Sri Lanka's audit report calls for action against officials, Chinese firm over fertilizer scandal

Colombo [Sri Lanka], September 5 : After the fertilizer deal between Sri Lanka and China caused the island nation's exchequer a loss of USD 6.9 million as the stock of fertilizer was rejected in December 2021 over reports that it contained harmful bacteria, Sri Lanka's audit report called for action against officials and a Chinese firm.
The report has recommended prosecuting officials, as well as a Chinese firm, Qingdao Seawin Biotech Group Co Ltd which was responsible for an unsupplied fertilizer stock, reported the Sunday Times.
The audit has also claimed compensation from the Chinese company for attempting to unload a stock of unsterilized fertilizer that contained destructive bacteria.
The special audit report compiled by the National Audit Office on the procurement of 96,000MT of organic fertilizer from the Chinese company, Qingdao Seawin Biotech Group Co. Ltd, also recommended blacklisting the company, as it has not performed in accordance with the laws and agreements of Sri Lanka, reported the Sunday Times.
"... proceed with the legal action against the supplier and obtain compensation for attempting to enter a stock of unsterilized fertilizer... containing the destructive bacteria -- Erwinia and Bacillus which cause diseases called mild rot and blight for economically valuable crops in Sri Lanka 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 is no recommended agrochemical for control," the report said.
The report also made many observations on the shortcomings in the procurement process and technical evaluation because no Technical Evaluation Committee members participated in the evaluation process and only the chairman of the committee had signed the documents related to the pre-qualification evaluation from each bidder.
After that, the relevant supplier company had been informed by Shipping Advice on September 23, 2021, that the 20,550MT of fertilizer was sent from the Qingdao Port in China to the Colombo Port, reported the Sunday Times.
Last September, a controversial situation arose when Hippo Spirit the ship that carried the fertilizer cargo was anchored off the Colombo port but could not unload the stock as it had not been sterilised in accordance with the Plant Quarantine Act and was found to be consisting of harmful bacteria in the samples.
By refusing to accept and pay for the shipment, the importers, the two state-owned companies Ceylon Fertilizer Company Limited and Colombo Commercial Fertilizer Company Limited, filed cases at the Colombo Commercial Court to secure payment injunction orders against the People's Bank, reported the Sunday Times.
After the issue was raised through diplomatic channels, a Cabinet Memorandum was submitted to resolve the issue through mediation on the advice of the Attorney General.
Accordingly, approval was granted to pay an advance of USD 6.9 million for 75 per cent of the cost of the fertilizer stock. Later, the two cases had been settled and withdrawn with the condition that the fertilizer should be resupplied with the desired composition and quality in accordance with the court settlement.
"Nonetheless the expected standard of stock of fertilizer has not been obtained until now. Although the period of the letter of credit and the performance bond should be extended and kept valid as per the settlement terms, those documents expired on March 12 and on March 24 respectively. As a result, the ability to encash the money paid on settlement has been lost if the supplier will not provide standardised fertilizers. Resulting all of the above, the entire amount paid for fertilizers has become a loss to the government," the report said.