Turkish model for DISCOs

One of the last ‘decisions’ by the caretaker government — adoption of the ‘Turkish model’ for managing power distribution companies — could provide huge dividends to the country if the incoming government chooses to maintain it and implement it fully. According to news reports, IMF, World Bank and the International Finance Corporation are willing to support such a move. The policy shift comes after the government failed to generate interest in outright privatisation of power distribution companies (DISCOs), and a proposal to hand over control to the relevant provincial governments was deemed unlikely to fix what is broken.
The so-called Turkish model is, at its core, outsourcing of management to private entities, which would gradually be given full control of the companies, with the government’s role being limited to regulatory oversight. To sweeten the deal, the government would take on all or most of the companies’ existing debt. Getting the deals through would likely require assurances to employees unions so the government would enforce restrictions on layoffs for a few years before the new management could go forward with any necessary rightsizing. In the meantime, the government may offer support, covering salaries for redundant employees or financing their golden parachutes.
The hope is that our DISCOs can recreate the turnaround of their Turkish counterparts, which were able to attract significant private investment, deliver better service quality, and cut losses by over 30% in just a decade after making the change in 2002. However, it is also worth noting that in more recent years, Turkish media regularly accuse their DISCOs of making “excessive profits”. Turkey’s wider economic problems are at least partly to blame for the recent dissatisfaction with DISCOs there. Inflation there spiked past 50% in 2022 and was over 80% for a while in 2023. It is still about 65% right now. With that in mind, even at their worst, Turkish DISCOs are clearly better run than almost all of their Pakistani counterparts. 

Published in The Express Tribune, March 1^st, 2024
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