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Tuesday February 27th, 2024

Sri Lanka ministers defends decision to pay millions to Chinese fertilizer company

ECONOMYNEXT – Senior government ministers in cash-strapped Sri Lanka on Sunday (19) defended a decision to pay 6.7 million US dollars to a Chinese fertilizer company over a deal that had gone awry, as opposition lawmakers decried the move.

Minister of Highways Johnston Fernando told reporters that antagonising a nation as powerful as China will not be in Sri Lanka’s interest in the long run.

“This issue must be resolved amicably. It’s easy for people to say we paid money for a ship of faeces. But antagonising a powerful country could prove more disadvantageous for us in the long term,” he said.

“[Losing] 6 million dollars is not like losing 1.6 billion dollars. China is a country that gave us money when we needed it,” he said.

Sri Lanka’s cabinet of ministers has decided to pay the 6.7 million dollars to the China’s Qingdao Seawin Biotech Group Co Ltd, whose organic fertilizer was rejected by the island nation.

Sri Lanka’s National Plant Quarantine Service (NPQS) had claimed that samples of the fertilizer contained harmful bacteria, prompting the Chinese company to demand 8 million US dollars from the agency in early November.

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

The shipment was rejected by Sri Lanka while en route to the island, with the authorities denying entry to what opposition lawmakers and other critics had called a ship of faeces.

Sri Lanka’s scientific findings were roundly rejected by the Chinese company, with the Chinese embassy in Colombo going as far as to blacklist the state-run People’s Bank for not making the payment owed to the company.

The Chinese company subsequently sought arbitration in Singapore, and Sri Lanka later decided to settle the matter by paying 6.7 million dollars to the fertilizer company, on terms purportedly agreeable to both parties.

Asked if Sri Lanka can afford to pay such a colossal sum at a time when the country is facing its worst economic crisis since Independence amid a worsening foreign reserves shortage, Minister Fernando told reporters that the money simply had to be paid.

“The cabinet has decided to pay the amount. It must be paid,” he said.

Education Minister Dinesh Gunawardena, speaking to reporters after an event in Colombo said the matter needs to be resolve amicably.

“China is a friendly nation to us, as is India. These matters can be resolved amicably, and the president has instilled confidence in the country that this can be done. That’s what’s important,” said Gunawardena.

“If there are certain shortcomings meanwhile, steps  must be taken to correct them,” he added.

The opposition is crying foul.

Main opposition Samagi Jana Balavegaya (SJB) MP Ashoka Abeysinghe told reporters: “These funds are being charged for turning the ship away. The fertilizer must be paid for separately. Some ministers are saying countries cannot be antagonised. What is this government?”

SJB MP Nalin Bandara addressing a gathering said: “This isn’t money from Medamulana (the ancestral home of the ruling Rajapaksa family; not the money in the American bank accounts of Gotabaya or Basil Rajapaksa. It’s your money.”

“It’s 1.4 billion rupees collected from your sugar, lentils purchases, from the reloads bought by young people, to pay for this faeces. Who ever thought Sri Lanka would have to pay for faeces?”

Meanwhile, Environment Minister Mahinda Amaraweera, who represents the Sri Lanka Freedom Party (SLFP), was also critical. The SLFP is a constituent party of the government coalition that is increasingly at odds with the ruling Sri Lanka Podujana Peramuna (SLPP).

“No, we have no such hope on China. I don’t see China saving us or helping us contrary to claims. There is a risk of a coming food crisis. We must prepare for it.  We must launch a massive food production campaign, an agricultural operation.  Or we’ll be in big trouble,” he said. (Colombo/Dec20/2021)

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Sri Lanka president appoints Supreme Court-faulted official as police chief after CC clearance

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe appointed Deshbandu Tennakoon as the 36th Inspector General of Police (IGP) of the country after the Constitutional Council (CC) cleared the official who along with three other police officers were asked by the Supreme Court to compensate 2 million rupees in a fundamental rights case last year.

“President Ranil Wickremesinghe has appointed Deshbandu Tennakoon as the IGP in accordance with the provisions of the Constitution,” the President’s Media Division (PMD) said.

The island nation’s Supreme Court on December 14 ordered Tennakoon when he was the Acting IGP and three other officials to pay a compensation of 500,000 rupees each for the violation of the fundamental rights of an individual.

The Supreme Court also instructed the Police Commission to take disciplinary action against the said Police officers after it considered the petition filed by W. Ranjith Sumangala who had accused the Police officers of violating his fundamental rights during his detention at Mirihana Police Station in 2011.

The Supreme Court held that the four police officers violated the fundamental rights of the petitioner by his illegal arrest, detention and subjection to torture at the Mirihana Police Station, which was under the supervision of Tennakoon at the time of the arrest.

President’s Secretary Saman Ekanayake presented the official appointment letter to Tennakoon on Monday (26) at the Presidential Secretariat.

When Tennakoon was asked over if the Supreme Court decision would have an impact on his appointment as the IGP last week, he declined to comment, saying that it was a Supreme Court matter and he does not want to say anything about it.

Tennakoon was also criticized by Colombo Archbishop Cardinal Malcolm Ranjith when he was appointed as the Acting IGP citing allegations against him related to security lapses leading up to the Easter Sunday attacks which killed at least 269 in April 2019.

However, Tennakoon rejected the allegations. (Colombo/Feb 26/2024)

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No water tariff hike in Sri Lanka this year: Minister

Millennium Challenge Corporation Photo.

ECONOMYNEXT – Sri Lanka’s planned water tariff formula is ready, and the government will implement it this year only if the formula’s tariff is lower than the current price, Water Supply Minister Jeevan Thondaman said.

President Ranil Wickremesinghe’s government has been implementing IMF-led pricing policies on utilities and the Water Supply Ministry has already come up with a formula.

“There is a water tariff formula in place right now and we are waiting for it to be drafted and seek approval from the cabinet,” Thondaman told reporters at a media briefing in Colombo on Monday.

“Once this water tariff formula is in place, there will be an annual revision with an option of biannual review.

The formula has been developed with the help of the Asian Development Bank. The formula includes electricity and exchange rate among many others as components like the fuel formula.

The National Water Supply and Drainage Board (NWS&DB) increased the water tariff in August 2023, claiming that the operating cost had been increased owing to high interest payment for bank loans and increased electricity prices.

The last year revision saw the consumers paying 30-50 percent increase from the existing water bill.

Minister Thondaman said he will implement the new formula this year only if there is a reduction.

TARIFF CUT WILL BE IMPLEMENTED 

“We will have to wait to see what the formula is. If the formula shows us there needs to be a reduction in the water tariff, we can implement it. But if there is an increase, why should we burden the people when we are on a road to recovery?” he said.

He said a group of experts including University Professors are working on the formula and the numbers.

“Once they come with the number, we will have to take a decision on whether we are going to impose on the people or not,” he said.

“We have already spoken to the Asian Development Bank and informed them we have established the formula. But according to the ADB requirement of this policy-based loan, the implementation period is only in 2025.”

“But right now, you want to take the approval for the formula for sustainability.”

The Energy Ministry is considering a drastic slash in electricity tariff soon. Thondaman said the exact numbers will be decided on after the finalized electricity tariff.

However, he said that as per the formula, there has to be a up to 10 percent increase in the water tariff as of now.

“Given the current formula set up, there must be around a 9-10 percent increase. It was actually at 14 percent. What we have done is since it is at 14 percent, we also did a calculation to see how we can do a cost cutting,” he said.

“So, despite our cost cutting measures, there will be an increase of 9 or 10 percent. But we will not be imposing it as of now because this year is meant to be policy sector reforms. Next year is meant to be the implementation.”

“As per August 2023 water tariff hike, we are able to come close to sustainable. So right now, there is no issue in the water sector. But a formula eventually needs to be established.” (Colombo/Feb 26/2024)

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Sri Lanka rupee closes at 310.80/311.00 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 310.80/311.00 to the US dollar Monday, from 310.95/311.05 on Thursday, dealers said.

Bond yields were down.

A bond maturing on 01.02.2026 closed stable at 10.60/80 percent.

A bond maturing on 15.09.2027 closed at 11.80/90 percent down from 11.90/12.05 percent.

A bond maturing on 15.03.2028 closed at 12.00/12.15 percent down from 12.10/25 percent.

A bond maturing on 15.07.2029 closed at 12.20/70 percent from 12.20/95 percent.

A bond maturing on 15.05.2030 closed at 12.30/70 percent down from 12.40/95 percent.

A bond maturing on 15.05.2031 closed at 12.60/80 percent from 12.45/13.00 percent.

A bond maturing on 01.07.2032 closed at 12.50/90 percent from 12.50/13.30 percent. (Colombo/Feb26/2024)

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