(Adds details, comments, reaction)
By David Ljunggren and Rod Nickel
OTTAWA/WINNIPEG May 15 The Canadian government
intends to keep in place a revenue cap on western grain that
Canadian National Railway Co and Canadian Pacific
Railway Ltd haul for export, two sources familiar with
the matter said on Monday.
The measure is contained in draft legislation that Minister
of Transport Marc Garneau is due to unveil on Tuesday at 10:30
am ET (1430 GMT), said the sources, who requested anonymity
because of the sensitivity of the situation.
"The revenue cap stays. There's no question about that," a
source said. "It's not being phased out."
Garneau's chief spokesman, Marc Roy, declined to comment.
The grain revenue cap, formally known as the maximum revenue
entitlement (MRE), has been in place since 2000 and is intended
to balance the market power of the two big railways with that of
farmers and grain companies, who in many areas rely on one rail
company. Keeping it would be popular with farmers, who say the
annual revenue cap controls costs they pay when they deliver
"Our grain is captive," said farmer Todd Lewis, president of
Agricultural Producers Association of Saskatchewan. "If there
was lots of competition, you probably wouldn't need (the cap).
We need some assurance that rates aren’t going to go through the
Railways oppose the measure, saying it reduces their
incentive to invest in grain hauling.
A CN spokeswoman declined to comment. CP could not be
A study ordered by the previous Conservative government
recommended last year phasing out the revenue cap over seven
Western farmers rely on railways to move wheat and canola
crops great distances to ports, and do not benefit from a river
barge system as in the United States.
(Reporting by David Ljunggren in Ottawa and Rod Nickel in
Winnipeg; Editing by Phil Berlowitz and Andrew Hay)