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Audit report calls for action against officials, Chinese firm
View(s):Fertiliser scandal
A special audit report has recommended prosecuting officials who were responsible for the transaction of USD 6.9 million (Rs 1.38 billion) for an unsupplied fertiliser stock and directed to claim compensation from the Chinese company for attempting to unload a stock of unsterilised fertiliser that contained destructive bacteria.
The special audit report compiled by the National Audit Office on the procurement of 96,000MT of organic fertiliser 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.
“… proceed with the legal action against the supplier and obtain compensation for attempting to enter a stock of unsterilised fertiliser… 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 not Technical Evaluation Committee members participated in the evaluation process and only the chairman of the committee had signed the documents related to 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 fertiliser was sent from the Qingdao Port in China to the Colombo Port.
Last September, a controversial situation arose when Hippo Spirit the ship that carried the fertiliser 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 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.
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 percent of the cost of the fertiliser stock. Later, the two cases had been settled and withdrawn with the condition that the fertiliser should be resupplied with the desired composition and quality in accordance with the court settlement.
“Nonetheless the expected standard of stock of fertiliser 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 fertilisers. Resulting all of the above, the entire amount paid for fertilisers has become a loss to the government,” the report said.
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