Canadian railways penalized for excess grain revenues

Tue Dec 29, 2015 4:52pm EST
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WINNIPEG, Manitoba Dec 29 (Reuters) - The Canadian government said on Tuesday that it has fined the country's two big railways, Canadian National Railway Co and Canadian Pacific Railway Ltd, for earning too much revenue from hauling western grain during the 2014/15 crop marketing year.

Ottawa implemented the grain revenue cap in 2000 after it eliminated a subsidy for grain movement by rail called the Crow Rate. The cap applies to revenue the railways earn by moving grain from the Western Canadian crop belt.

The Canadian Transportation Agency said CN's grain revenue was about C$6.9 million higher than its cap of roughly C$738 million, while CP's revenue came in C$2.1 million above its cap of about C$722 million.

The agency ordered the railways to pay back the excess amounts, as well as 5 percent penalties of C$343,330 for CN and C$106,858 for CP. No reason was given as to why the railways exceeded the cap. The money goes to the Western Grains Research Foundation.

The railways have long called on Ottawa to remove the revenue cap, which is not imposed on other commodities. Grain-handling companies and farmer groups, however, say that the cap is necessary because of too little competition in Canada for rail service.

Jeremy Berry, a spokesman for CP, said the railway is reviewing the agency's ruling. CP shipped more western Canadian grain to ports in 2014/15 than it did the previous year, he said.

A CN spokesperson could not immediately comment. (Reporting by Rod Nickel in Winnipeg, Manitoba)