By Dhananath Fernando
Originally appeared on The Morning
The Ministry of Finance Annual Report for 2025 is now out. One chapter every Sri Lankan should read carefully is the section on State-Owned Enterprises (SOEs), the businesses owned by the Government.
The story is simple. Even in a year where Sri Lanka showed strong fiscal discipline, SOE performance weakened. Profits declined. Several institutions made losses. The return to the Treasury was small. The taxpayer continued to carry the burden.
The President himself recently said that some of these entities may have to be closed down, and that even closing them will cost money. That is the problem with SOEs. They are easy to start, difficult to reform, expensive to maintain, and politically painful to close.
According to the Annual Report, the 51 key SOEs made a profit of Rs. 444.4 billion in 2025. At first glance, that looks impressive. But in 2024, the same group made Rs. 539.1 billion. Profits have fallen by more than 17%. In fact, the 2025 profit is slightly lower than the Rs. 445 billion recorded in 2023.
Sri Lanka has more than 500 State-owned and State-controlled entities, but detailed reporting is usually available only for the main 51. So even the picture we see is not the full picture.
The real story
Many people may still say: “What is the problem? They are making profits.”
But profit alone does not tell the story. We must look at the assets used to generate that profit. The total asset base of these 51 SOEs is about Rs. 16.5 trillion. That is roughly half of Sri Lanka’s GDP. From this massive asset base, the total profit was only Rs. 444.4 billion. That means the return on assets is about 2.7%.
To put it simply, imagine you own a shop worth Rs. 1 million. If that shop gives you only around Rs. 27,000 a year, or about Rs. 2,250 a month, would you call it a good investment? Even an ordinary fixed deposit may give a better return. So while it is easy to declare that they are profitable, it is much harder to say they are good businesses.
Where did most of this profit come from? Banking and finance.
Out of the Rs. 444.4 billion in total SOE profit, about Rs. 304.8 billion came from banking and finance institutions such as the Bank of Ceylon, People’s Bank, the National Savings Bank, and the Employees’ Trust Fund. The Bank of Ceylon alone reported a profit of about Rs. 120 billion, roughly 27% of the total profit of all 51 key SOEs.
But whose money is in these institutions? Largely our own money deposits, savings, retirement funds, and State-linked financial power. A large part of SOE profit does not come from competitive business success. It comes from State banking power, regulatory advantages, monopoly positions, and public funds.
This pattern is visible across many SOEs. The profitable ones are often monopolies or protected businesses. The Sri Lanka Ports Authority, National Water Supply and Drainage Board, and National Lotteries Board are not ordinary businesses competing in an open market.
It is like passing a law saying only I can sell bread in the country and then proudly declaring that my bakery is profitable. Is that business excellence, or monopoly privilege?
Now look at the loss-making side. The biggest hit in 2025 came from the Ceylon Electricity Board (CEB). The CEB recorded a loss of Rs. 38.7 billion. In 2024, it made a profit of Rs. 141.6 billion. In one year, it moved from a large profit to a large loss.
The CEB is also a monopoly. In 2024, high electricity tariffs helped it show a profit. In 2025, with tariff reductions, cost problems, and operational inefficiencies, it returned to losses. According to reported data, the average sales price per unit fell from Rs. 36.01 to Rs. 26.24, while the cost per unit was Rs. 30.23. When electricity is sold below cost, the final bill does not disappear. It comes to the taxpayer.
There is another lesson here. When the State operates in areas where there is competition, it often struggles. Construction-sector SOEs recorded losses. SriLankan Airlines, Lanka Sugar, the State Plantations Corporation, and the Sri Lanka Rupavahini Corporation also remained loss-making.
The message is simple. Give a monopoly and the SOE may show a profit. Put it in competition and it often struggles. Then the problem is not only management. It is ownership, incentives, and structure.
The real cost
The most important question is this: how much of this so-called profit actually came to the Treasury?
The answer is very little.
The total levies and dividends paid by SOEs to the Consolidated Fund in 2025 amounted to Rs. 56.5 billion. In the same year, the Government provided about Rs. 103 billion in budgetary support to SOEs. In simple terms, SOEs gave the Treasury Rs. 56.5 billion, but received about Rs. 103 billion from the Budget.
The total losses of loss-making institutions amounted to about Rs. 69.8 billion. When we consider the budgetary support of about Rs. 103 billion, and deduct the Rs. 56.5 billion received as dividends and levies, the net burden on the taxpayer is still around Rs. 117 billion.
That is the real cost of SOEs.
Rs. 117 billion is not just a number in an Excel sheet. It is money that could have gone to the poor through Aswesuma. It is money that could have gone to hospitals, medicine, schools, courts, policing, and basic public services. Every rupee used to keep a failing State business alive is a rupee not spent on a poor family.
Many people believe that if honest people are appointed to these institutions, the problem will be solved. Honesty is important. Competence is important. Good boards are important. But they are not enough. The problem is structural.
The State already has a share in every profitable business through corporate tax. With Value-Added Tax and other taxes, the Government receives even more. Therefore, the Government does not need to run businesses to earn revenue. It can earn revenue by creating the conditions for businesses to grow.
The proper role of the State is not to sell sugar, fly planes, grow tea, sell fish, run lotteries, manage hotels, sell cashew, or operate construction companies.
The role of the State is to maintain law and order; protect national security; provide a targeted safety net for the poor; improve education and healthcare; fix the courts, Police, and regulatory system; and create fair competition.
When the Government tries to do everything, it ends up doing the most important things badly.
That is why SOE reform is not only about profit and loss. It is about priorities. It is about whether the State should use scarce public money to protect poor families or to protect failed businesses.
The 2025 data tells us something clearly. Even after an economic crisis, even under fiscal discipline, and even with better political intentions, the SOE problem has not gone away.
The taxpayer is still paying the bill.
Research Publication
