Government subsidy: cost cuting measure or revenue enhancement?

Question

Hello all,

Just to clarify one point: is it wrong to mention public funds as a way to cut down costs?

Technically this would be another revenue stream, but can be justified by specific cost cutting purposes (ex: subsidy for the investement costs of a company willing to enter the renewable energy market)?

Thanks you very much for your insights,

Best

Marie-Eve

Answer 1

Hi,

It depends on who is your client.

For a private company, it will be just a part of revenues that otherwise would be paid by the end user.
For a government-owned company or a public-private partnership, it may be a decrease in revenues. Imagine government subsidizing the subway tickets for veterans. If the subway is not privately owned - government most probably will subsidize less than a regular ticket price.
I can't imagine a case when government subsidies will be a cost-cutting tool

Best,

Vlad

Answer 2

Please make good use of Google, thanks.