Sri Lanka may get sanction from China over disputed organic fertilizer

Sri Lanka may get economic sanction from China and restrictions may be imposed on tea imports as the country has rejected a consignment of organic fertilizer stocks of a Chinese firm.

In September, the Sri Lankan government had rejected a 20,000-tonne consignment of organic fertiliser stocks from Shandong-based Qingdao Seawin Biotech Group Co.Ltd over what Chinese sources call shady claims of quality issues, reports The Indian Express.

Nevertheless, the Sri Lankan government decided to pay USD 6.7 million to the Chinese firm.

But the firm said the episode had 'damaged their reputation', The Daily Mirror newspaper reported, ahead of the planned visit of Chinese Foreign Minister Wang Yi to Colombo from 8 January to 9. Discussion on this issue is expected during the visit of Wang here, the report said.

Interestingly, Wang's visit will mark the 65th anniversary of China-Sri Lanka diplomatic relations and the 70th anniversary of the Rubber-Rice Pact between Colombo and Beijing.

Top officials at Seawin Biotech have approached the Shandong Provincial government to put pressure on the Chinese government to impose sanctions on Sri Lanka, the report said.

The Chinese firm is also planning to escalate this issue on an international level, by lodging an official protest to several international institutions, and demanding restrictions on the import of Sri Lankan tea, the report said.

Earlier this month, Seawin Biotech had also launched an international arbitration against Sri Lanka on this issue in Singapore.

The firm has also claimed that the bidding involving the dispute over imported fertilisers was dubious and shady, and it involved breaking business rules and hiding the truth from the public.

According to the Daily Mirror report, Seawin Biotech has urged other Chinese firms not to trust Sri Lankans and even asked them to obtain payment in advance before undertaking transactions.

Earlier this month, US-based ratings agency Fitch downgraded Sri Lanka's sovereign rating to 'CC' from 'CCC', saying there was an increased probability of default in the coming months in light of the country's worsening external liquidity position, underscored by a drop in foreign exchange reserves.

The row over organic fertilisers has turned into a major diplomatic spat between the two close allies.

Considering Sri Lanka's geo-strategic location, China has pumped in billions of dollars of investments in the island nation.

China's acquisition of Hambantota port for a 99-year lease has raised alarm bells around the world over its debt diplomacy under its multibillion-dollar Belt and Road Initiative, especially in smaller countries over and above their capacity to repay.

Sri Lankan scientists, however, questioned the quality of Chinese fertiliser consignment, saying that instead of helping, it could prove harmful to the crops.

"Our tests on the samples showed that the (Chinese) fertiliser was not sterile," Dr Ajantha De Silva, director-general, Sri Lankan Department of Agriculture, told the BBC last month.

"We have identified bacteria which are harmful to plants like carrots and potatoes." After the fertiliser stocks were rejected, a Sri Lankan court instructed the People's Bank not to pay the Chinese firm.

Subsequently, the Economic and Commercial Office of the Chinese Embassy in Colombo blacklisted the People's Bank for failing to make the payment, according to the Letter of Credit and contracts between the two parties.

Sri Lankan government suddenly stopped all chemical fertiliser imports in May to convert the country into the world's first completely organic farming nation, according to BBC.

It's the first consignment of Colombo's plans to purchase 99,000 tonnes of organic fertiliser from Qingdao Seawin Bio-tech group, a Chinese company specialising in seaweed-based fertiliser, at a cost of $49.7m (£36m).

The issue is with the quality of the fertiliser - which scientists say, instead of helping, could prove harmful to crops.

"Our tests on the samples showed that the (Chinese) fertiliser was not sterile," Dr Ajantha De Silva, director general, Sri Lankan Department of Agriculture, told the BBC. "We have identified bacteria which are harmful to plants like carrots and potatoes."

They insist that since the cargo has implications for the bio-security of the country, it cannot be accepted.

The decision has triggered an angry rebuttal from Qingdao Seawin. It has accused the Sri Lankan media of using terms like "toxic, garbage, pollution" and other derogatory words to "slander the image of the Chinese enterprises and the Chinese government".

"The unscientific detection method and conclusion of National Plant Quarantine Service (NPQ) in Sri Lanka obviously do not comply with international animal and plant quarantine convention," the company thundered in a statement.

As the controversy escalated, a court ordered the state-owned People's Bank to stop payment of $9m for the cargo already awaiting entry.

The Chinese embassy in Colombo responded by blacklisting the bank for not honouring the payment to the company.

The Qingdao Seawin has also demanded eight million dollars' compensation from the Sri Lankan National Plant Quarantine Service for the loss of reputation it has suffered following the controversy.

And as all this unfolds onshore, the ship has not left Sri Lanka's waters.

When Sri Lankan port authorities denied permission for it to unload its cargo in late October, Hippo Spirit moved away from the Colombo harbour and reportedly sailed to waters off the coast of Hambantota port on its southern coast.

Now, latest images by the marine traffic website indicate the ship is currently stationed near Sri Lanka's south-western coast, not far from Colombo.

The message is clear. The Chinese company is not willing to take back its cargo.

Following recent meetings with Chinese embassy officials, Shasheendra Rajapaksa, a Sri Lankan junior minister, said they had agreed to re-test a fresh sample through a mutually agreed third-party laboratory.

"We were not forced into this, but they only made a request," Mr Rajapaksa said, adding "The current shipment cannot reach Sri Lanka".

If the cargo is returned to China, that would be a big loss of face for Qingdao Seawin and the Chinese government. The company says it exports organic fertiliser to more than 50 countries, including Australia and the US.