Tariff Regulation on the base of Weather and Seasonal Changes in Transportation Environment

Journal of Environmental Treatment Techniques

2020, Volume 8, Issue 4, Pages: 1331-1336

J. Environ. Treat. Tech.

ISSN: 2309-1185

Journal web link: http://www.jett.dormaj.com

https://doi.org/10.47277/JETT/8(4)1336

Tariff Regulation on the base of Weather and

Seasonal Changes in Transportation Environment

Arkadii Anatol’evich Simdiankin *, Pavel Sergeevich Probin , Lyudmila Petrovna Belyu ,

Natalia Alekseevna Prodanova , Tatiana Leonidovna Melekhina , Savda Yaragievna

Yusupova ⁴

Russian state university of physical education, sport, youth and tourism (SCOLIPE), Sireneviy boulevard, 4, Moscow, 105122, Russian Federation

Plekhanov Russian University of Economics, Stremyanny lane, 36, Moscow, 117997, Russian Federation

Financial University under the Government of the Russian Federation, Shcherbakovskaya Str, 38, Moscow, 105187, Russian Federation

Russian customs Academy, Komsomolsky Av, 4, Lyubertsy, Moscow region, 140015, Russian Federation

Received: 22/12/2020

Accepted: 30/08/2020

Published: 20/09/2020

Abstract

One of the most promising areas for the development of the domestic economy is the agricultural sector which is characterized by a

high level of volatility due to a wide range of business risks including weather and seasonal changes. There are significant economic

imbalances despite the active processes of automation of the agricultural sector as well as the desire of farmers to reduce the cost of

production while simultaneously improving its quality. And it’s largely due to imperfect approaches to price formation. One of these

problematic areas is the sphere of cargo transportation of agricultural products. Now the usual ways of supporting entrepreneurs in the

form of preferential loans, special tax regimes, and aid grants are no longer fully able to create optimal conditions for agricultural

producers. The reason of this is the complex, multi-faceted nature of production and financial and economic relations in the agricultural

sector. Above-listed tools are able to harmonize the sphere of agriculture as an economic system, however, a number of issues require

the development of effective organizational and economic measures in a rather tight range. So, it is advisable to review the pricing

conditions for cargo transportation of agricultural products taking into account both the weather conditions and the factor of seasonality.

The authors give reasons for the need to introduce a flexible approach to the application of trade surcharges (tariff schedule) in this area.

The rationale for the feasibility of correcting prices for carriers’ services taking into account these factors is presented since the proposed

measures reduce the surface damage of agricultural products during transportation. It leads to a longer period of sell-by-date and, that is

why, obtaining additional income which more than compensates of the transportation costs increasing.

Keywords: Agriculture; Competitive environment; Condition of the road surface; General transportation problem; Price formation;

Tariff regulation; Weather condition

Introduction¹

varieties of methods for setting tariffs (1), that could be

allocated into two groups: a) methods of regulation on the base

of the economically sound outlays and b) incentive regulation.

The first group consists of:

In conditions of economic instability one of the priorities is

to minimize costs while ensuring a higher level of quality in

comparison with competitors. Any price increasing in this case

should imply a sufficiently strong justification since the final

consumer may be reoriented to lower-quality but cheaper

products. At the same time several types of risks need to attract

additional funding as a way to overcome them. Exchange

relations participants strive to maintain an acceptable price

level in the market with a known range of cost fluctuations.

However, if we turn to the field of cargo transportation of

agricultural products it becomes obvious that the level of risks

for the carrier of cargo will differ significantly in different

seasons and weather conditions. But these aspects are not

always objectively reflected in the price of its services. As a

result of these risks the condition of cargo delivered in different

seasons and weather conditions may also differ significantly.

Lost production risk has a negative impact on the financial

condition of persons engaged in its processing, wholesale and

retail trade. As a result it is influenced on the final price of the

product paid by the consumer. In this regard we consider it

necessary and possible to address the mechanism of tariff

regulation. In practice there are a significant number of

–

Cost-plus regulation;

Revenue requirement method;

Rate-of-return regulation;

Revenue assets base (RAB).

The second group consists of:

Performance-based regulation (PBR);

Yardstick regulation (YR);

–

Cap regulation (CR)

In our opinion the problems of crop seasonality and weather

conditions are the most complex since it is not always possible

to take into account the degree of their influence when

developing measures for the development of agriculture, for

example, when designing special tax regimes and target

programs. Thus, the most rational approach is to apply a more

advanced system of tariff regulation for the transport of

agricultural products.

Corresponding author: Arkadii Anatol’evich Simdiankin, Russian state university of physical education, sport, youth and tourism

SCOLIPE), Sireneviy boulevard 4, Moscow, 105122, Russian Federation. E-mail: prodanova-00@mail.ru.

(

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2020, Volume 8, Issue 4, Pages: 1331-1336

economy acquires the role of a stabilizing factor while ensuring

employment and infrastructure development. Since agriculture

is the most important part of the real sector, on the one hand,

and tariff regulation is a factor of increasing economic security

Literature review

It is established that among the weaknesses of modern

Russian agriculture the most significant are transport costs as

well as a high level of dependence on seasonality and weather

conditions (2). In addition, the situation is complicated by the

problems related to improving taxation of the agricultural

sector (3, 4). As mentioned earlier the existing methods of

supporting agriculture such as taxification and aid grant are

mostly aimed at harmonizing the entire sphere of economic

relations (5-8). When setting tariffs for cargo transportation it

should be guided not by principles of general application but by

the specifics of management at the level of a specific territory

with specific climatic conditions as well as the specific

condition of the road surface in each season and so on. In this

regard there is an objective need to consider the relevant

problems in the format of transport problems when the

successful solution can determine the optimal level of the tariff

taking into account the influence of environmental factors (9-

(

18, 19), on the other hand, it is worth considering the specifics

of applying alternative approaches to the justification and

calculation of tariffs in this area. In particular, the tariff

regulation is a very effective tool for economic impact and it’s

able to harmonize the system of financial and economic

relations in a specific set range – not only the high influence of

the regional factor is taken into account (20, 21) but also the

specifics of a definite branch of the economy. Let's turn to the

historical aspect of the range of issues under consideration. At

the beginning of this millennium issues of customs and tariff

regulation of agriculture were considered in a separate order in

the context of Russia's accession to the WTO (22). Later

Frolova and Boyko and then the emphasis was placed on the

need to implement measures of state support for agriculture that

fit into the laws and requirements of the WTO since the

agricultural sector has become positioned as a sphere for

creating investment projects in the context of international

cooperation (23). At this moment it seems appropriate to

approach this issue in a completely different way, namely, to

develop effective approaches to pricing in the format of a tariff

system. And these very tariffs provide a faster final economic

effect when there is the introduction of a progressive scale of

trade allowances for the services of carriers (depending on

external environmental conditions) (24-29). At the same time

the final consumer is insured against fluctuations in prices since

the trade premium for seasonality and weather conditions (it’s

charged by the cargo carrier) is compensated by a larger amount

of goods delivered to the wholesale and retail trade with higher

quality (30-36). Thus, without taking into account the local

characteristics of a particular territorial unit it is impossible to

completely realize full potential of the domestic agricultural

sector. In our opinion an effective way is to introduce improved

methods of tariff regulation at the regional and local levels.

2). Thus, the main task is: a higher economic effect is

determined by an increase in the volume of products without

signs of damage” with an increasing level of tariff for

“

transportation of agricultural products (in conditions of

increasing risk due to weather and seasonal factors). This

condition implies both a longer sale period and a minimum

percentage of waste product (the presence of rot, loss of

marketable style). It is worth noting that mathematical

modeling methods are of priority in order to establish the

optimal tariff value (13). Today the transport planning is

closely related to the economy since it takes into account a wide

range of factors that are different in nature: the level of constant

and direct expenses, the profit margin, the negative impact on

the environment and so on. Even when investigating a single

factor in the optimization of the transport model we should take

into account

a significant number of nuances: fuel

consumption, route length, grade in favor and much more.

Subsequently, the accumulated estimates are included in the

target function to further calculation of the impact of individual

variables (14). We can come to the following conclusion:

modern transport problems take into account the degree of

influence of a wide range of external and internal factors but

the issues of economic justification of the impact of seasonality

and weather conditions on the system of agricultural cargo

transportation – from the perspective of price formation – do

not always remain sufficiently developed (15-17). The

allocation of cargo transportation of agricultural products to a

separate problem area is due to the fact that the processes in the

studied area are influenced by a significant number of

additional external factors including the seasonality of the crop

and weather conditions. These nuances should be taken into

account in the “pricing process” since they directly affect the

features of vehicle operation, on the one hand, and the level of

damage to the cargo, on the other hand. In other words, the

economic interests of producers, transport companies and

ultimate customers (wholesale and retail trade) directly depend

on the pricing models used in the system of agricultural cargo

transportation.

3 Basic part

It is known that a mathematical model describing the cargo

transportation from several suppliers to several consumers is

described as follows:

С = ∑^푛

∑

푚

푥 푐 → min ,

푖ꢀ1 푗ꢀ1 푖푗 푖푗

{

∀푥푖푗 ≥ 0,

(1)

∀푐_푖_푗≥ 0,

where 푐_푖_푗is tariff, 푥_푖_푗is cargo transported on the route with the

tariff 푐 . This model describes the general conditions of

푖푗

transportation at known tariffs, the demand for a homogeneous

cargo from consumers and the ability to meet this demand from

suppliers. A one-time tariff for cargo transportation from point

A" to point "B" does not allow taking into account the

preservation of cargo during transportation – especially for

damage-sensitive cargo in particular fruit and vegetable

products. At the same time the ratio of the "quality" of the cargo

at the initial points and final destinations is also not taken into

account. In real conditions the preservation ability of

agricultural cargo is significantly affected by fluctuations in the

vehicle body due to bad weather conditions (for example,

swaying of the body by flow of wind) or unsatisfactory

condition of the road surface.

The elimination of imbalances in the development of the

agricultural sector is a problem that deserves special attention

especially in the light of the conditions of global economic

instability. Historical experience of the development of

economic relations clearly demonstrates that in the conditions

of crisis and financial market volatility the real sector of the

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2020, Volume 8, Issue 4, Pages: 1331-1336

Figure 1: Changes in road conditions due to weather and season

At the same time, weather conditions can also significantly

affect to the condition of the road surface if we are talking, for

example, about natural roads (Fig. 1). The authors propose to

take into account the impact of weather and road conditions on

cargo transportation by cutting off (if possible) routes that are

actually or potentially affected by them. To change or

completely "cut off" routes it is proposed to use an increased

tariff bringing it to a prohibitive one in cases such as the use of

natural roads in heavy rain or snowfall, strong winds on open

part of road, spring flooding etc. Then, taking into account the

weather and road conditions formula (1) will look like this:

basic tariffs. Three types of the so-called transfer function can

be used to estimate the weight coefficients (Fig. 2). The linear

function (Fig. 2, a) allows to increase the weight coefficient

when conditions change but it cannot take into account quick

and pronounced changes such as weather conditions when we

need to prohibit movement along a certain route. A linear tariff

increase for this rout may not lead to forming a "prohibitive"

tariff but only equalize it or slightly exceed the tariff for the

existing alternative route. The sigmoidal function (Fig.2, b) has

the property of amplifying weak signals better than strong ones

as well as preventing saturation from strong signals coming

simultaneously with weak ones that allows to "customize" the

tariffs more precisely. The threshold function (Fig. 2, c) when

approaching unfavorable weather conditions (heavy rain, wind,

snow etc.) or seasons (spring in most regions of the Russian

Federation is characterized by flooding conditions and autumn

– morning and evening frosts) will allow to "cut off" the

С = ∑^푛

∑

푚 푟

푥_푖_푗(푐_푖_푗+ max(с ; с ))min ,

푖ꢀ1 푗ꢀ1

푤

푖푗 푖푗

ꢄ

ꢂ

∀푥_푖_푗≥ 0,

^∀^푐푖푗 ≥ 0,

(2)

− for highway,

푟

с = ꢅ

푖푗

ꢃ

0 − for another types of the road,

0 − for dry windless weather in summer,

> 0 − for other weather conditions and seasons,

ꢂ

possibility of transporting cargo on certain routes by setting a

푤

푖푗

= ꢅ

ꢁ

푤

푖푗

prohibitive tariff с equal to, for example, infinity. The

weighing coefficient can be selected in various ways – one of

which, perhaps, most accurately describes the condition of the

road surface that affects the transport of cargo-acceleration

푟

where с

is correctional tariff for road surface and its

푖푗

푤

푖푗

condition; с is correctional tariff for weather conditions. The

modified general transportation problem table with (2) will

look as shown in Table 1. Total tariffs may be determined by

summation or multiplication of the "weight coefficients" to the

(Table 2). In this case both linear and sigmoidal functions can

푟

푖푗

be used to describe the tariff с .

Table 1: Example of filling in a general transportation problem table with correctional tariffs that describe weather and road conditions

Demanders

푐_푖_푗

푐_푖_푗+ с^푤

---------

m-1

푐_푖_푗+ с

푐_푖_푗+ с^푟

푐_푖_푗

푐_푖_푗+ с^푟

푤

푖푗

푐_푖_푗

---------

푐_푖_푗

---------

푐_푖_푗

푖푗

--------

---------

푐_푖_푗+ с

---------

푐_푖_푗

푐_푖_푗+ с^푟

푤

푖푗

푐_푖_푗+ с^푤

푐_푖_푗

---------

푖푗

Figure 2: Transfer functions

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2020, Volume 8, Issue 4, Pages: 1331-1336

Table 2: Coefficients determining the permissible amplitude

of vehicle vibrations

up to prohibitive (sigmoidal function) and for 1-4, 2-4, 3-6 –

linearly increasing the tariff weight coefficients.

The initial weight coefficients can be obtained both on the

basis of evaluation of statistics of damage and safety of the

products transported on these routes in different weather

conditions and on the basis of assessment of, for example,

acceleration during the transportation process directly. Then

these data can be used for plot of nomograms connecting the

tariff change and the state of the road surface and vehicle speed

on it. Let’s draw up a general transportation problem table and

set tariffs (in rubles per ton of cargo) for dry and windless

summer weather taking into account the length of the route and

the geographical features of the area. Let’s randomly assign

apple stocks on garden 1-3 in tons and set the demand for

products store, warehouse and mini-factory for the production

of apple juice also in tons (Table 3). The solution for this table

in MS Excel has the following form (Fig. 4, a). Let’s change

the tariffs due to changes in weather conditions when it is either

dangerous to move along routes 1-5, 1-6, 2-5 or fluctuations in

the vehicle body increase significantly because of the

deterioration of the road surface that can cause the increasing

the fruit surface damage. This is especially true for route 1-6

which passes through a ravine – in bad weather it can become

a "trap" for the vehicle. Let’s use a prohibitive tariff for this

route equating it to the sum of all the routes' tariffs as well as

use double tariff for routes 1-5 and 2-5 (Fig. 4, b). It is clearly

visible that route 1-6 is excluded from the schedule of

transportation of products but the cost of transportation

increases. In these circumstances the manager (owner) should

decide to solve this dilemma – either accept the risks of saving

the route if the conditions change or flexibly change the route

understanding that this will ultimately save the equipment,

products and, possibly, the life of the driver of the vehicle. It

should also be noted that for a mini-factory the damaged

products are not so "critical" if they are immediately sent for

processing. However, the repair costs of vehicle components

can significantly exceed the difference between the cost of

transportation in warm and dry summer weather and spring

mud.

Empirical coefficients

Crop

_Н_,_m_/_s2

Р, m/s

Apples

Red tomato

Green tomato

Field-fresh potatoes

Melons and pumpkins

Plums

0,3…1,42

2,83…4,3

4,24…7,0

5,62…7,0

5,62…8,38

5,03…5,22

5,46…5,70

5,70…6,16

5,93…6,16

5,93…6,38

5,62…11,14 5,93…6,83

8,38…11,14 6,38…6,83

Cucumbers

Here is an example of calculating the total cost of cargo

transportation using MS Excel taking into account the change

in the tariff for a certain rout of cargo transportation due to

deterioration weather. Choose real routes on the map of the

Ryazan region of the Russian Federation – apple gardens in the

Vishnevka village of Oktyabrsky district of the Ryazan region

–

to simulate transportation. These closes 1,2,3 are apple

gardens, 4 – a food store, 5 – a warehouse, 6 – a mini-factory

for processing fresh apples into juice. Let's define potential

transportation routes from all closes to the store, warehouse,

and mini-factory. We neglect the transportation of apples

within closes 1-3 and take into account only the routes from

their nearest border to the destination – a store, warehouse,

mini-factory. Then the routes will look like this (Fig. 3). Figure

clearly shows that routes 1-5, 1-6, 2-5 (completely on natural

roads besides rout 1-6 – crosses a ravine) depend significantly

on weather conditions and the season; routes 1-4, 2-4, 3-6 (part

of the route passes on natural roads) partially depend on these

conditions; other routes do not depend on the above conditions

since they pass on asphalt roads. We will exclude from

consideration the condition of asphalt surface on these road

sections due to the short length of the route besides assuming

that the speed of the vehicle is low. Consequently, for routes 1-

, 1-6, 2-5 – increasing weight coefficients can be introduced

Figure 3: Routes from apple gardens 1-3 to store 4, warehouse 5 and mini-factory 6: routes 1-4, 1-5, 1-6 are highlighted in red; routes 2-4, 2-5, 2-6 are

highlighted in yellow; routes 3-4, 3-5, 3-6 are highlighted in blue

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2020, Volume 8, Issue 4, Pages: 1331-1336

Table 3: General transportation problem table for dry and windless summer weather

Demanders

(Warehouse 5)

(Shop 4)

(Mini-factory 6)

Stocking

(Garden 1)

(Garden 2)

(Garden 3)

Wants

Figure 4: Solution of transportation problem table with with the original tariffs (a) and increased tariffs due to weather conditions (b)

Conclusions

Authors’ contribution

The proposed method of accounting for natural-climatic

All authors of this study have a complete contribution for

data collection, data analyses and manuscript writing.

and road conditions in tariffs will allow us to clarify them by

introducing weight coefficients that change tariffs up to

prohibitive ones according to the linear, threshold or sigmoidal

function. Although the total cost of transportation under the

proposed approach will increase relative to the original

optimized solution but this increase will be offset by a reduction

in the cost of repairing vehicles. In addition, reducing the fruits

surface damage will allow to sell them for a longer period of

time which will also increase the overall profit.

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