Chinese toxic milk food makers to pay $160 million as compensation

Twenty-two dairy firms whose mealmine-tainted baby milk that claimed the lives of six children and affected another 300,000 in September this year, will pay 1.1 billion yuan ($160 million) as compensation to the families of those affected by their products (See: FDA warns ethnic Chinese communities against illegal Chinese baby formula). Many families are said to have rejected the compensation. 

According to Chinese authorities about 900 million yuan will be paid as a one-time compensation to the affected families while the remaining 200 million yuan ($29 million) will go to a newly created fund that will be managed by China Life, the country's biggest life insurer to cover future health problems of the affected children.

Families of children who died will get 200,000 yuan ($29,000), those children who were seriously sick will get about 30,000 yuan ($4,400) while the ones suffering minor kidney problems will each receive 2,000 yuan ($292).

The news of the compensation came as 17 people were put on trial on charges of producing, selling melamine and mixing it with milk to show increased false reading of proteins in quality test.

Last week, the Sanlu Group, which was at the core of the tainted milk scandal, filed for bankruptcy protection as it faced an 1.1-billion yuan debt and its former chairwoman, Tian Wenhua will be put on trial next week.

However, most of the affected families have rejected and refused to sign the measly compensation agreement with 63 families although saying it was a step in the right direction but the 2,000 yuan compensation to families of children suffering from kidney problems to be woefully inadequate as many families have borrowed money and spent on an average of 30,000 yuan to cover the cost of surgery to remove stones in the kidney.

Many activists said that the fund of 200 million yuan ($29 million) to cover the future cost of health problems of the affected children was too low and insufficient.

In September the public anger increased at revelations that Chinese local authorities had ignored warnings by the New Zealand-based minority Sanlu shareholder Fonterra about the adulteration, but had refused to recall the product.

Fonterra, the New Zealand dairy farmer's co-operative had acquired 43 per cent of the Sanlu company in 2005, for $107 million, and had been pushing for a recall of the milk formula since early August after receiving several complaints but Sanlu and the local Chinese authorities chose to ignore the warnings. (See: Toxic milk scandal leads to arrests in China)

New Zealand Prime Minister Helen Clark had gone on record saying that Chinese officials acted only after her government pushed the Chinese authorities.

The milk powder was mixed with the chemical – melamine, which is rich in nitrogen and is often used to inflate protein levels in foods. But the chemical can have serious health effects on humans. It is widely used in making plastics and fertilisers and has been used by Chinese businesses to artificially boost protein readings in animal feed and other food products.

The toxic chemical takes on the appearance of protein and can mislead testers in believing that the milk product has a higher nutritional content than it actually has. Suppliers who sold the raw milk apparently added the chemical so that it would be passed by food inspectors.

Chinese police made arrests in the spreading scandal as health officials reported that a second infant had died and 1,253 others had been sickened after drinking tainted milk powder. The authorities had earlier arrested two brothers in Hebei province, home of the state-owned Sanlu Group that sold the contaminated product.

With investigation being carried out nationwide, the inspection of milk revealed that the contamination ran wider than the tainted milk powder, which seemed at that time to be the tip of the ice-berg. (See: China's tainted milk scandal escalates)

The crisis was initially thought to have been confined to baby milk powder but tests had found melamine in samples of liquid milk taken from China's two largest dairy producers, Mengniu Dairy Group and Yili Industrial Group, as well as Shanghai-based Bright Dairy. All the 17 suspects put on trial could face the maximum death penalty if convicted.