Effectiveness of allowing small carriers access to 160 kilometres of large companies’ track debated
The federal government’s decision to broaden railway shipment interswitching rights has prompted a variety of reactions from industry players.
Freight Management Association of Canada president Bob Ballantyne is one of those who likes the increase in interswitching rights to 160 kilo-metres from 30 km.
“It tends to work pretty well and is fairly widely used,” he said.
“This is a surrogate for real competition.”
However, analyst Joseph Schulman of transportation industry consul-tancy firm CPCS denounces the decision.
“This is a large step backwards,” said Schulman.“Interswitching always adds time, adds complexity and adds cost to moving goods.”
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The two were speaking at recent conferences on opposite ends of the Prairies: Schulman at the University of Manitoba Transport Institute’s Fields on Wheels conference in Winnipeg Dec. 3 and Ballantyne at the Dec. 5 at Informa Economics’ fall outlook conference in Calgary.
Interswitching allows shippers to demand that railways let them switch their shipments onto another railway’s line if they are within a specific distance.
The new provisions make most grain shipments available to both national railways.
Theoretically, this should encourage railways to become more concerned about offering decent rates and service to customers, even if those customers have access to only their rail lines.
The regulations came into effect only in August, so it is still unclear how much interswitching will occur.
However, Dale McKeague of the Canadian Transportation Agency told the Fields on Wheels conference that the CTA might not even know how much interswitching is occurring now.
“Unless there’s a dispute, we don’t find out about it” until after the end of the crop year, McKeague said.
“Even though the regulation (was) passed Aug. 1, we’re not sure if anybody’s used the 160 or not.”
Schulman railed against the expansion of interswitching, saying the government does not appear to have analyzed the likely impact, did not appear to consider alternatives and has introduced a heavy-handed regulatory structure that reverses decades of efficiency-based policy developments.
“Extending interswitching, as has been done, is a very significant policy change. It is not just a matter of tweaking existing regulations,” said Schulman.
“It appears that these changes were determined simply from looking at the location of prairie grain elevators and also to ensure support from all shippers (outside the grain industry).”
Schulman said the railways might be forced to build new infrastructure and buy extra equipment if interswitching occurs more often, which would result in higher rail rates.
However, Ballantyne said interswitching is part of a bank of levers, including service level agreements, that help captive shippers force railways to take their concerns seriously.
They can be used when railways don’t seem willing to negotiate with their customers.
ed.white@producer.com
