A burnt-out container ship that already triggered Sri Lanka's worst maritime environmental tragedy was sinking on Wednesday with several hundred tonnes of oil still in its fuel tanks, the navy said.

The Singapore-registered X-Press Pearl was carrying tonnes of lethal chemicals and cosmetics burning for 13 days within sight of the island's coast before rescue workers finally managed to extinguish the blaze on Tuesday.

There were 25 tonnes of nitric acid, 28 containers of plastic pellets as well as a container listed as "environmentally hazardous substance liquid.”

As the burning ship coats beaches in oil and debris causing grave environmental damage, the ship slowly sinking instilled an even greater fear of ecological loss should the ship’s oil leak into the Indian Ocean.

https://www.youtube.com/watch?v=TCbN0YMQbGA

"The stern of the ship is underwater, the water level is above the deck," navy spokesperson Indika de Silva said.

"The ship is going down."

Officials had planned to pump contaminated water from the ship onto barges but the operation has been abandoned.

The navy said an Indian coast guard vessel in the area had the equipment to deal with an oil slick if necessary.

The inundation of microplastic granules from the ship's containers has already forced a fishing ban and prompted concern for the wildlife and environment.

Officials believe the blaze destroyed most of the nearly 1,500 containers onboard.

Sri Lanka has launched a criminal investigation with the three senior-most crewmen asked to remain on the island till investigations are completed.

The authorities said they believed the fire was caused by a nitric acid leak that the crew had been aware of since May 11, nine days before the blaze started.