod Eireann.
In return for agreement on rationalisation, the PD document recommends that staff in the three units within CIE - Iarnrod Eireann, Bus Eireann and Dublin Bus - be given free shares to a level of 5 per cent in each company.
In the event of a State sell-off of CIE, a further "significant tranche of shares would be made available to staff at a fair price".
The document recommends that the three CIE subsidiaries should be established as totally autonomous operations with full commercial freedom including the ability to compete with each other.
The PDs also argue that an industrial relations culture persists at group level within CIE which prevents the rail and bus operations "from responding adequately to the needs of a rapidly changing market place".
The establishment of a direct rail link between Dublin and Derry is also mentioned as a means of developing public transport in an all-island context.