Governments may also provide subsidies to privately operated utilities through in-kind grants and tax exemptions. In-kind grants may take a variety of forms, such as water abstraction rights, which would otherwise be subject to some form of charging regime, or land grants. Tax exemptions are commonly applied to publicly operated utilities and these may be extended once the utility is privately operated.
Again, these subsidies are not targeted to service delivery outcomes or to those customers most in need of assistance. As a result, there will be a leakage of benefits to nonpoor households, assuming that these benefits are passed on to customers and are not captured by the operator itself in the form of offsetting cost increases.
In case subsidies are necessary, these forms of subsidy should be evaluated by making comparable estimates of the benefits and costs of each subsidy and assessing how well they achieve their stated objectives, such as targeting the poor.