UPDATE 1-Ottawa should scrap railway grain revenue cap -study

Thu Feb 25, 2016 1:10pm EST
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(Adds other recommendations, background, transport minister comment)

By Rod Nickel

WINNIPEG, Manitoba Feb 25 (Reuters) - Ottawa should phase out over seven years its cap on the amount of revenue railways can earn transporting grain, a study for the Canadian government recommended on Thursday, a move long urged by railways and opposed by farmers and grain handlers.

A review of Canadian transportation laws, aimed at modernizing the system, recommended that Western Canadian grain movement become more "commercially grounded."

Canada's two big railways, Canadian National Railway Co and Canadian Pacific Railway Ltd, move most of Western Canada's wheat, canola and other crops to the United States or ports.

Farmers and grain handlers say keeping the revenue cap is necessary because of limited railway competition in Western Canada. Railways are critical to moving crops the vast distances from western grain elevators to ports in British Columbia and on the Great Lakes.

Grain movement slowed dramatically after the huge 2013 harvest, causing the then-Conservative government to impose minimum grain volume requirements on the railways.

But critics of the revenue cap say it makes hauling grain needlessly complex, and gives railways greater incentive to prioritize other commodities. Last year, Ottawa fined both major railways for earning too much revenue from grain.

The Liberal government, elected last year, made the 286-page report public on Thursday. Transport Minister Marc Garneau said he would carefully consider the findings.   Continued...