Qingdao Seawin sends demand letter to state quarantine service. Sri Lanka is promoting organic farming. India airlifts chemical fertilizer for paddy cultivation as an immediate relief measure

A Chinese company is seeking damages from a Sri Lankan government agency for rejecting a shipment of organic fertilizer found to have pathogens in an ongoing dispute that could test Colombo’s relationship with Beijing.

Qingdao Seawin Biotech Group Co. Ltd. wants $8 million as compensation from the National Plant Quarantine Service for losses and damages to its reputation or the agency faces legal action, according to a letter of demand seen by Bloomberg News.

The dispute stems from Sri Lanka’s ambitious plan to promote organic farming by banning imports of chemical fertilizer. Qingdao Seawin initially won a Sri Lankan government tender to supply organic fertilizer under this new policy but the agency found that a sample from the cargo had pathogens, including the erwinia bacteria that can cause crop failure.

The consignment was not allowed to unload in Sri Lanka, prompting state-run Ceylon Fertilizer Company Ltd to get a court order to halt the People’s Bank from making payment to Qingdao Seawin. It’s not clear if the contract’s terms allowed for the buyer to stop payment.

Qingdao Seawin in the letter of demand issued on Nov. 5 has disputed the government agency’s findings that the consignment contained harmful bacteria, saying it followed international procedures and standards of production.

While the Sri Lankan government has since requested Quingdao Seawin to send a new consignment for testing, China’s embassy in Colombo waded into the dispute to tweet that the People’s Bank was now blacklisted, without giving details.

China’s Foreign Ministry said last week the Qingdao Seawin’s cargo of fertilizer had already passed third-party testing and the issue was being worked through. “China has always attached great importance to the quality of exports,” ministry spokesman Wang Wenbin said.

Sri Lanka’s President Gotabaya Rajapaksa is seen as close to Beijing and has been pushing for a free trade agreement. The country has been drawn into China’s Belt and Road Initiative with debt-funded infrastructure projects and is struggling to repay as foreign exchange reserves dwindle.

The country has stopped imports of some goods to build up reserves but wants to keep organic fertilizer imports going to support its tea, rubber and coconut plantations that are the livelihood of hundreds of thousands of small farmers and workers.

With the squeeze in fertilizer supplies owing to the ban on chemical variants, farmers have staged protests as some crops have begun to fail. The government has denied that the ban on chemical fertilizers was to limit expensive imports, saying the plan was initially floated in 2019 as Sri Lanka wanted to become the first country in the world to grow 100% organic produce.

The Indian Air Force last week sent nitrogen fertilizer to Sri Lankan farmers after the government relaxed some of the measures.