Definition: Concessions

Balance of Payments, Eurostat

This term is used in this context for contracts where government asks a corporation, generally afterer a competitive procedure, to manage the construction, as well as finance and operate an asset during the entire contract (but this unit may sub-contract some tasks to
other suppliers under its sole responsibility), while directly charging the final users who, predominantly, are not government users. For example a corporation might build a road and levy tolls on vehicles using it. The payments to government are treated as government revenue according to their nature, at inception and regularly all over the lifetime of the
concession. In some cases, assets may also be transferred to government at the end of the concession.
Under these contracts the major part of the partner’s revenue comes from a direct sale of services to a variety of units under fully commercial conditions, but possibly with specific government requirements (often compensated by government in the form of subsidies). It
may also be the case that the price is not freely set by the private partner or agreed by the private partner and the end-users but is fixed in the bidding documents and only adjusted upon the occurrence of certain events. There may also be payments from the corporation to government. Payments may occur initially (as a purchase of a related licence) or during the
lifetime of the contract (royalties, specific taxes, etc.
Source:
Eurostat, “Long term contracts between government units and non- government partners (Public-private-partnerships)”; (2004 edition), Office for Official Publications of the European Communities, 2004, Luxembourg
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