• NAO calls for action against officials
• Agriculture Ministry awaits CID probe
• No move yet to claim compensation

The Criminal Investigation Department (CID) has intensified its investigation into the controversial organic fertiliser transaction between Sri Lanka and the Chinese company Qingdao Seawin Biotech Group Co. Ltd., which led to a financial loss of $ 6.9 million for the country.

A senior CID official, speaking to The Sunday Morning on condition of anonymity, confirmed that investigations into the alleged irregularities in the fertiliser procurement were actively underway.

However, the official noted that no further information could be released at this stage as it could affect the integrity of the ongoing inquiry.

The controversy dates back to November 2021 when Sri Lanka’s National Plant Quarantine Service (NPQS) rejected a consignment of organic fertiliser imported from Qingdao Seawin Biotech, claiming the presence of harmful bacteria in the samples.

The Chinese company disputed the findings and demanded third-party testing. The rejection of the shipment led to a standoff between the supplier and the Sri Lankan authorities, with the Chinese company seeking $ 8 million in damages and initiating arbitration proceedings in Singapore.

Despite rejecting the shipment, the Sri Lankan Government had eventually agreed to settle the dispute by paying $ 6.9 million to the Chinese supplier. The payment was made by the State-owned People’s Bank through a letter of credit after a court order barring the transaction was removed. 

The decision to make the payment despite the rejection of the fertiliser consignment drew widespread public criticism and concern from legal and agricultural experts.

In 2022, the Attorney General’s Department had advised the Government to initiate legal action to recover the losses incurred from the failed fertiliser deal. However, The Sunday Morning reliably learns that no such legal proceedings have been filed against Qingdao Seawin Biotech to date.

Inquiries made in 2023 revealed that the Sri Lankan authorities had formally informed the company of their requirement to either refund the amount or supply chemical fertiliser as compensation. 

The Chinese company, however, had responded that it did not handle chemical fertiliser and had offered instead to supply another shipment of organic fertiliser of the same type as originally contracted.

A senior official from the Ministry of Agriculture in 2023 disclosed that, given the sensitive diplomatic nature of the matter, the issue had been referred to the Ministry of Foreign Affairs for bilateral discussions between the two Governments and that the Agriculture Ministry had sought guidance from the Cabinet by submitting a formal Cabinet paper seeking instructions on how to proceed with the settlement.

The official also added that although the ministry could act under the terms of the existing settlement agreement, it sought explicit Cabinet approval to ensure procedural compliance and avoid potential complications in the future. 

Also, it was revealed that at one point, Qingdao Seawin Biotech had indicated a willingness to provide chemical fertiliser for part of the compensation, although no such arrangement had been finalised.

Despite the years that have passed since the controversy first erupted, numerous attempts by The Sunday Morning to obtain responses from the Ministry of Foreign Affairs have been unsuccessful.

In 2021, plans were made to import 96,000 MT of fertiliser, but the first shipment was rejected under the Plant Protection Act after being found to be contaminated with harmful bacteria. Despite this, 75% of the payment was made in advance. 

The deal sparked widespread protests from farmers and contributed to reduced agricultural yields. In addition to the financial loss, indirect and unquantified economic impacts include crop losses and potential legal liabilities.

The National Audit Office (NAO) has called for legal action against responsible officials and the supplier, and urged recovery of the funds lost due to poor oversight and premature payment without securing financial guarantees.

When contacted by The Sunday Morning, Ministry of Agriculture Secretary D.P. Wickremasinghe confirmed that the CID was currently conducting investigations into the matter.

However, he acknowledged that aside from these ongoing inquiries, the Government was yet to take any formal steps to pursue compensation for the financial losses incurred.

He stressed that no legal action or claims had been initiated at this stage and the focus remained primarily on the CID’s investigation.