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AG advises Chinese fertiliser trade issue resolution 

15 Dec 2021

  • Notes terms being agreeable to both local and Chinese companies
  • Companies in talks on SL payment of $ 1.7 m; no final decision yet   
BY Buddhika Samaraweera Attorney General (AG) President’s Counsel Sanjay Rajaratnam has instructed to resolve the dispute that has arisen between China-based Qingdao Seawin Biotech Group Co. Ltd. and two Sri Lankan fertiliser companies – Ceylon Fertiliser Company Ltd. and Colombo Commercial Fertilisers Ltd. – regarding the purchase of organic fertiliser, on trade terms that can be agreed upon by both parties, according to the Agriculture Ministry. The Agriculture Ministry and the Justice Ministry have submitted two Cabinet memoranda to the Cabinet of Ministers’ meeting held on Monday (13) in this regard, and the Cabinet has authorised the relevant authorities to act in accordance with the instructions given by the AG. A statement issued by the Agriculture Ministry on the matter stated that the Chinese company has agreed to take back the ship, “Hippo Spirit”, that was anchored in Sri Lankan waters with a consignment of organic fertiliser and then depart for Singapore, keeping the performance guarantee as a security. Meanwhile, it was reported that the relevant Sri Lankan authorities have agreed to pay the sum of $ 5 million deposited by the Chinese company for the supply of organic fertiliser as a security, and another $ 1.7 million to Qingdao Seawin Biotech Group Co. Ltd. According to media reports, a cabinet paper has also been submitted regarding the payment of the relevant amount to the Chinese company. However, when inquired about this, State Ministry of Promoting the Production and Regulating the Supply of Organic Fertiliser, and Paddy and Grains, Organic Foods, Vegetables, Fruits, Chillies, Onion and Potato Cultivation Promoting, Seed Production, and Advanced Technology Agriculture Secretary Nihal Ranasinghe yesterday (14) told The Morning that no final decision had, as of last evening, been reached with regard to the said payment. He added that the relevant companies are in discussions over the matter.  “It is still under discussion and no agreement has been reached yet,” said Ranasinghe. Furthermore, when inquired about this, an official of the Agriculture Ministry said that although steps are being taken to resolve the dispute between the Chinese company and the two local fertiliser companies, he is not aware of a financial transaction in this regard. Meanwhile, Agriculture Ministry Secretary Prof. Udith K. Jayasinghe-Mudalige, on an earlier occasion, told The Morning that the Chinese company in question is free to produce organic fertiliser to the required standard and supply it back to Sri Lanka. However, he said that all imported fertilisers will be subjected to proper quality tests. The Morning, in September this year, reported that a tender has been awarded to import 99,000 metric tonnes (MT) of organic fertiliser made in China, a stock which is, according to the testing agencies, harmful to the soil, plants, and humans as the samples have failed the mandatory tests carried out by the local testing agencies. It was reported that the mandatory tests carried out by the Sri Lanka Standards Institute (SLSI), the National Plant Quarantine Service (NPQS), and the Sri Lanka Atomic Energy Board (SLAEB) on the said fertiliser samples have failed. According to the testing agencies, the stock of fertiliser could contain harmful microorganisms, pathogens, and even diseases harmful to the soil, plants, and humans. Following the mandatory tests carried out by the SLSI, the NPQS, and the SLAEB on samples of organic fertiliser made in China failing, the local agent of the said Chinese manufacturing company told The Morning in September that another set of samples were to be given to the SLSI, NPQS, and the SLAEB. However, Agriculture Department Director General Dr. Ajantha de Silva told the media at the time that tests carried out on the said samples have once again confirmed the presence of harmful bacteria. Accordingly, following tests carried out by local testing agencies on the second set of samples of organic fertiliser made in China in which the presence of harmful bacteria was confirmed, the Agriculture Ministry, on 29 September, decided not to import organic fertiliser from the Chinese company in question. In this backdrop, in a press release issued on 8 October, the Chinese Embassy stated that the decision made by the authorities to reject the Chinese company’s organic fertiliser based on the NPQS’s report is not only questionable, but has also caused a great financial loss to the company. It further added that the Embassy hopes that the related parties on the Sri Lankan side and the Chinese company could co-ordinate based on the principles of respecting science and facts, and the spirit of contract, in order to resolve the issue promptly, adding that the differences should be addressed through dialogue in good faith for the mutual benefit of China-Sri Lanka bilateral co-operation. The Chinese company had also sent a Letter of Demand (LoD) seeking a sum of $ 8 million in damages from the NPQS, which revealed that the fertiliser samples from the said company were found to contain harmful bacteria following tests carried out on them by the NPQS on two occasions. Meanwhile, the Hippo Spirit vessel, which was in Sri Lankan territorial waters carrying the controversial fertiliser consignment shipped by Qingdao Seawin Biotech Group Co. Ltd., left Sri Lanka’s maritime space last week. With the said ship leaving Sri Lankan waters last week, it was reported that the Chinese company was to initiate an international arbitration process against Sri Lanka over the problematic situation that arose regarding the controversial stock of organic fertiliser. The Agriculture Ministry, in response to such reports, said that they were ready to face any arbitration with the evidence they possess. When inquired about the reports of an arbitration process, Prof. Jayasinghe-Mudalige told The Morning on 9 December that the company has the right to go for an arbitration process and that the Agriculture Ministry and the other relevant authorities are ready to face it accordingly.


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