Increased Budget Through Local Government Cooperation
Subsidized Volume Expanded Threefold
Rental Cost Disclosure to Promote Competition
Aiming to Reduce Agricultural Distribution Costs
The government has expanded and reorganized the "Logistics Equipment Shared Use Support Project," which subsidizes part of the cost when logistics equipment such as pallets are jointly rented for shipping agricultural products to wholesale markets and large retailers. By increasing the budget, the program broadens its range of beneficiaries, while also requiring the disclosure of rental costs for pallets and similar equipment to encourage cost reduction through competition.
An official from the Ministry of Agriculture, Food and Rural Affairs stated on the 13th, "Starting this year, we have significantly expanded the budget for the Logistics Equipment Shared Use Support Project through cooperation with local governments, increasing the amount of subsidized equipment by more than three times."
This support project is a policy subsidy program that enables the joint rental of logistics equipment such as pallets and plastic crates, which are essential for shipping agricultural products from production areas to wholesale markets or large retailers, and provides partial support for the associated costs.
Watermelons produced by farmers are waiting to be shipped, packed in multi-tier wooden crates rented by the Agricultural Product Distribution Center (APC) through the government's logistics equipment shared use support project. (Photo by Ministry of Agriculture, Food and Rural Affairs)
When farmers supply their produce in boxes to the Agricultural Product Distribution Center (APC), the APC transfers these products into pallets or plastic crates for distribution to consumers. At this stage, the APC rents pallets and plastic crates from logistics companies. Under the Logistics Equipment Shared Use Support Project, the government covers 30% of the rental costs.
The main objectives of the support project are to establish a foundation for joint shipping at the production area, promote the organization and scaling up of production sites, improve the efficiency of agricultural product distribution through the use of standardized logistics equipment, and reduce distribution costs by partially subsidizing the rental fees for logistics equipment borne by distribution entities. The primary beneficiaries are production area distribution organizations that operate APCs (such as agricultural cooperatives and agricultural corporations) and other distribution entities. These organizations supply approximately 50 types of reusable logistics equipment-including pallets, plastic crates, and multi-tier wooden crates-to production areas.
An official from the Ministry of Agriculture, Food and Rural Affairs explained, "By utilizing the Logistics Equipment Shared Use Support Project, APCs can reduce their logistics equipment rental costs, which ultimately leads to increased income for farmers. Previously, only about 30% of the nationwide logistics equipment rental volume-worth 100 billion won-was subsidized, but with the budget increased from 12.2 billion won to 30 billion won, we expect the entire volume to be covered."
In April of this year, the ministry reformed the system to enhance the effectiveness of the Logistics Equipment Shared Use Support Project by addressing structural inefficiencies in the logistics equipment rental market, which had been dominated by a few suppliers, and by alleviating information asymmetry between logistics companies and users. The key changes include increasing the support budget from 12.2 billion won in national funds to a combined 30 billion won in national and local funds, thereby expanding the subsidized volume by more than three times. As a result, the ministry expects that subsidies will be provided for most of the logistics equipment rental volume related to horticultural products, allowing more users to benefit.
Price disclosure has also been made mandatory to reduce rental unit costs. By requiring the disclosure of unit prices for the entire project volume and introducing a public bidding system for suppliers, the ministry aims to foster competition among suppliers and reduce rental prices. This approach is intended to minimize inefficiencies caused by supplier-driven pricing, provide transparent price information to users, and establish a user-centered operational system.
A dedicated support center has also been established and is being operated to enhance the professionalism and efficiency of project management. Nonghyup Logistics, which has high expertise in agricultural product distribution and logistics, was selected as the project operator and opened the "Integrated Support Center for Agricultural Product Logistics Equipment" in July of this year. The center will serve as a control tower, overseeing overall project management and identifying areas for institutional improvement.
The expanded and reorganized support project is already delivering results. Jeong Seongpil, head of the Osong Nonghyup APC in a watermelon-producing area, said, "Through the Logistics Equipment Shared Use Support Project, we are able to receive timely supplies of multi-tier wooden crates, which are essential for shipping watermelons. Before the project was revised, only a portion of the equipment we used was subsidized by the government, making it difficult to obtain price information from each logistics company when contracting for the remaining volume. After the revision, with government subsidies applied to the entire volume and the publication of rental prices, rental costs have decreased and price information has become easily accessible, resulting in high satisfaction at the field level."
The Ministry of Agriculture, Food and Rural Affairs plans to further improve distribution and logistics efficiency by developing an "integrated management information system" to enable users to easily and quickly utilize and settle logistics equipment usage, and by promoting standardization, especially for high-usage plastic crates. An official from the ministry added, "In addition, to address the limited accessibility of logistics equipment supply in island and mountainous regions, we will support warehousing and shipping transportation costs for distribution entities in vulnerable areas. To promote environmentally friendly policies, such as reducing the use of cardboard boxes, we will also provide incentives for switching to logistics equipment and carry out recycling projects centered around the integrated support center."
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