- 46% increase in budget compared to the previous year … Inducing eco-friendly rail logistics activation –
The Ministry of Land, Infrastructure and Transport (Minister Noh Hyeong-Ouk, MOLIT) announced that the ministry will be holding a contest to select candidates for the 2022 project from May 9th to May 19th. The project is related to the transportation transition support project which will provide subsidies to operators or shippers that changed from using road transportation to rail transportation for cargos.
Contractors will be selected in May after evaluating the candidates’ plan on road → railroad transition volume.
Also, contractors who are eliminated from the contract will be selected as a prospective contractor (conditional contractor) within the range of 30% of the budget. They will receive subsidy support if the balance of execution is expected in the process of project implementation.
Rail transportation is a famous for being an eco-friendly transportation method*; however, improvements had to be made in order to activate railway logistics as there is an additional cost burden** due to transshipment.
* Railway's greenhouse gas emission is 4% compared to trucks (Korea Transportation Association, 2009)
** Based on the import/export containers, the cost of rail transport is 10% to 20% higher than that of road
Accordingly, the Ministry of Land, Infrastructure and Transport has implemented a transportation transition support project (from 2010) that returns social and environmental benefits* generated by the transportation transition from road to rail in the form of subsidies to shippers.
* Reduction of greenhouse gases, air pollutants, noise and prevention of road congestion and traffic accident, etc.
※ (Legal basis) Article 21 of the Sustainable Transport and Logistics Development Act
Over the past 10 years, 8 billion tons of cargo has been transitioned from roads to railroads through the transportation transition support project. The reduction effect in carbon emission of this project in equivalent to planting 300 million trees.
This year, by expanding and reorganizing the transportation transition support project, the total amount of support has been increased by more than 40% compared to the previous year. The social and environmental benefits of rail transportation, which is the standard for calculating the unit price of the subsidy support for transportation transition, were increased by more than double to enhance the benefits.
① Budget increase (2.8 billion won in 2021 → 4.1 billion won in 2022)
KRW 4.1 billion is planned to be provided as the subsidy for transition this year, which is a 46% increase from last year's KRW 2.8 billion and 36% from the average of KRW 3 billion for the past 10 years. Based on the result of the support for this year, the subsidy amount may continue to increase.
* (Budget Trend) 3.2 billion won (2017-20) → 2.8 billion won (2021) → 4.1 billion won
② Increase in the unit price of the subsidy support for transition (reduction of social and environmental costs, etc.)
The subsidy for transition is calculated as the smaller of the fare difference between the road and the railroad and the social/environmental benefits. It has been pointed out that social and environmental benefits are set so low that it does not compensate for the difference in fares between road and rail, which means that it is not a sufficient incentive to induce rail logistics.
Accordingly, by reassessing social and environmental benefits and realizing subsidies, the foundation for the expansion of railway logistics has been established.
*(before change) 31.9 won/ton km → (after change) 64.7 won/ton km
** Ratio of subsidy to fare difference: (originally) 40-50% → (improved) 80% (varies by item and section)
However, subsidies will be provided only for volumes that have increased by more than 5% compared to the previous year (average rail transport in the previous three years) to actively induce the increase of new rail transport transition volumes, To apply for the project, fill out the project application form by 18:00 on Thursday, May 19th and submit (by visit or post) to the Transitional Transportation Business Team of Korail Logistics Association (02-793-2931).
* Refer to the website of the Ministry of Land, Infrastructure and Transport (www.molit.go.kr) and the website of the Korail Logistics Association (www.klaru.co.kr)
More details will be provided for the relevant industry through a project briefing session hosted by the Korail Logistics Association. Q&A session will be held then as well.
* (Date/Venue) Tuesday, May 10th 2022 10:00 Yongsan Station ITX-6 Conference Room (4th floor)
Hee-eop Kang, director of Railway Bureau in the Ministry of Land, Infrastructure and Transport, said, “Recently, centered around Europe, carbon reduction has been emphasized not only in production process but also in distribution process. Matters such as a carbon border tax has been discussed as well.”
He stated, "In line with the global trend, we expect a lot of logistics companies to participate in the transportation transition support project so that they can contribute to the vitalization of rail logistics."
Please refer to the attached PDF.