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Railway Service Under MP’s Scrutiny

Put a railway representative in front of the Commons agriculture committee and complaints about service and cost aren’t long in coming.

Cliff Mackay, President and CEO of the Railway Association of Canada, wanted to explain the need for replacing the aging fleet of government grain hopper cars and the importance of letting market requirements shape the provision of transportation services.

But Liberal agriculture spokesman Wayne Easter and Conservative MPs Randy Hoback pointed to persistent complaints from farmers about service levels.

“The farm community clearly believes, and I agree with them, that the railway efficiency gains haven’t been passed on to the primary producers,” Easter said. “The Canadian Wheat Board study clearly showed that the railways were basically gouging farmers … of substantial millions.”

He said the government should conduct a cost ing review to find out whether farmers and other shippers are being overcharged.

Hoback said the railways tell farmers loading producer cars what day cars will be spotted and that they have to be ready for pickup within 24 hours or demurrage will be charged. The farmer loads the trucks with grain the day before but the cars don’t arrive.

“Who should pay for that?” he asked Mackay. “Because I know right now the person paying for it is the farmer. But who should pay for that?”

Mackay said that would be an issue for the service review to consider. He said the railways have worked hard to keep their freight cars moving seven days a week. “One of the big issues in railways over many years is that their performance in that context was frankly not very good, in the old days.”

To many farmers, it still isn’t, Hoback pointed out.

Mackay said railway freight rates dropped “an average of 7.5 per cent in real terms from 1998 to 2007, including rates for the movement of agricultural product. I think we would all agree, including our customers, that the product offerings to shippers have improved considerably since the days of fully regulated markets. From 2002 to 2007, transportation rates have had the lowest rate of growth of any farm input, rising by only three per cent in real terms over that time compared to the 96 per cent growth in cost of diesel fuel, 62 per cent growth in the cost of gasoline, and 75 per cent growth in the cost of fertilizers over the same period.”

The rai lways have been constant pressure during the past decade to revitalize their infrastructure, reduce costs and improve the use of our equipment along with strong demand for transportation services, Mackay said. The railways have lost almost a quarter of their traffic because of the recession except for grain, which has grown.

“Railways have invested more than $11 billion into their business over the last five years,” he said. “Several important developments have given us the confidence that the time was right to make major investments.

“Amendments to the Canada Transportation Act were tabled that specifically ruled out forced access and set the stage for a stable regulatory environment in Canada for the foreseeable future. Uncertainty about covered hopper cars has been removed. We also have confidence that there would be no major changes to the maximum revenue entitlement.”

However the grain car fleet is about 40 years old “and although they are operationally in reasonable condition they are nearing the end of their normal interchange approved life. Railways and governments will require further investment in the short term to replace these aging assets. It’s important that returns are sufficient to ensure that a fleet of this magnitude is maintained at its current level and modernized over time.”

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