The controversial Chinese organic fertiliser company, Qingdao Seawin Biotech Group Co. Ltd., is yet to compensate Sri Lanka for the massive loss incurred from the organic fertiliser deal.

It was reported that Sri Lanka had incurred a loss of around $ 6.9 million from the deal, which also caused a diplomatic spat between the two nations.

Sri Lankan authorities have already communicated to the controversial Chinese company of its requirement of either receiving chemical fertiliser or money as compensation, but the respective Chinese company is yet to communicate with the relevant authorities on what it would agree to, The Sunday Morning reliably learns.

According to a senior official attached to the Agriculture Ministry, the Chinese company had stated that it could instead supply another shipment of organic fertiliser of the same type, as the company was not handling chemical fertiliser. 

The Agriculture Ministry official said that the matter had been handed over to the Foreign Ministry as further communications had to be conducted bilaterally between the two countries.

“A committee was appointed and an official from the Foreign Ministry was also appointed to that committee, but nothing has happened since then,” the Agriculture Ministry source stressed.

Minister of Agriculture Mahinda Amaraweera told The Sunday Morning that although an official had been appointed from the Ministry of Foreign Affairs to facilitate the quick settlement of compensation, there had been no forward action since the Foreign Ministry got involved.

“Things are as they were before. There has been no progress reported to me or the ministry. We are also waiting to find out what’s going to happen,” he added.

Meanwhile, the advice from the Attorney General’s (AG) Department had been to act as per the instructions of the Cabinet and therefore, the ministry had already forwarded a Cabinet paper to obtain instructions, it is learnt. 

It is also learnt that the company had earlier agreed to provide chemical fertiliser for part of the transaction.

The official went on to explain that even though the ministry could act upon the settlement agreement, it had sought instructions from the Cabinet so as to avoid any issues in the future.

In November 2021, the Sri Lankan Government rejected a consignment of organic fertiliser from China’s Qingdao Seawin Biotech Group citing quality issues – a claim the firm disputed, demanding third-party tests. 

Thereafter, the Government paid $ 6.9 million to the Chinese fertiliser company.

Last year, the AG advised on recovering the losses from the organic chemical fertiliser procurement.

The shipment was rejected by Sri Lanka while en route to the island following claims of quality issues.

Sri Lanka’s National Plant Quarantine Service (NPQS) had claimed that samples of the fertiliser contained harmful bacteria, prompting the Chinese company to demand $ 8 million from the Government in early November.

The Chinese company subsequently sought arbitration in Singapore and Sri Lanka later decided to settle the matter by paying $ 6.9 million to the fertiliser company, on terms purportedly agreeable to both parties.

Sri Lanka’s State-run People’s Bank made the payment on a Letter of Credit (LC) it had issued after a court order barring the lender was removed.

In the meantime, the National Audit Office (NAO) in its special audit report issued on 26 August 2022 on the controversial organic fertiliser transaction, signed by Auditor General W.P.C. Wickramarathna, has recommended proceedings against the responsible officials for the fertiliser transaction, failure to recover the loss to the Government due to the failure to encash the relevant securities before their expiry or extend the tenure of the securities, and for releasing funds without any security in case of advance payment.

Further, the NAO has recommended proceeding with legal action against the supplier for actions taken to ship a stock of unsterilised fertiliser containing bacteria that cannot be imported into Sri Lanka in accordance with the terms of the agreement and the Plant Protection Act No.35 of 1999 and there being no recommended agrochemical for control; for the losses incurred as a result of the unavailability of fertiliser required for paddy cultivation in the 2020/2021 season as per the agreement; for obtaining an amount of $ 6.9 million for an unsupplied fertiliser stock; and for non-compliance with the motion.

Furthermore, the NAO has recommended taking actions to blacklist the relevant supplier company in Sri Lanka which has not performed in accordance with the Sri Lankan laws and agreements.