Two traditional enemies found something to agree on last week.
The railways and the National Farmers Union, who generally disagree on just about everything to do with grain transportation, were both quick to condemn the federal government’s proposed policy reforms.
But true to form, the two implacable foes panned the reform proposals for opposite reasons.
From the railways’ perspective, the new policy is little more than an attempt to take cash out of their pockets while doing almost nothing to free up an over-regulated industry.
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They called it dysfunctional, unfair, unbalanced and arbitrary.
“The only thing that’s new is the rate cut,” said CN Rail spokesperson Jim Feeny.
“We get lower revenues but we’re not able to work with the shippers to look for ways to generate the efficiencies that would address the lower revenues.”
As might be expected, the NFU has a different take on the subject.
“I think it’s a huge gain for the railways,” said Saskatchewan farmer Terry Boehm, chair of the NFU’s transportation committee. “It gives them most of what they had asked for in the initial round of Estey consultations.”
The farmers union said railways will be able to keep hundreds of million of dollars in productivity gains that they have pocketed since 1992 and will gain the ability to manipulate freight rates to redesign the grain system to their liking.
Along with a number of other producer groups, the NFU is unhappy that last week’s announcement put off for more study a decision on open access and other measures designed to encourage competition.
“This is very railway-friendly legislation,” said Boehm.
The new policy package includes a cap on railway revenues that will see freight rates reduced by about 18 percent from what they were slated to be Aug. 1.
While the railways have supported the concept of a revenue cap, they say it is too low.
They warn that it could result in cutbacks to the freight services and rate discounts that are now available, and lead to reduced investment in their grain gathering systems.
“That’s not a threat,” said Feeny. “We have an 18 percent reduction in revenue. We’ll have less money to invest and you invest where you get the best return.”
A costing review by the Canadian Transportation Agency last summer found that in 1998 the existing rate structure provided the railways with a contribution to constant costs of between 39 and 43 percent of volume-related variable costs. A Transport Canada official said under the proposed revenue cap, that contribution will be between 25 and 30 percent.
The farmers union is also unhappy there is no regulatory formula to ensure the cap will go down as railway costs decline.
