Korean Railway Safety Act (9): Railway Service Act - Licensing and Fare Determination

Introduction: Railway, Law as Service and Business

While the Railway Safety Act focuses on “Safety” and the Framework Act on “Structure,” the ‘Railway Service Act’ prescribes how the railway should be operated as a “Service” and a “Business.” It contains information such as what permission you must obtain from the state to operate a train and through what process the price of a train ticket (fare) we pay is determined.

Today, we will summarize the essence of this law that sets the rules for the railroad business.

1. Licensing of Railway Transport Business (Article 5, etc.)

Not just anyone can operate a train. A person who wishes to perform railway transport business must obtain a ‘License’ from the Minister of Land, Infrastructure and Transport.

Criteria for Licensing: The Minister comprehensively evaluates the appropriateness of the business plan, safety assurance capability, and financial capability.
Classification: Divided into passenger transport business and cargo transport business, and each must have separate licensing requirements.
Revision/Renewal: If the business scope changes significantly or the license period expires, a re-approval or renewal process is required.

2. Determination of Fares and Charges (Article 10)

Can operators set the price of a train ticket at will? The answer is ‘No.’ Since railways have a strong nature as public goods, there is state intervention.

Fare Ceiling System: The Minister of Land, Infrastructure and Transport determines and publicizes the ‘Ceiling (Maximum Limit)’ of passenger fares considering the burden on the people.
Notification System: A railway operator determines the actual fare to be received within the ceiling range determined by the Minister and must ‘Notify’ it to the Minister.
Cargo Charges: Unlike passenger fares, cargo charges are a system where operators relatively freely determine and notify them.
Insight: Within the ceiling range, it is about ‘Notification’, not approval.

3. Railway Service Evaluation (Article 27)

The state regularly evaluates railway services to protect the rights and interests of railway users.

Cycle: Conducted Every 2 years. (Don’t confuse it with the 5 years of the comprehensive plan!)
Evaluation Items: Train punctuality, safety, customer satisfaction, accessibility, etc.
Result Utilization: Rewards can be given to operators with excellent evaluation results, and improvement orders can be issued to operators with insufficient results.

4. Suspension and Closure of Business (Article 17)

You cannot arbitrarily stop a line.

Permission: If you wish to suspend or close a railway transport business, you must obtain ‘Permission’ from the Minister. (Simply notifying is not sufficient to minimize the inconvenience of users.)

Conclusion: Balance Between Public Interest and Profit, Railway Service Act

The Railway Service Act makes it clear why the state controls railway fares and why lines cannot be closed arbitrarily. This is because the railway is a matter of survival that guarantees the people’s right to move.

A Solid Foundation: Understand the flow of ‘Fare Ceiling (Publicity) -> Actual Fare (Notification).’ Also, the fact that the service evaluation cycle is ‘2 years’ is an important regulatory standard. Reading with the purpose of ‘User Protection’ flowing behind the law will make your understanding of the industry’s business environment much clearer.

Read More: