Question

Define domestic transportation tariff and explain its role in domestic transportation services. Include the balancing of the role of contract services with transportation tariffs.

Answer 1

Domestic transportation tariffs is a system of rates wherein the payment for the transportation services is collected based on these rates. There are two different transportation tariffs namely- freight and passenger. Domestic transportation tariffs play a critical role in the domestic transportation services. The tariffs help the transportation services to combat competition. No company (private sector) can become a dominant market player due to the price increase. The transportation tariffs enable customers to have awareness of the price/cost for the particular service. Hence, misleading customers on price can be controlled with the help of tariffs. This helps the domestic transportation services to have a healthy competition in the transportation industry.

The contract services also play a critical role in the transportation industry. The main objective of the contractors is to minimize the transportation cost at the same time gain profits. This is feasible only with the help of the domestic transportation tariffs. The companies seek vendors for the contract services and choose the contractor who has quoted a lesser price (with quality service) than others. The companies set the domestic transportation tariffs as the standard to evaluate the contract services.