Fertilizer row escalates as Chinese firm seeks $8 million in compensation from Sri Lanka

The fertilizer row that erupted late month between the Sri Lankan government and a Chinese firm, Qingdao Seawin Biotech Group Co Ltd, is showing no signs of ending anytime soon as the firm has now demanded $8 million in compensation, weeks after the former canceled the contract citing contamination

Nov 08, 2021
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China-Sri Lanka

The fertilizer row that erupted late month between the Sri Lankan government and a Chinese firm, Qingdao Seawin Biotech Group Co Ltd, is showing no signs of ending anytime soon as the firm has now demanded $8 million in compensation, weeks after the former canceled the contract citing contamination.  

The firm sent a notice last week, seeking $8 million compensation within three days, alleging negligence on the part of Sri Lankan authorities which caused huge reputational and financial losses to it, reported the Daily Mirror newspaper.  

Significantly, the move came almost a week after the Chinese Embassy in Sri Lanka blacklisted People’s Bank, one of the country’s largest state banks, for defaulting a letter of credit (LC) for the disputed fertilizer shipment. The embassy also advised other Chinese entities engaged in business dealings in Sri Lanka not to accept letters of credit (LCs) issued by the bank.  

However, Sri Lankan officials contested the claim, arguing the payment was halted after a court order on the issue. 

Soon after canceling the contract, the Sri Lanka government sought Indian help in supplying organic fertilizers. Responding to the urgency, the Indian government roped in ships of the Indian Navy and an Indian Air Force plane to ferry fertilizers quickly to its southern neighbour. 

However, the rapid developments seem to have irked the Chinese who then resorted to coercive steps. For both India and China, Sri Lanka has apparently become a battleground for gaining influence in a strategic waterway. 
  
Sri Lanka’s refusal to accept the shipment has caused some strain in diplomatic relations with China, especially after a cabinet minister made statements based on inaccurate information on events, sources familiar with the ongoing tussle between the two countries at the diplomatic level was quoted by local media as saying. 

The Chinese firm, however, contested the reports of Sri Lankan authorities that claimed contamination and added that its request for the third-party test was also rejected by Sri Lanka. 

(SAM)