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Tuesday February 7th, 2023

Chinese fertilizer firm demands US$8mn in damages from Sri Lanka testing agency

ECONOMYNEXT – China’s Qingdao Seawin Biotech Group Co Ltd, whose organic fertilizer, which Sri Lanka’s National Plant Quarantine Service (NPQS) said contained bacteria, has demanded 8 million US dollars from the agency, alleging negligence.

The Letter of Demand, seen by EconomyNext and dated November 5, has been addressed to NPQS Additional Director W A R T Wickramaarachchi.

The move comes a week after Chinese Embassy in Sri Lanka blacklisted People’s Bank, one of the country’s largest state banks for not honouring a letter of credit (LC) for the disputed fertilizer shipment following a court order to halting payment.

Related: Sri Lanka blocks payment to China Qingdao Seawin Biotech over fertilizer with bugs

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 said.

The letter stated that NPQS had claimed that the organic fertilizer had been found to have gram-positive and gram-negative bacteria and said that the “preliminary studies had revealed that bacteria to be Bacillus spp. and Erwinia spp. which can be pathogenic to plants.”

“I am instructed to inform you that my client specifically and categorically deny and refute the purported findings stated in your reports referred to herein above to the effect that the samples of my client’s product does not contain the Erwinia bacteria,” Attorney at Law M J S Fonseka stated in the LOD on behalf of the Chinese company.

“Therefore I am instructed that the contents of your reports to the effect that the samples of my client’s product contain ‘Erwinia’ are wrong, incorrect and untrue which has caused and continues to cause my client enormous loss and damage.”

The LOD also said the process of manufacturing kills all pathogenic pests and bacteria as there is a “Roller Double Drying Process at temperature of 600 degree Celsius and Chinese authorities have confirmed that there was no presence of Erwinia.

It also said the NPQS had used the wrong temperature and the test was “unscientific”.

“Such erroneous conclusion has been reached by you due to your negligent conduct inter alia by not complying or conforming with the testing,” the LOD stated.

The incorrect testing due to such negligent conduct from the Sri Lanka agency has suffered significant loss and damage of around US 8 million dollars and [the company] continues to suffer further loss and damage due to loss of reputation and goodwill as well as existing and potential business, it said.

“In the above circumstances, I am instructed to demand from you and the demand is hereby made for you to make a payment of United States Dollars (USD) 8 million to my client within 3days from the date hereof for the loss and damage caused to my client due to your negligent conduct set out herein above.”

“In the event of your failure to accede to the above demand of my client I have been further instructed to institute action against you in your personal capacity to recover the aforementioned damages from you and to vindicate the rights of my client without any further notice.” (Colombo/Nov07/2021)

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Sri Lanka Railways to seek PPPs to boost revenue streams

CURFEW RUSH: Commuters scrambling to get home after curfew was declared in Sri Lanka on March 20, 2020.

ECONOMYNEXT – Sri Lanka Railway department hopes to expand Public Private Partnerships and earn more non-passenger revenues to offset recurring operational costs, an official said.

“For the past 10 years, except the last few years, the Railway operational income only covers around 50 percent of the operational expense of the Department,” the General Manager of the Railway, D.S. Gunasinghe told EconomyNext.

“Our plan is to increase the non-passenger revenue of the Railway department.

“And we cannot expect and do not hope for money from the government.”

Sri Lanka Railways already has agreements with Prima, a food firm, and Insee Cement, which is bringing in additional income, Gunasinghe said.

“We had agreements for material transportation such as sand in the past, however it was canceled but we hope to start it again” he said.

The department will rent out its storage facilities and circuit bungalows for the tourism sector to create additional revenue streams.

Sri Lanka Railways recorded an operating loss of 10.3 billion rupees during 2021, compared to a loss of 10.1 billion rupees in 2020, the Central Bank 2021 annual report showed.

The total revenue of the SLR stood at 2.7 billion rupees, a 41.3 percent drop from a year ago.

(Colombo/ Feb 06/2023)

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Sri Lanka’s doctors distribute anti-tax hike leaflets to train commuters

ECONOMYNEXT – Doctors representing Sri Lanka’s Government Medical Officers Association (GMOA) distributed leaflets outside the Colombo Fort railway station against a progressive tax hike, threatening to address the government in a “language it speaks”.

GMOA Secretary Haritha Aluthge told reporters outside the busy Fort railway station Monday February 06 afternoon that all professional associations have collectively agreed to oppose the personal income tax hike.

“The government is taking a lethargic approach. They cannot keep doing this. They have a responsibility towards the citizens, the country and society,” said Aluthge.

The medical officer claimed that the government was acting arbitrarily (අත්තනෝමතික).

“If it cannot understand the language they’ve been speaking, if the government’s plan is to put all professionals out on the street, if it doesn’t present a solution, all professional unions have decided unanimously to address the government in a language it speaks, ,” he said.

Aluthge and other GMOA members were seen distributing leaflets to commuters leaving the railway station. Doctors in Sri Lanka in general are likely to earn higher salaries than the average train commuter, and a vast majority of Sri Lanka’s population, most of whom take public transport, don’t fall into the government’s new tax bracket. Many doctors, though certainly not all, collect substantial sums of money at the end of every month as doctor’s fees in private consultations.

About two miles away from the doctors, the Ceylon Blank Employees’ Union, too, engaged in a similar distribution leaflet campaign on Monday at the Maradana railway station. A spokesman promised “tough trade union” action if there was no solution offered by next week.

Sri Lanka’s cash-strapped government has imposed a Pay As You Earn (PAYE) tax on all Sri Lankans who earn an income above 100,000 rupees monthly, with the tax rate progressively increasing for higher earners, from 6 percent to 36 percent.

A person who paid a tax of 9,000 rupees on a 400,000 rupee monthly income will now have to pay 70,500 rupees as income tax, the latest data showed. This has triggered a growing wave of anti-government protests mostly organised by public sector trade unions and professional associations.

Even employees of Sri Lanka’s Central Bank recently joined a week-long “black protest” campaign organised by state sector unions against the sharp hike in personal income tax, even as Central Bank Governor Nandalal Weerasinghe said painful measures were needed for the country to recover from its worst currency crisis in decades.

The government, however, defends the tax hike arguing that it is starved for cash as Sri Lanka, still far from a complete recovery, is struggling to make even the most basic payments, to say nothing of the billions needed for public sector salaries.

Economists say Sri Lanka’s bloated public service is a burden for taxpayers in the best of times, and under the present circumstances, it is getting harder and harder to pay salaries and benefits.

Sri Lanka’s new tax regime has both its defenders and detractors. Critics who are opposed to progressive taxation say it serves as a disincentive to industry and capital which can otherwise be invested in growth and employment-generating business ventures. Instead, they call for a flat rate of taxation where everyone is taxed at the same rate, irrespective of income.

Others, however, contend that the new taxes only affect some 10-12 percent of the population and, given the country’s economic situation, is necessary, if not vital, at least for a year or two.

Critics of the protesting workers argue that most of the workers earn high salaries that most ordinary people can only dream of, and, they argue, though there may be some cases where breadwinners could be taxed more equitably, overall, Sri Lanka’s tax rates remain low and are not unfair.  (Colombo/Feb06/2023)

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Sri Lanka bond Yields end steady

ECONOMYNEXT – Sri Lanka’s bond yields closed steady on Monday, dealers said while a guidance peg for interbank transactions remained unchanged.

A bond maturing on 01.07.2025 closed at 32.15/30 percent, steady from Friday’s 32.05/10 percent.

A bond maturing on 01.05.2027 closed at 28.90/29.10, steady from Friday’s 28.90/20.05 percent.

The Central Bank’s guidance peg for interbank US dollar transactions appreciated by one cent to 361.96 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 370.35 rupees on Monday, data showed. (Colombo/Feb 06/2023)

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