Seoul Metropolitan Bus Fare Setting and Reform Measures

Buses are a key mode of transportation in the Seoul metropolitan area, linking commuting and everyday travel within and between cities, and they function as a social connective price that ties together labor, housing, commerce, and education. Accordingly, bus fares are not merely the price of an individual service, but a policy variable directly connected to prices, public finance, the right to mobility, and the efficiency of the urban economy.

The primary purpose of this report is to examine the calculation standards and decision-making structure of bus fares in the Seoul metropolitan area, with a focus on Seoul Metropolitan Government and Gyeonggi Province, and to propose policy and institutional improvement measures for maintaining rational bus fares based on market pricing mechanisms and enhancing the efficiency of the public transportation system.

First, the report reviews the general theory of public utility pricing, comparing the characteristics and limitations of the total cost method, rate-of-return method, marginal cost pricing, and price cap regulation, and confirms that Korea’s “Public Utility Pricing Standards” operate on a structure combining total cost compensation and an appropriate return on investment. It also points out structural problems in the current calculation system, including inadequate reflection of non-operating income, incomplete accounting separation, and the rigidity of the appropriate rate of return on investment.

Next, it compares the bus fare calculation and settlement systems of Seoul and Gyeonggi Province. Under the quasi-public operation system, Seoul operates a settlement structure for operating costs and holding costs based on standard costs, and has recently attempted to reduce costs and strengthen fiscal control by shifting from an ex post settlement system to a pre-determined system. Under the public management system, Gyeonggi Province has adopted a structure centered on standard transportation costs, mixing actual expenses, standard unit prices, and contracted unit prices. However, in both regions, the cost-reimbursement nature of the quasi-public operation system weakens incentives for cost reduction, fails to sufficiently reflect differences in route-specific demand and costs, and creates the problem that appropriate returns on investment and performance profits continue to be maintained as a matter of practice even after investment costs have been recovered. In particular, unless the gap between actual expenditures and potential required costs—such as depot costs, performance profits, maintenance costs, and other vehicle upkeep expenses—is rigorously verified, there is a risk that excessive public fare increases and expanded fiscal support will be repeated.

Accordingly, this report emphasizes the need to redesign, more conservatively, the recognized level of appropriate return on investment based on the point around 10 years, when initial investment costs are generally offset, and to limit pressure for bus fare increases through measures such as adjusting the return rate for fully depreciated assets, disclosing non-operating income, and mandating independent cost verification.

The report also points out the limitations of the quasi-public operation system, while presuming that deficit compensation remains necessary in areas with low profitability but high public value, such as village buses and entrusted city bus routes. However, it argues that the method should shift away from the current comprehensive cost reimbursement and toward approaches that consider both efficiency and equity, such as differentiated fares by time of day and day of the week, expanded demand-responsive transport, direct user subsidies, and performance-linked subsidy systems.

A review of overseas cases found that major countries such as the United Kingdom, the United States, Australia, and Japan, even in support policies for senior citizens and the transportation disadvantaged, harmonize fiscal sustainability with the guarantee of mobility rights through conditional support—such as peak-hour restrictions, off-peak discounts, and income-linked flat-rate passes—rather than universal free rides.

On this basis, the report proposes the following directions for bus fare policy in the Seoul metropolitan area: ① conservative recognition of appropriate returns on investment, ② greater transparency and efficiency in the settlement structure of the quasi-public operation system, ③ demand-based fare differentiation by time of day and day of the week, ④ redesign of selective mobility welfare suited to an aging society, and ⑤ a gradual transition to a demand-responsive public transportation system.

In conclusion, bus fares in the Seoul metropolitan area are not simply a matter of “holding them down” or “raising them in line with costs,” but rather an object of sophisticated institutional reform that takes into account public value, fiscal soundness, and market efficiency together. Through this, it is necessary to achieve both fares at an appropriate level based on market pricing mechanisms and efficient transportation welfare.

I. Introduction: Bus Fares and the Urban Economy

II. Public Utility Pricing and Decision-Making Systems and Their Problems

1. Academic Discussions on the Concept of Public Utility Charges and the Determination of Their Levels

2. Korea’s Public Utility Pricing and Decision-Making System and Its Problems

III. The Seoul Metropolitan Area (Seoul and Gyeonggi) Bus Fare Calculation and Decision-Making System and Its Problems

1. The Structure and Problems of Seoul Metropolitan Government’s Bus Fare Calculation and Settlement

2. The Structure and Problems of Gyeonggi Province’s Bus Fare Calculation and Settlement

IV. Overseas Public Transportation Fare Cases in Major Countries

V. Conclusion and Recommendations: Strategies for Maintaining Bus Fares Based on Market Pricing Mechanisms and Institutional Improvement Measures

1. Redesign of the Total Cost + Appropriate Return on Investment Pricing Method

2. Reorganization of the Fare System and Supply Structure: Expanded Differential Fare Systems and Demand-Responsive Systems

3. Comprehensive Recommendations

References

---

Original title: 수도권 버스요금 산정·결정 체계와 개선방안

Author: Gwang yong Go

Date: 2026-04-23

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=report&pn=1&idx=28826