REGINA – Saskatchewan’s Opposition says it wants the government to lobby for a railway costing review in light of a report that says grain producers are being overcharged for freight shipping.
NDP agriculture critic Cathy Sproule raised the issue in question period Monday, citing a report released by a farm coalition last week.
The report says in 2013-14, Canadian National (TSX:CNR) and Canadian Pacific railways (TSX:CP) earned $322 million more than the 20 per cent return on investment “deemed fair” by the Canadian Transportation Agency.
Norm Hall, president of the Agricultural Producers Association of Saskatchewan, one of the groups to commission the report, said the earnings for that year amounted to a 61 per cent return for railways.
He added that from 2008 to 2014, this amounts to $2 billion in excess earnings.
The Canadian Transportation Agency has a revenue cap to limit how much railways can earn from western grain shipping.
“What we’re seeing is they’re charging $8.36 (per tonne) above the maximum revenue entitlement,” Hall said. He added that railways have become more efficient, burning less fuel and running longer trains, but farmers aren’t benefiting from the changes.
CN spokesman Mark Hallman said he believes the revenue cap issue will be examined during the ongoing the Canadian Transportation Act review process.
“And the question of a costing review will hopefully be carefully assessed within that context,” he said, adding that he doesn’t believe producers are being overcharged. “We have no further comment.”
CP couldn’t immediately be reached for comment.
Agriculture Minister Lyle Stewart said he hopes the current review will result in railways being “properly incentivized to deliver product.”
“We think it’s more important to provide better railway service before we start worrying about changing the cap,” he said.
Sproule said she isn’t satisfied that the government is doing enough for agriculture producers.
“Obviously the maximum revenue entitlement is a complicated formula that’s been worked out over the years,” she said. “But clearly there’s an issue when $2 billion is being taken out of farmers’ pockets.”
Last week Prime Minister Stephen Harper said it’s not in Canada’s economic interest to have two railway companies with “extraordinary market power” dictating terms of the transportation industry.
The Prairies experienced months of railway backlogs after a bumper grain crop last year.
CN and CP were fined a total of $150,000 for failing to transport the minimum required grain volumes set out by the federal government.
Farm lobby groups in Saskatchewan and Manitoba said the fines didn’t reflect the damage caused by the delays.
Harper said the system isn’t under the same strain as last year, but the government remains concerned.