In a related development Sri Lanka's Daily FT newspaper reported that the trade ministry has requested the country's President to write off 1.
8 billion rupees due to co-operatives.
In Sri Lanka co-operatives and politics have a close connection.
In the 1970s, in an era of import controls and licensing, co-operatives thrived as they were used a means to distribute goods which were often rationed or under price control.
Sri Lanka's ruling administration now has a policy of not privatizing state enterprises, but some officials are attempting to bring outside management and capital through indirect means.
A review by the Treasury said Lanka Salusala had pending court cases, and there was not enough management interest in strategic planning, implementation and performance evaluation.
According to a 2009 report, the firm had 274 workers.
Critics say state enterprises are a key way for rulers to engage in tax banditry.
Many state enterprises now need money collected from the