The two national railways pocketed $1 a tonne less for hauling grain last year then they were allowed to under the annual revenue cap.
But there is disagreement on whether that’s good or bad news for farmers.
Figures released last week by the Canadian Transportation Agency indicate that the combined grain revenues of Canadian National Railway and Canadian Pacific Railway in 2001-02 were $558.1 million.
That’s $22.2 million less than their combined revenue cap of $580.3 million.
On a per tonne basis, the railways’ cap was $26.28 per tonne for an average 1,440 kilometre haul, but their actual revenue was $25.28 per tonne.
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The previous year, the first in which the revenue cap was in effect, the railways took in 19 cents a tonne less than allowed.
The manager of the CTA’s grain division said everyone in the grain sector, including shippers and farmers, benefits when the railways charge less than the cap.
“It’s a very positive development for the grain industry that the railways have come in below the cap by a dollar a tonne,” said Jim Riegle.
He said the numbers indicate that the cap was not an “inhibiting factor” in the rates charged by the rail companies to haul grain.
“If the revenue cap was not an inhibiting factor, it certainly supports the argument that western grain rates are really being set under normal commercial conditions.”
But the chair of the Canadian Wheat Board’s transportation committee said railways’ revenue is only “marginally” below the cap, coming within 3.8 percent of the allowable maximum in 2001-02 and within 0.7 percent the previous year.
“The revenue cap is extremely generous to the railways and they appear to be pricing within a few dollars of it,” said Ian McCreary.
“I think it’s a strong indication there is still no competition.”
He thinks the railways came in as far below the cap as they did only because they underestimated the amount of grain that would move in multi-car units and qualify for discount freight rates.
“Any money that was left on the table was an accident,” he said, adding he expects the railways won’t let that happen again this year.
While the revenue cap for 2002-03 increased by an inflation-based 0.9 percent, the railways bumped up their freight rates by around four percent.
However, Riegle said the fact the railways were $1 a tonne below the cap indicates that maxing out revenue wasn’t their priority.
The revenue cap was implemented in 2000 to replace the old maximum rate scale. The idea was to give rail companies more flexibility in setting freight rates while protecting farmers by limiting the railways’ total grain-hauling revenue.
McCreary said this year’s revenue cap numbers send a message that more needs to be done to keep freight rates under control.
“It indicates we still need some sort of protection on the rate scale. And if we don’t get competitive access, then we need to see some screwing down of the revenue cap.”
CN Rail spokesperson Jim Feeny said the railways’ success at coming in below the cap indicates there is competition for grain business.
He rejected the idea that CN came in below the cap because more grain than expected qualified for rate discounts. He said the railway lived up to its obligation to stay below the revenue cap the first two years and will do so again in 2003-03.
The revenue cap calculation does not attempt to determine how much of the savings was returned to farmers. That is the job of the federal grain monitor, which is expected to submit a report on the 2001-02 crop year to the federal government within a few weeks.
