(a) Tariff subsidies to supplement the Project Company's revenue when the project income falls below a certain minimum level; conceived as an alternative to the full commercial freedom to determine tolls, tariffs, etc.
e.g. Perpignan-Figueras Rail Concession between France and Spain: state subsidy covering 57 per cent of the construction costs. | (b) Subsidy support can be provided by the government to cover the difference between the full commercial price and the actual user charge so as to retain incentive for private sector efficiency. |
(c) Subsidies usually take the form of direct payments to the project company (lump sum payments or payments calculated specifically to supplement the project company's revenue): audit and financial disclosure provisions in the projects agreement required. An alternative to direct subsidies may be to allow the project company to cross-subsidize less profitable activities with revenue earned in more profitable ones.
(d) Limitations: (i) requirements of competition laws (many countries prohibit the provision of subsidies not expressly authorized by legislation), and (ii) requirements of international/regional agreements.29
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29 For more information on this topic, see EBRD risk-sharing reports on the Perpignan-Figueras Rail Concession between France and Spain.