Fertilizer Issue

What is the loss?

USD 6.7 million (approximately LKR 1.4 billion) as compensation to the Chinese organic fertilizer supplier
Approximately USD 29.4Million (approximately LKR 509 million) for purchasing Nano Nitrogen liquid fertilizer from the Indian supplier at a rate higher than the reported market rate.


In April 2021, President Gotabhaya Rajapaksa proposed a complete ban on the importation of chemical fertilizers to Sri Lanka. The proposed alternative was to increase the production of organic fertilizer in the country.[1]

However, it was reported that the Government of Sri Lanka is importing organic fertilizer manufactured in India and China for domestic usage. A consignment of 20,000    metric tonnes of organic fertilizer imported from the China-based supplier, Qingdao Seawin Biotech Group Co., Ltd. was later reported to have been reverted by the Sri Lankan authorities, following a test of samples that detected harmful material.[2] Following these developments, the Ceylon Fertilizer Company Limited obtained a court order from the Colombo High Court to block payments to the Supplier[3] and the Supplier responded in early November with a Letter of Demand to the National Plant Quarantine Service (NPQS), as compensation for the loss and damage caused by the alleged negligence of the NPQS. The Supplier demanded a sum of USD 8 million (approximately LKR 1.6 billion) within 3 days.[4]

On the 24th of November 2021, the Minister of Agriculture Mahindananda Aluthgamage noted that Sri Lanka will pay USD 6.7 million (approximately LKR 1.4 billion) (75% of the total cost of the shipment) to Qingdao Seawin Bio-tech Group for the shipment of 20,000 tons of fertilizer that was rejected due to contamination. It was also reported that Sri Lanka has agreed to buy fresh stocks of fertilizer from the same company.[5]

Meanwhile, the Department of Agriculture ordered about 2 million liters of Nano Nitrogen liquid fertilizer from the Indian Farmers Fertilizer Cooperative in Gujarat at a price of USD 12.45 per 500ml. Both the media and activists questioned this agreement citing that the market value for Nano Nitrogen fertlizer (in India) stood at around USD 3.23.[6]

Furthermore, the opposition raised concerns about deviation from due process when making the payments to import the fertilizer. While the due process is to make the payments via the accounts maintained by the Ceylon Fertilizer Company Limited, it is reported that the Treasury had directly ordered the People’s bank to release an amount of USD 1.275 million by opening a new private account under the name “United Farmers Trust Limited”.[7]

As of the 6th of December, China’s Quingdao Seawin Biotech has sought compensation of 8 million US dollars from Colombo Commercial Fertilizers Ltd. through an arbitration center in Singapore.[8]

On 7th January 2022, it was reported that the People’s bank released USD 6.9 million to the company. https://www.hirunews.lk/english/293292/sri-lanka-pays-over-6-million-to-chinese-fertilizer-ship

However, on 9th January 2022, the Minister of Agriculture said that there will be no financial loss to the country, Sri Lanka would receive another shipment of fertilizer following the settlement. https://lankanewsweb.net/archives/1727/nothing-wrong-with-paying-us6-9-million-to-chinese-fertiliser-ship-agriculture-minister/

What is the corruption?

  • Possible undue gains by decision makers and misappropriation of public funds to purchase Nano Nitrogen liquid fertilizer at a rate higher than the market price.[9]
  • Lack of accountability and misuse of public funds due to the massive expenditure that had to be incurred to import organic fertilizer and the poor administration of the Chinese fertilizer shipment.
  • Possible breach of procurement procedure and possible collusion and undue gains by decision makers involved in the Chinese fertilizer shipment issue.
  • Lack of transparency towards the general public.

 What has been done?

  • A criminal inquiry over the allegation of price fixing for the Nano Nitrogen fertilizer has been initiated.[10]
  • Samagi Jana Balawegaya lodged a complaint at the CIABOC alleging a potential misappropriation of public funds for the purchase of Nao Nitrogen liquid fertilizer.[11]

What can be done?

  • Demand an investigation into how Sri Lanka agreed to reach a settlement for a stock of contaminated fertilizer that was rejected.
  • Demand an independent inquiry into the agreement on purchasing nano nitrogen and on the process adopted.
  • Demand for transparency and accountability in the implementation of national policies.


Image: https://economictimes.indiatimes.com/

[1] https://www.presidentsoffice.gov.lk/index.php/2021/04/22/importation-of-chemical-fertilizers-will-be-stopped-completely/

[2] https://www.newsfirst.lk/2021/11/15/rejected-chinese-fertilizer-will-not-be-re-tested-reaffirms-agriculture-dg/

[3] https://www.newsfirst.lk/2021/10/23/court-order-obtained-to-suspend-payments-for-chinese-fertilizer/

[4] https://www.newsfirst.lk/2021/11/07/pay-us-us-8-mill-in-3-days-or-else-chinese-fertilizer-co-tells-sri-lanka/

[5] https://www.sundaytimes.lk/211121/news/dispute-over-chinese-organic-fertiliser-govt-backs-down-462783.html

[6] https://www.newsfirst.lk/2021/11/19/nano-nitrogen-costs-higher-in-sl-than-in-india/

[7] https://island.lk/nano-nitrogen-deal-opposition-calls-for-probe/

[8] https://www.newsfirst.lk/2021/12/06/hippo-spirit-arbitration-and-additional-costs/

[9] https://www.newsfirst.lk/2021/12/01/complaint-alleging-fraud-in-importing-nano-nitrogen-fertilizer-lodged/

[10] https://www.newsfirst.lk/2021/11/24/criminal-inquiry-underway-on-overpriced-indian-nano-fertilizer/

[11] https://www.newsfirst.lk/2021/12/01/complaint-alleging-fraud-in-importing-nano-nitrogen-fertilizer-lodged/