By K. Prasanna
Sri Lanka is currently grappling with a severe economic crisis, forcing the nation to seek financial assistance from the International Monetary Fund (IMF). The government has been persistently trying to privatize or restructure state-owned enterprises (SOEs) that are financially draining the state. Many of these SOEs, established to generate revenue, have been incurring substantial losses, compelling the government to inject public funds to keep them afloat.
According to information obtained through the Right to Information (RTI) Act, 20 state-owned enterprises that were originally created to generate income are now operating at a loss. These entities continue to require public funds to sustain their operations. According to the Department of Public Enterprises data reveals that, out of 52 state-owned enterprises, 20 incurred a combined loss of Rs. 851.786 billion within 2018-2022 period. The Department has stated that data for 2023 is not yet available.
Among the loss-making entities are significant institutions like the State Engineering Corporation, the National Machinery and Equipment Corporation, the State Development and Construction Corporation, Lakdiva Engineering Company, the Government Printing Department, the Ceylon Electricity Board, North Sea Limited, the Ceylon Petroleum Corporation, the Vijaya Kumaratunga Memorial Hospital, the Palmyrah Development Board, Sri Lanka Cashew Corporation, Milco Private Limited, Sri Lanka Fisheries Corporation, Sri Lanka Fishery Harbour Corporation, the Sri Lanka State Plantations Corporation, Gal Oya Plantations, the People’s Estate Development Board, the National Livestock Development Board, Lanka Sathosa, and the Paddy Marketing Board.
During the period from 2018 to 2022, all state-owned enterprises except the Ceylon Petroleum Corporation incurred a total expenditure of Rs. 203.84 billion. These 19 enterprises recorded a combined loss of Rs. 345.27 billion.
The 20 loss-making SOEs employed a total of 36,468 workers, with the largest number of employees (23,205) working at the Ceylon Electricity Board. Despite having a large workforce, many of these enterprises continued to incur significant losses. The Ceylon Petroleum Corporation, for instance, employed 2,064 workers and emerged as the highest loss-making enterprise, with a reported loss of Rs. 817.25 billion from 2018 to 2022. Although it generated a revenue of Rs. 3617.54 billion, its expenditure amounted to Rs. 4430.063 billion during the same period.
To continue operations at these loss-making enterprises, the Treasury has had to allocate additional funds, which has placed further strain on the country’s finances. Despite Sri Lanka’s declaration of emerging from bankruptcy, the economic crisis is ongoing and the financial burdens imposed by these SOEs threaten to push the nation backward.
It has also been observed that a significant portion of the revenue generated by many SOEs has been spent on salaries and other employee benefits. For instance, the Ceylon Electricity Board, with 23,205 employees, incurred a loss of Rs. 125 million in 2022, while spending Rs. 1,708.3 million on salaries and allowances.
In light of the ongoing economic crisis, the government has initiated restructuring measures as part of its efforts to revive the economy. As part of this strategy, there are ongoing efforts to either restructure or privatize loss-making SOEs to return them to profitability. However, the Department of Public Enterprises has confirmed that no SOEs have been privatized up to 2023, despite these losses.
In the first quarter of 2024, Sri Lanka secured a loan of $100,184 million, as reported by the Ministry of Finance. Of this, $57,283 million was domestic debt, $37,041 million was foreign debt, and $5,860 million was collateralized debt. The country’s expenditure has now doubled relative to its current revenue, exacerbated by the continued operation of loss-making SOEs. In many cases, the debt acquired by these SOEs exceeds their annual revenue, worsening the financial crisis.
Efforts to make state-owned enterprises profitable have so far failed. Additionally, there is significant public opposition to the privatization of these entities, which further complicates the situation. Therefore, it is crucial to turn these loss-making SOEs into profitable ventures to alleviate the debt burden on the nation.
Perks and Privileges of Loss-Making State-Owned Enterprises – 2022
| Perks and privileges of the loss-making state-owned enterprises – 2022 | |||
| State owned enterprise | Upto 31-12-2023 production Rs. Million | Number of employees | Expenditure for salaries and allowances Rs. Million |
| Ceylon Electricity Board | 125 | 23,205 | 17,083 |
| State Engineering Corporation | 940 | 572 | 1,681 |
| Lakdiva Engineering Company | 20 | 80 | 13 |
| State Printing Corporation | 228 | 482 | 100 |
| Vijaya Kumarathunga Memorial Hospital | 13 | 205 | 183 |
| Ceylon Petroleum Corporation | 615,053 | 2,064 | – |
| People’s Estate Development Board | 5 | 198 | 91 |
| Sri Lanka Fisheries Corporation | 150 | 676 | 390 |
| Milco Company | 392 | 1,228 | 355 |
| Palmyrah Development Board | 25 | 224 | – |
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