3 Jan 2009

Victims of China milk scandal set to receive payout

2:50 pm on 3 January 2009

Chinese state media is reporting a fund set up in the wake of the tainted baby milk scandal is now ready to start paying out.

Six children died and 290,000 others became ill in China after drinking milk contaminated with melamine produced by 22 companies, including the bankrupt Sanlu Group, which is partly owned by New Zealand multi-national Fonterra.

Melamine, an industrial compound used in plastic and fertiliser, was added to milk to cheat protein tests.

The compensation fund was set up by the companies involved in the scandal.

Chinese state media agency Xinhua is reporting that the China Dairy Industry Association says the money for the fund is in place.

The Beijing-based organisation is also quoted as saying the fund will cover the charge on acute disease medical treatment and the one time cash payment for victims.

No specific amount for each child has yet been revealed. However, CNN reports that each child will be offered medical coverage until they reach 18 years of age.

Fonterra says there is no claim on it to pay any compensation. It has written off its 43% shareholding for a loss of $200 million.

Victims texted to ask forgiveness

The 22 dairy firms involved have sent a text message asking for the forgiveness of people affected by contaminated milk.

The text message, which was sent to millions of Chinese mobile phone subscribers, says that the companies are, in their words, "deeply sorry for the harm caused to the children and society."

The message says the companies sincerely apologise and beg for forgiveness.

A Fonterra spokesperson says it was not aware of the text message before being alerted to it by Radio New Zealand.

However, Fonterra says Sanlu has no obligation to advise it of this, as the Chinese company is now in the hands of court-appointed receivers.