The Cabinet decided Tuesday to reject a parliament-approved bill that would provide state subsidies to the taxi industry, an official said, amid criticism that the legislation is an extravagant, populist measure.

The decision has been widely expected as President Lee Myung-bak and his government have been critical of the bill that calls for including taxis in the category of mass transportation, along with buses, subways and trains, making the industry eligible for government subsidies and other benefits.

The Cabinet approved a motion urging the parliament to reconsider the bill in a meeting presided over by Prime Minister Kim Hwang-sik. Lee is expected to uphold the decision and formally veto the bill as early as later in the day.

Last week, Lee said he would respect Cabinet members' views on the issue.

Taxi drivers have threatened a general walkout if Lee exercises a veto.

"Public transportation refers to a traffic means that is capable of mass transportation and operates with specific routes and timetables, but taxis cannot be included in this category," Yim Jong-yong, a minister of the Prime Minister's Office, said during a briefing on the decision.

Yim said that it would be unfair to give taxis special treatment when ferries and airplanes are excluded from the category. The legislation would also put immense financial strains on regional governments as they have to shoulder most of the burden, and most municipalities are opposed to the bill, he said.

Still, Yim said the government is well aware of problems in the taxi industry, such as poor working conditions for drivers, and has put together new legislation aimed at improving the situation and providing a variety of benefits to the industry.

The legislation will be submitted to the National Assembly at an early date, he said.

The bill passed through the National Assembly early this month with overwhelming support from both the ruling Saenuri and the main opposition Democratic United parties. Even if Lee rejects the legislation, the National Assembly is expected to approve it again with two-thirds support.

On Monday, ruling party floor leader Lee Hahn-koo said that if the government vetoes the bill, his party will discuss the issue with the opposition and the taxi industry, but added that the party has little choice but to approve the bill again if the opposition wants it strongly.

Opposition floor leader Park Ki-choon said it would be a matter of course to seek a re-approval.

Should the bill pass through parliament again, Lee must make it into law.

Critics have denounced the bill as a populist measure aimed at winning the votes of taxi drivers ahead of last month's presidential election. They said the law could cost the nation an additional 1.9 trillion won (US$1.78 billion) and lead to tax hikes amid the economic slump.

Opponents have also said that taxis cover only 9 percent of transportation, compared with buses with 31 percent and subways and trains with 23 percent, and therefore it is unfair to provide taxis with the same treatment as the other mass transportation means.

They also said most benefits of the new law would go to taxi business owners, not drivers. (Yonhap)