CP seeks revenue bump by lifting grain freight caps
By: The Globe and Mail
Canadian Pacific Railway Ltd. is calling for an end to a government-imposed limit on revenues the country’s two major railroads can make hauling grain in Western Canada, a measure designed to protect farmers from soaring shipping costs.
The so-called maximum revenue entitlement set by the government on wheat, canola and other grain for export has been outpaced by the rise in crop prices and is preventing railways from buying bigger and more efficient rail cars to move grain, the Calgary-based railway said in a submission to a government panel that is reviewing the Canada Transportation Act.
“The removal of the [regulation] would allow for increased investment, capacity, and overall competitiveness in the grain supply chain,” said CP, noting commodity prices have risen by 166 per cent since 2000 while the railway’s freight rates have gone up by less than 6 per cent. “Canadian rail rates are the lowest in the world.”
CP said removing the cap would allow it to replace its fleet of 5,500 grain cars – which average 35 years old – with new hoppers that can carry 25 per cent more grain per train.
The maximum revenue Canada’s two major railways can make hauling wheat, canola and other grain in Western Canada for export is set by the Canadian Transportation Agency using a complex formula that takes into account crop volumes, distance hauled, inflation and other factors. Railways are free to set their own freight rates, provided total sales fall below the ceiling set by the government.