Colombo, Oct 29 (PTI) The Chinese Embassy here on Friday blacklisted Sri Lanka's state-owned People's Bank following a dispute that erupted after the island nation blocked the payment of USD 4.9 million of a Chinese company for allegedly supplying a contaminated shipment of organic fertiliser.

Sri Lankan government-owned Ceylon Fertilizer Company has blocked the payment to China-based Qingdao Seawin Biotech over the shipment of contaminated fertiliser containing harmful bacteria.

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Ceylon Fertilizer has obtained a Commercial High Court order to block the payment on October 22.

“Recently People's Bank has witnessed the vicious event of Letter of Credit (LC) default causing huge losses to Chinese enterprises in international trade with Sri Lanka. This bank now has been black listed by the Economic and Commercial office of the Chinese embassy in Sri Lanka,” a statement from the Chinese embassy here said.

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It said the Chinese enterprises are reminded to strengthen risk control and avoid LCs issued by the People's Bank.

The escalation of the issue came after the Chinese Ambassador called on the Prime Minister Mahinda Rajapaksa where Rajapaksa asked the Chinese to send a fresh shipment of fertiliser for Sri Lanka to meet the payment.

The Chinese embassy insisted that the decision made by the Sri Lankan authorities to reject organic fertiliser is not only questionable but also causing great financial loss to the Chinese company.

Reacting to the Chinese embassy, the People's Bank said it was bound by the enjoining order that precluded the bank from processing the payment.

The bank assured the Chinese company that once the “legal barriers are removed the LC payment will be effected promptly”.

President Gotabaya Rajapaksa in May ordered a halt to importing chemical fertilisers to turn the island nation's agriculture sector to 100 per cent organic.

Last week Sri Lanka received the first consignment of 3.1 million litres high quality non-harmful Nano Nitrogen liquid fertiliser from India to help the island nation's Eastern province in the cultivation of maize and paddy.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)