The OCS is facing "a national cannabis supply shortage brought on by the federal government's mismanagement," the budget document says.

The losses are the result of its initial investment in developing a wholesale distribution network, combined with the fact that OCS has sold relatively little product so far — which the provincial Progressive Conservative government blames on the federal Liberals.

Ontario's provincially-run cannabis distributor is set to lose $25 million in the current fiscal year, according to projections in the 2019 budget released by Queen's Park on Thursday.

"By choosing to throw open the doors to cannabis legalization without first taking into account the reliability and sustainability of the national cannabis supply, the federal government is failing to curb the growth of the illegal cannabis market while also creating widespread business uncertainty for the people and businesses seeking to make a living in this new industry."

The budget document predicts the OCS will turn profitable next year, earning a net income of $10 million. It sees profits rising to $40 million annually by the 2021-22 fiscal year.

The OCS sells cannabis to retail customers through its website, and is also the provincially-run wholesaler to the network of private retailers currently being rolled out across the province.

The previous provincial Liberal government had intended the OCS to be the monopoly, government-run cannabis retailer, but Premier Doug Ford's government overhauled the system last fall, issuing licences for 25 retailers through a lottery.

Though the rules allow private retailers to operate as of April 1 of this year, only a handful of locations have opened so far.

The government says the cap of 25 retailers is temporary, and it "remains committed to moving towards an open allocation of licences, where the number of stores is limited only by market demand."

"We have taken the responsible approach, opening only as many stores as we have product for," Finance Minister Vic Fedeli told the media Thursday.

Data from Statistics Canada indicates that the vast majority of cannabis being bought in Canada continues to be sold through illicit channels. The agency also found that legal cannabis costs considerably more than illegal options — about 57 per cent more, nationally.

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