Shipment term

Sri Lanka-China Fertilizer Confusion: Committee Named Over Money Paid For Shipping

ECONOMYNEXT – Sri Lanka’s agriculture ministry has appointed a committee to determine what action to take about $6.9 million the cash-strapped nation was forced to pay a Chinese fertilizer company the last year for a deal gone wrong.

Agriculture Minister Mahinda Amaraweera told parliament on Thursday September 1 that the committee was headed by the ministry secretary and the attorney general had also advised on an action plan.

Amaraweera said that so far efforts to get a refund or a shipment of chemical fertilizer instead of cash have been unsuccessful.

“Action must be taken quickly,” he said, responding to opposition lawmakers.

In December 2021, at a time of Sri Lanka’s misguided foray into 100% organic farming, the government decided to pay $6.9 million to China’s Qingdao Seawin Biotech Group Co Ltd, whose organic fertilizer has been rejected by the island nation.

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

Related: Chinese Fertilizer Company Seeks $8 Million in Damages from Sri Lanka Testing Agency

The cargo was rejected by Sri Lanka en route to the island, with authorities refusing entry to what opposition lawmakers and other critics had called a ship of faeces.

Sri Lanka’s scientific findings were flatly rejected by the Chinese society, with the Chinese Embassy in Colombo going so far as to blacklist the public People’s Bank for failing to make the payment due to the society.

The Chinese company then filed for arbitration in Singapore, and Sri Lanka later decided to settle the case by paying the fertilizer company $6.9 million, on terms that were supposedly acceptable to both parties.

The state-run People’s Bank of Sri Lanka made the payment on a letter of credit it had issued after a court order restraining the lender was withdrawn.

The botched deal, analysts say, has soured China’s relations with Sri Lanka.

The Indian Ocean country is currently going through the worst monetary crisis in the history of its central bank. (Colombo/September 1, 2022)