Keystone Agricultural Producers in Manitoba is strongly opposed to the major increase in the volume-related composite price index announced by the Canadian Transportation Agency late last week, said KAP president Doug Chorney, and it is urging the federal government to move quickly to look into the 12-year-old system.
The index – which will jump by 9.5 per cent on August 1 – is used in calculating the revenue cap that was placed on CN and CP in 2000 for the shipping of western Canadian grain. Normally, the rate increases closer to the general rate of inflation.
“This will have significant impact on what the railways can charge farmers without having to pay revenue penalties,” said Chorney. “We have seen CN and CP become very efficient at charging farmers as much as possible in the past decade – while the absence of any true competition has allowed them to continue to provide dismal service to their customers.”
The reason for the hefty hike in the VRCPI is the way in which the CTA has begun calculating the railways’ cost of capital and cost of pensions.
“We foresaw this when the CTA asked for stakeholder input last year, and we expressed our opposition to this methodology,” said Chorney.
“When the revenue cap was first introduced, we were told that there was no way the railway companies would come close to reaching it – but they are, and with this change the cap will be set even higher.”
KAP is calling on the federal government to review the original costs used in creating the revenue cap. New efficiencies used by the railways have resulted in cost decreases that are not being taken into account, and are not being passed onto farmers, Chorney said.
In addition, KAP is insisting that CN and CP costs of doing business –including investment in elevator siding and multi-car block incentives to shippers – not be allowed as deductions to the revenue cap.
KAP is also pressing the federal government to make good on a past promise designed to address service levels provided by the railways to grain shippers.
“The government must follow through on its commitment to legislate service level agreements between railways and shippers – and to include performancepenalties if railways do not comply with the terms of the agreement,” said Chorney.