Sri Lanka overpaid Indian fertiliser company in 2021: Audit report
The previous government paid more than double the market price to import nano nitrogen liquid fertiliser from an Indian fertiliser company that was selected through an unsolicited proposal, and received only seven percent of the total order placement despite settling the amount in full, an audit report has revealed.
The National Audit Office report found that, during the 2021 Maha season, the Indian Farmers Fertilisers Corporative Limited (IFFCO) was selected to supply the fertiliser through its local agent United Farmers Trust (UFT) based on two unsolicited proposals it had submitted.
The company is yet to pay Rs 48 million as total outstanding for the failure to supply the agreed fertiliser consignment.
Due to Sri Lanka's foreign currency shortage at that time, the Indian company proposed to supply fertiliser on a credit basis.
Even though agreements had been entered into on November 22, 2021 for the import of 4,250,000 bottles (2,125,000 litres) at USD12.45 a bottle containing 500ml of liquid fertiliser, only 306,454 bottles of fertiliser had been imported in four instances. The Government had to incur a cost of Rs711,863,096, the audit report said.
In his recommendations, Auditor General W P C Wickramaratne said that steps should be taken to recover the over payment of Rs49,846,406 for the first stock (100,224 bottles) either from the relevant company or the parties that had approved payments without proper evaluation due to "failure of responsible parties such as Ministry of Agriculture, Procurement Committee, and Technical Evaluation Committee in specifically identifying the substantial price payable for a bottle of liquid nano fertiliser."
The urgent import of liquid fertiliser from India commenced in September in the wake of the previous government's disastrous policy of organic farming by banning chemical fertilisers, pesticides and weedicides in the country in April 2021.
In the following month (May), thee then Cabinet of Ministers approved a proposal to import organic fertiliser from a Chinese company – Qingdao Seawin Biotech Group Co Ltd – which was turned away by Sri Lankan authorities when it reached the Colombo Port without a valid Quarantine Certificate.
The audit inquiry also noted that even though the price of a 500ml bottle of nano liquid fertiliser had been mentioned at INR240 – equivalent to USD3.185 – on the Indian manufacturing company's website, they were imported to Sri Lanka at USD5 per bottle according to Cusdecs (Customs declaration).
"However, it was not confirmed during the audit that the importation could be carried out at the price indicated on the website. It had been revealed at a meeting held on November 10, 2021 that the price of a liquid fertiliser 500ml bottle was USD5.25 (FCA). Despite having such knowledge, 100,224 bottles of nano nitrogen liquid fertiliser had been purchased at USD12.45 each and 206,232 bottles had been purchased at USD10 each without making purchases at a low price," the report indicated.
The audit inquiry also observed that the Agriculture Ministry had not taken steps to sign an agreement with the supplier at a price beneficial to the government, and the supplier, his agent and the manufacturer had gained a profit exceeding a fair profit margin.
Ahead of the import, no experiment had been carried out in a laboratory or model farm before the release of this fertiliser to cultivation lands. Fertiliser had been imported without proper evaluation of the requirement of nano liquid fertiliser, the inquiry observed.
The inquiry noted that the fertiliser was given under different names to farmers without ascertaining the contents, which was questionable, and that proper attention had not been paid to the qualifications of the relevant supplier.