The double-decker boat that sank was carrying supplies for more than 1,000 people and was the first Red Cross shipment to the disaster area, the International Federation of Red Cross and Red Crescent Societies said. All four relief workers on board were safe, it said.
"This is a great loss for the Myanmar Red Cross and for the people who need aid so urgently," said Aung Kyaw Htut, the distribution team leader of the Myanmar Red Cross.
The sinking was the latest setback for distribution of aid following Cyclone Nargis. Though international aid has started to trickle in, almost all foreign relief workers have been barred entry into the isolated nation. The junta says it wants to hand out all donated supplies on its own.
The boat was making the 12-hour journey from Yangon to Mawlamyinegyun when it hit a submerged tree trunk and began taking water near Bogalay town, which was extensively damaged by the cyclone, the IFRC said.
The boat was carrying 100 bags of rice, drinking water, water purification tablets, and other goods. Some relief items were saved and will be transported by foot or bicycle to the nearest town to await onward shipment, it said.
The International Federation's disaster manager in Yangon, Michael Annear, described the sinking as "a big blow."
"Apart from the delay in getting aid to people we may now have to re-evaluate how we transport that aid," he said.
Also Sunday, Myanmar's state television said that the cyclone's death toll has gone up by about 5,000 to 28,458. The number of missing was reduced to 33,416. International aid groups, however, say that the death toll could eventually top 100,000 as humanitarian conditions worsen.
British aid group Oxfam said Sunday that the death toll could multiply by up to 15 times, or rise to 1.5 million, if people do not get clean water and sanitation soon, which could result in a medical catastrophe.
"It's really crucial that people get access to clean water sources and sanitation to avoid unnecessary deaths and suffering," Oxfam regional chief Sarah Ireland told reporters in Bangkok, Thailand.
The government has refused to let in most foreign experts who have experience in handling humanitarian disasters. It insists it is capable of distributing the aid being pledged by international donors. Meanwhile, aid is piling up in foreign countries, awaiting approval from the junta.
The country's main airport in Yangon is also incapable of handling more than five flights a day, when it should be taking in at least one every hour, said PLAN, a London-based chi "Logistically, the situation looks bleak," it said in a statement. "In short, they have one congested airport, ill equipped to deal with the influx of cargo, no port, restricted fuel and no trucks."
Aid group World Vision said it has requested visas for 20 people and received approval for two, while the U.N. World Food Program had one approved out of the 16 it requested. Still, the U.N. was making some progress in aid delivery.
The junta released 38 tons of high-energy biscuits to the WFP that were confiscated on Friday.
"We're delighted and very encouraged by what is a very positive sign," said WFP spokesman Marcus Prior.
He said a Thai Airways flight ferried 4.4 tons of high-energy biscuits for the WFP on Sunday, and a second flight from Italy would bring 30 tons of supplies and equipment later.
But World Vision, which has a big presence in Myanmar, said relief material delivered so far is a drop in the ocean.
"It is very obvious that of the thousands of people who have been helped there are tens of thousands who have not been reached," World Vision's Samson Jeyakumar said in Bangkok. He said its supplies were running out in Yangon.
Many survivors have been without help for more than a week after fleeing their inundated villages to take shelter in monasteries and schools in towns. The canals and flooded roads to higher ground were littered with the bloated bodies of humans and animals. The stench of death was everywhere.
At relief camps, long lines of people waited to collect rations of rice and oil. Where there were no camps, people clustered on roadsides hoping for handouts. "Help us!" was written in chalk on the side of one home.
"Please, don't wait too long," said Ma Thein Htwe, 49, who waited with dozens of other women and children at a monastery in Kyungyangon for her ration of rice.
Ko Zaw Min, 27, said not enough aid was reaching his community. Each family was given only about a pound of rice a day.
"I want to build my home where it used to stand, in the field over there," said the farmer, who lost his 9-year-old son and 1-month-old baby in the disaster. "But I have nothing."