High-Speed Rail Integration Raises Questions on Track Usage Fees

Discussions surrounding the integration of Korail and SR's high-speed rail services have emerged as a new variable in the restructuring of track usage fees. The Korea Railroad Corporation (KRC) introduced a cost-based 'unit usage fee' system last year, but the push for operational integration before the system is fully established raises the likelihood of adjustments to the settlement methods and fee levels in the future.

According to the Ministry of Land, Infrastructure and Transport and KRC on June 30, the corporation is currently piloting a revised track usage fee system that charges based on train operation distance and frequency, moving away from the previous revenue-linked model. Track usage fees are a key revenue source for the KRC, paid by rail operators for using national railway facilities.

To alleviate the burden on operators during this transition, KRC has set a pilot period from 2025 to 2027. During this time, the unit usage fee system will be applied, but actual settlements will be based on operator revenue, ensuring that the fees do not deviate significantly from previous levels.

However, the integration of Korail and SR, targeted for September, poses challenges. The unit usage fee system was designed with a multi-operator framework in mind, and merging the two companies could necessitate further adjustments to the operational structure, route allocation, and fare system, which may impact how track usage fees are calculated.

Industry experts believe that if fare adjustments similar to those of SRT or route efficiencies are implemented post-integration, it could affect KRC's track usage fee revenue. Changes in operation frequency, distance, and revenue structure may make it difficult to ensure revenue stability under the current transitional settlement method.

KRC's simulations suggest that under the existing unit usage fee system, track usage fee revenue will likely remain stable post-integration. The differences in revenue rates applied to Korail and SR have been reconciled with the introduction of the unit usage fee, indicating that the merger will not automatically lead to a decrease in revenue.

Nonetheless, negotiations with the new single operator following the merger remain an unknown factor. If the integrated Korail seeks to reduce its track usage fee burden due to management pressures or fare adjustments, a second round of negotiations between KRC and the operator may become necessary.

A KRC official stated, "The issue of track usage fee distribution is inevitably linked to the high-speed rail integration issue," adding that if new variables arise that complicate the application of existing methods, they may consider establishing mechanisms to compensate for usage fees.

The increasing financial burden on KRC also heightens sensitivity around discussions of track usage fee reform. Unlike other infrastructure public enterprises, such as the Korea Expressway Corporation, which have relatively stable revenue structures from tolls, KRC's core revenue source, the track usage fee system, is affected each time the railway governance changes. Additionally, KRC is facing costs of approximately 254.1 billion won for modifying signaling devices for KTX and SRT as part of the introduction of the domestically developed next-generation train control system, KTCS-2.

A railway industry insider remarked, "It is difficult to rule out the possibility that discussions on operational efficiencies following high-speed rail integration will lead to demands for lower track usage fees. We need to design a financial structure that includes not only the integration effects and operator burdens but also the management of railway facilities."