Fonterra rail contract 'no sweetheart deal'

There's no sweetheart deal behind Fonterra's decision to drop Port Taranaki as the export port for a large chunk of its locally made dairy products, says KiwiRail.

Critics of the decision are claiming the extra cost of railing the 22,000 containers to Auckland and Tauranga must be making use of the Government's $90 million KiwiRail subsidy to be financially viable.

But yesterday KiwiRail chief executive Jim Quinn telephoned the Taranaki Daily News to say the subsidy was irrelevant.

"KiwiRail needs that subsidy that's a fact. But the Fonterra deal has nothing to do with that," he said.

"We price freight movements by distance. Fonterra had clearly made its decisions based on how it wants to operate its end-to-end supply chain.

"The price the dairy company pays to move that product from Whareroa to Auckland or Tauranga will be considerably more than the cost to Port Taranaki but that's its choice."

Mr Quinn said his organisation priced responsibly and according to what is asked of it by its clients.

"I can understand how this is causing angst in New Plymouth, and I can understand the frustrations. But this has been Fonterra's call, not ours."

It was also in KiwiRail's commercial interests to ensure rail traffic was using the entire rail network, so it was keen to see the line to Port Taranaki utilised as fully as possible, said Mr Quinn.

Even now the Fonterra decision was having a major workload impact at the Smart Rd rail yards in New Plymouth, which might result in a reduced staffing requirement.

"There will be an effect, but we're hoping to manage it so there need not be any job losses," he said.

"So it is in our best interests to have freight moving both ways."

- © Fairfax NZ News