Cargill threatens to shut down Paradip refinery due to power problem

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Edible oil processing company Cargill India, which markets cooking oil brands such as Sweekar, Nature Fresh and Gemini, has said, it will have to shut down its oil refinery at Paradip if the state government does not initiate steps to improve power supply to the unit.

As the cost of alternative power source is eating away profit margins, the company said, it will be difficult to run the unit in future.

“Our refinery is a continuous processing unit. Due to frequent power failure, we have incurred around Rs 4.17 crore on running our diesel generator in past 4 years. We are afraid, if this continues for some more time, it will be difficult to run the plant in future,” said a company executive in a letter to the state energy department.

The company, a subsidiary of US trading giant Cargill, has been operating a cooking oil refinery at Paradip since 2011.

It has so far invested more than Rs 130 crore in two phases in the plant, which has a capacity to produce 30,000 tonnes of oil per month.

It has a dedicated 33 Kv feeder connection, provided by Central Electricity Supply Utility (Cesu), for supply of 1950 Kw power. Between 2011 and 2013, the supply disruption to the oil refinery has been 1000 hours. In the first two months of this year, the supply disruption was 105 hours, data from Paradip electrical circle of Cesu showed.

The energy department has referred the matter to Odisha Electricity Regulatory Commission (OERC) to take further action in the matter.

The company primarily imports crude palm oil from Indonesia and Malaysia and refines it in the Paradip plant.

The refined oil is sol in the eastern and central Indian market. As power supply is a key energy requirement to run the unit, it is becoming difficult for the company to keep its profit margin intact, said the company official.

“The cost of production is too high due to such inadequate power supply. The frequent power failure causes quality deterioration of the oil produced. We are facing a lot of problem to sell the oil in the market since our rate is not competitive with the market rate,” the company official pointed out in the letter.

The company is presently running three refineries at Kandla (Gujarat), Kumkum near Pune and Paradip in the country. The combined production capacity of these three refineries is 3500 tonnes per day.