• Rs. 1.75 b advance paid, no cattle delivered
• No security for billion-rupee payment
• 5,000 imported cattle, no status report
• Rs. 360 m forex loss in failed deal
• Rs. 2.1 b financial blow to State

Sri Lanka’s latest Government audit has called for immediate legal and disciplinary action against public officials and decision-makers responsible for the disastrous dairy cattle import project that has resulted in losses exceeding Rs. 1.75 billion in public funds.

The audit report, tabled recently, has criticised the decision to release an advance payment of Rs. 1,749,672,697 for the importation of 15,000 dairy cattle under Phase 3 Step 2 of the Dairy Cattle Import Project, despite unresolved problems in the previous phase and without completing the basic prerequisites for such an import.

The report has specifically recommended that action be taken against officials who had made the observations, recommendations, and approvals that had led to this idle payment. 

It has further stated that efforts should be made to recover the full advance from the supplier, Wellard Rural Exports Ltd., and if recovery is not feasible, to recover the loss from the responsible public officials and advisers.

The audit has highlighted that the same supplier had been reselected in 2017, nearly a decade after delivering substandard and diseased cattle under a previous contract, and at a significantly higher price. 

The audit has recommended a formal inquiry into how procurement was awarded once again to the same company without proper competitive procedures or accountability, and called for those responsible to be identified and held to account.

In addition, the audit has flagged the absence of a formal review or follow-up study on the condition of the 5,018 dairy cattle already imported under Step 1 of Phase 3. 

It has urged authorities to conduct an immediate assessment on both the animals’ current condition and the livelihoods of the dairy farmers who received them in order to inform of remedial action.

The report has also noted systemic weaknesses in project governance and has urged the formulation of a formal, cost-effective methodology for managing future large-scale, high-value public projects. 

It has recommended that the General Treasury play an active, direct role in monitoring such projects, both at the allocation and implementation stages, to avoid a repeat of this costly failure.

According to the special audit report, despite well-documented problems with cattle imported from Australian supplier Wellard Rural Exports during earlier phases – including the detection of contagious diseases and operational losses – the Ministry of Rural Economy had proceeded to release a staggering Rs. 1.75 billion ($ 11 million) as an advance payment in May 2018 for a subsequent phase of the project. Not a single cow has been imported under this transaction.

The audit has highlighted that the procurement process had violated multiple legal and financial safeguards. Key conditions such as performance securities, advance guarantees, and Cabinet approvals were either absent or deliberately altered without clear justification. The agreement with the supplier, worth billions, was executed without clearance from the Attorney General’s Department – a direct violation of established public financial regulations.

Adding to the financial blow, the Government had incurred a foreign exchange loss exceeding Rs. 360 million while repaying part of the foreign loans obtained for this failed project. Audit records have further shown that this advance payment had not been properly recorded in official financial statements and no follow-up measures had been taken to recover the funds, despite multiple recommendations and committee directives.

Notably, the same Australian supplier had previously been at the centre of controversy when dairy cows imported in earlier phases were found to be carrying bovine viral diarrhoea (BVD) and Fasciola hepatica, posing risks to both local livestock and public health. Still, no alternative supplier was considered for the subsequent procurement.

The report has further revealed that the Project Steering Committee had failed to convene for nearly a year during this critical period, and key decisions regarding multi-million-rupee payments had been made through informal channels. Meanwhile, Government records have failed to verify claims that the project had contributed to increased milk production or genetic improvements, with only partial, unsubstantiated data provided.

In 2020, a Cabinet memorandum had sought to allocate an additional Rs. 300 million from the Contingency Fund to provide relief to farmers affected by the earlier failed imports, without addressing the billions already lost or outlining a recovery strategy for the misused funds.

The audit has concluded that this project represents a significant financial loss to the Government due to poor planning, disregard for procurement guidelines, and a lack of accountability at multiple administrative levels. It has also warned of further potential losses from unsettled loans and interest payments, unless urgent corrective measures are taken.

As of February this year, no concrete steps have been disclosed to the public regarding the recovery of the funds or action against responsible officials. Public sector watchdogs and financial transparency advocates are now calling for a full parliamentary inquiry into what appears to be one of the largest procurement failures in recent memory.

When contacted by The Sunday Morning regarding the audit revelations, Agriculture Ministry Secretary D.P. Wickremasinghe stated that the ministry was currently in the process of locating relevant documents and carrying out preliminary work.

“We are in the process of gathering all the necessary documents. None of the officials involved at the time are currently serving in the ministry. Back then, this was handled by a different ministry and most of the documentation was subsequently handed over to the Financial Crimes Investigation Division (FCID). At present, both the Committee on Public Enterprises (COPE) and other parliamentary committees are investigating the matter, and we are working to retrieve whatever records remain,” Wickremasinghe explained.