Croatia secured EU regulatory approval on Wednesday for additional state aid for its Brodotrogir shipyard after promising to cut the yard's production and to sign a deal to sell it before the country joins the European Union in July.

Croatia has forked out 28 billion kuna ($4.76 billion) in subsidies in the last 20 years for its four loss-making shipyards. The sector went into decline after Croatian independence in 1991; joining the European Union later this year means it has to meet strict state aid rules.

Croatian authorities granted 2.8 billion kuna in restructuring aid to Brodotrogir in 2011. It increased the support by a modest amount last month, as a result of which it had to modify the shipyard's overhaul plan.

The European Commission, which ensures that state support does not give aided companies an unfair advantage, said Croatia's new measures allayed its concerns.

"Croatia proposed to withdraw the possibility for Brodotrogir to trade production quotas with other yards, a mechanism which was allowed by the accession act," the Commission said in a statement.

Brodotrogir would also cut capacity.

The Croatian authorities agreed to sign an agreement as part of the Commission's Wednesday decision, to sell the yard by July 1, when Croatia becomes the 28th EU member.

($1 = 5.8884 Croatian kunas)

(Reporting by Foo Yun Chee; editing by Rex Merrifield)