SASKATOON – Incentive rates had to be scaled back to bring them more in line with market reality, say railway officials.
Both railways have cut back on the discounts they’re offering to shippers for multiple car loading and unit train shipments.
Grain handling companies say they’re surprised and disappointed at the change, warning it reduces the financial incentive to build a more efficient grain gathering system.
But railway officials say the changes were needed to more accurately reflect the actual savings generated by the rate discounts.
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“We had to take a really hard look at just how much money we were saving with the incentive rate program in light of the new rate regime where rates are capped,” said CN Rail spokesperson Jim Feeny.
As of Aug. 1, both CN Rail and CP Rail are offering discounts of 75 cents a tonne on blocks of 18-25 cars, $2 on 26-50 cars and $3 on 51 or more cars. Volume-related discounts have been eliminated.
That’s a lot less than the railways proposed in December. CN proposed discounts that started at $1.70 a tonne for 18-20 cars and went as high as $5 a tonne for 100 cars. And the railways say they’ll cut back even more in 1996-97, reducing discounts to 75 cents a tonne on 25 cars, $2 on 50 cars and $3 on 100 cars.
Last year, through a combination of car block and volume-related discounts, companies could save up to $5 a tonne by loading and shipping 100 car unit trains.
The railways don’t like several aspects of the new rate regime, particularly the maximum rate cap and the federal government’s decision to deny a $2-a-tonne rate increase they would have got under the old legislation.
The maximum rate prevents them from charging an appropriate rate on high-cost branch lines, they say, so they can’t be as generous with incentive rates on the main lines.
Commercial realities
“We have sent a political message, no question about that,” said CP’s Don Bower. “These rates reflect our concern about the maximum rate but they also reflect the commercial reality of where the gains are.”
At one point, CP said it would offer discounts only on shipments of more than 50 cars, but after intense lobbying by the grain industry it agreed to match CN’s rates.
