The nation's railroads agreed yesterday to trim back their proposed freight rate increases to meet President Carter's anti-inflation guidlelines.
The agreement to cut back the proposed 8.1 per cent increase to a 7 percent hike was hailed by Transportation Secretary Brock Adams as a "breakthrough" in the Administration's program to hold down prices through voluntary action by private industry.
If the financially troubled railroads could comply, Adams said, "then other industries ought to be able to do the same thing."
According to Richard Briggs, a vice president of the Association of American Railroads, the rail leaders decided to cut back on the rate request following a series of meetings with officials of the Council on Wage and Price Stability, including Alfred K. Kahn, the President's chief inflation fighter.
William Dempsey, AAR President, said the decision was "a most difficult one." He cited significant declines in rail industry earnings during 1978 and "uncontrollable" cost increases facing the railroads over the next two years because of wage pacts signed before the guidelines were announced. "But we are hopeful this action and similar moves on a broad national scale will turn the tide against growing inflation," he said.
Dempsey said the revised rate request would give the railroads $200 million less a year than the original proposal would have yielded them.
Under the original proposal, filed Nov. 1, two-thirds of the nation's freight traffic would have been subject to am 8 percent rate increase and the remaining third would have had rates above or below that level.
Yesterday, the Council on Wage and Price Stability said the 1 percentage point reduction in the rail rate increase request "would appear" to meet the Administration's anti-inflation standards.
Because the standard calls for price increases of one-half percent less than those of the two previous years. COWPS noted that a realized rate increase of less than 6.6 percent would be required for compliance in the industry since the average realized rail rate increase for 1976-77 was 7.1 per cent.
However, COWPS took note of the railroads' assertion that the request for permission to raise rates by 7 percent, if approved, would yield effective rate increases averaging 6.5 per cent or less because not all railroads fully implement allowed rate increases on all traffic.
"The council will monitor the implementation of future rate increases to ensure that this is true," it said.
Both Adams and Kahn said they would seek approval of the 7 percent request from the Interstate Commerce Commission, which must approve the increase. Kahn noted that the ICC has already said it would follow the Administration's guidelines when it rules on rate increases.
The increases could become effective as early as Dec. 15 if the ICC maintains the schedule it has followed in recent cases.
According to rail officials, the proposed increases would have their greatest impact on electric bills because shipping coal will become more costly. Shipping costs will go up 9 per cent in the East 13 percent in the South, and 7 percent in the West, according to the AAR's Briggs.