A customer holds a coffee drink in a single-use plastic cup with a barcode label for deposit payback at a coffee shop on Jeju Island, December 2022. Korea Times file

Companies that participated in the Ministry of Environment's nationwide introduction of a single-use cup deposit program in 2022 have incurred billions of won in losses after the government abruptly scaled back the initiative, according to ministry officials and the companies, Wednesday.

Two printing firms in Gwangju and Cheonan, located in South Chungcheong Province, which had entered partnerships with the government, have collectively incurred losses exceeding 6.4 billion won ($4.6 million). These firms had invested in expanding their production capacities to meet anticipated demand. However, following the government's change in stance, business remained slower than expected.

The firms produced barcode label stickers for single-use cups commonly used at cafes and take-out stores that sell coffee drinks or beverages. Under the regulation, customers using single-use cups were charged an additional 300 won, which they could reclaim upon returning the cups with the barcode labels to the place of purchase.

When the ministry's regulation passed the National Assembly in 2020, with enforcement scheduled for June 2022, the original plan was for nationwide implementation. However, facing protests from local businesspeople in the single-use cup industry, the authority revised the plan to enforce it only in Sejong and Jeju Island. The authority stated that it aimed to evaluate public reception of the regulation before considering nationwide implementation.

The decision sparked speculation that the ministry was backing away from its environmental policy, prompting criticism from Jeju Governor Oh Young-hoon and environmental activists.

"The companies earlier this year separately filed a lawsuit against Korea Minting, Security Printing and ID Card Operating Corp. (KOMSCO) for their financial losses over the business," said an official at the single-use product reduction team under the ministry. KOMSCO, the ministry's sub-level partner for the initiative, directly communicated with the companies during the operation of the business.

"The outcome of the legal disputes will help us decide how to improve the regulation. As the regulation has been put in force for the past one and half years, we've received some complaints from Sejong and Jeju Island. We'll take a closer look at the regualtion to improve it."

According to KOMSCO, before the ministry changed its position, the companies had won the authority's bidding and agreed to manufacture and supply 2 billion barcode labels annually. The yearly shipments of products were valued at 8 billion won.

The company in Gwangju agreed to produce 1.4 billion barcode labels, while the other company agreed to manufacture 600 million. The bidding process also involved hiring a local logistics company to distribute the products nationwide.

However, last year, the printing companies manufactured only 64 million barcode labels, which constituted just 3.2 percent of the expected volume. Their sales amounted to less than 300 million won, accounting for only 3.8 percent of the anticipated figure.

The partnership contracts with the government expired last year, rendering the barcode label business no longer a viable option for investment returns for the companies.

The Gwangju firm had invested 4 billion won to buy 10 new machines and hire 10 additional workers, while the Cheonan company had injected 2.3 billion won into its operations. One of the contract terms stipulated that the companies would face penalties if they failed to meet daily production requirements, which further drove them to expand their production capacities.