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Under legal pressure, Sri Lanka decides to pay $6.7 million to Qingdao for rejected fertiliser

Sri Lanka-China relations slide over fertiliser squabble (Photo: IANS)

The Sri Lankan government has decided to pay $6.7 million to the Chinese fertiliser company Qingdao which has threatened international arbitration over rejection of its organic fertiliser.

Sri Lankan Minister for Agriculture, Mahindanada Aluthgamage shared this news on Tuesday. The payment will include the $5 million deposit which the company had made to a Sri Lankan bank.

Colombo has taken the decision on the advice of the Attorney General’s department. Simultaneously, Sri Lanka is asking the Chinese company to remanufacture the fertiliser in conformity with Sri Lankan standards.

As India Narrative mentioned earlier, the Chinese company demanded $8 million in damages and is also seeking international arbitration after Sri Lanka rejected its fertiliser shipment citing dangerous pathogens.

Import of organic fertiliser by Sri Lanka from China resulted in a legal and diplomatic spat with the island nation facing the fury of not just Qingdao fertiliser company but also the Chinese embassy in Colombo.

After Sri Lanka banned the Chinese ship Hippo Spirit carrying organic fertiliser with harmful bacteria and stopped payment over a deal worth $42 million, the Chinese embassy blacklisted the state-owned People’s Bank of Sri Lanka in retaliation. It also issued a series of tweets trying to imply that Colombo had gone back on the fertiliser contract as its various departments were not efficient enough.

After rejection of the fertiliser over quality issues, the Hippo Spirit ship ostensibly went back to China, However, it disappeared from the global tracking systems but was finally located near the Malacca Strait, somewhere near Singapore and Indonesia. After waiting for a few weeks, it came back to Sri Lankan waters.

The fertiliser controversy has festered on for nearly four months. As Colombo remained steadfast in not allowing the contaminated Qingdao fertiliser, it has been witness to Chinese arm-twisting and pressure tactics.

Now Colombo wants to end the matter by paying compensation to the Chinese company under the threat of international arbitration, or buy the contaminated fertiliser, which its scientists say can ruin Sri Lankan crops besides the soil.