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On Friday, the Canadian Transportation Agency (CTA) announced it will increase a price index used to establish CN’s and Canadian Pacific’s grain revenue caps by 7 percent on Aug. 1.

The revised Volume-Related Composite Price Index (VRCPI) for western grain movements will be used for the upcoming 2010-2011 crop year. The VRCPI is an inflation factor that reflects forecasted price changes for rail labor, fuel, materials and capital purchases by CN and CP, according to the CTA.

The 7 percent increase primarily is attributable to higher fuel prices, CTA officials said in a prepared statement. In the 2009-2010 crop year, the VRCPI fell by 7.4 percent because of lower fuel prices.

The revenue cap enables CN and CP to set their own rates, provided the total amount of revenue they collect remains below the ceiling set by the CTA. The agency is required to determine annual revenue caps that apply to the railroads’ movement of grain from Prairie elevators or U.S. origins to terminals in Vancouver and Prince Rupert, British Columbia, and Thunder Bay, Ontario. The caps also apply to grain moving to Thunder Bay or Armstrong, Ontario, that’s destined to eastern Canada.