The Korean Formula One Grand Prix will save more than 23 billion won ($20.5 million) in costs this year through a major deal with the sport’s governing body, according to the local organizer.

The South Jeolla province government announced Thursday the deal to cut the race commission fee, following negotiations with Formula One Management, F1’s commercial rights holder.

According to the deal, the local organizer will no longer pay the annual TV license fee to the FOM, which was estimated to cost 17.6 billion won ($15.6 million) this year, until its contract expires in 2016.

The deal also cuts the race commission fee by 10 percent this year. The provincial government paid $36 million to the FOM to host the country’s first-ever F1 event on the newly built circuit in Yeongam in 2010.

Last year, the local organizer also paid nearly $40 million as it had agreed on paying 110 percent of the previous year’s payment to continue hosting the event.

But, from this year, FOM will scrap the 10 percent additional commission fee, and will receive the same amount they received last year, the provincial government announced.

The new deal is a result of year-long negotiations between the South Jeolla provincial government and FOM.

Since the inaugural race in 2010, the local government has been suffocated by mounting debt.

The South Jeolla provincial government has been trying to renegotiate the contract with the FOM as it had already signed on to host the money-losing race until 2016 with an option to extend for five more years.

“With the successful negotiation, we’ll be able to save a significant amount of money this year,” said Kang Hyo-seok, director of the Korean F1 organizing committee.

He, however, admitted that the F1 race is still too expensive for Korea.

The local organizer generated around $23 million last year, while spending around $79 million for the 2011 race.

The 2012 Korean Grand Prix is to be held at the Korea International Circuit Oct. 12-14 in Yeongam. This year, the local organizer expects a loss of more than $26 million.

“It’s a still difficult situation, but we’re trying hard to improve it,” Kang added.

By Oh Kyu-wook (596story@heraldcorp.com)