CHENNAI, June 8. THE Chennai-based Shriram Group has taken a significantstake in Cauvery Oil Palm Ltd, which plans to commence operating its oilpalm unit in the first week of July, according to reliable sources.

The 2.5 tonne per hour unit located at Varanavasi, Perambalur district,has been set up at a cost of Rs 4.5 crore with assistance from theTechnology Mission for oilseeds, pulses and maize. The mission hascontributed Rs 2.5 crore as machinery for the plant and the promoters havebrought in the balance, they said.

The unit will initially produce crude palm oil for supply to vanaspatiunits. The company hopes to process about 1000 - 1500 tonnes of oil palmFresh Fruit Bunches (FFBs) in the first year of operation. This is about10 - 15 per cent of the plant's capacity. Cauvery Oil Palm hopes toachieve full capacity utilisation during the third year of operation.

Cauvery Oil Palm is promoted by Dr V. Krishnamurthy who heads the BharatTechnologies Group.

The low availability of FFBs from the farms is due to the droughtconditions hitting output from the farms. Industry estimates peg oil palmacreages at about 2100 hectares with 1500 hectares in Perambalur and thebalance distributed across Tiruchi, Thanjavur and Karur districts.

However, the acreages have not increased despite subsidy assistance of Rs20,000 per hectare in the first four years of cultivation and an assuredmarket with prices of FFBs fixed at Rs 2200 per tonne, because farmerswere wary of cultivating a crop for which there was no processingfacility. In Andhra Pradesh, where oil palm cultivation was started a fewyears earlier than Tamil Nadu, over 50,000 hectares of oil palm isavailable with major players including ITC, Godrej and SICAL procuring andprocessing FFBs.

The commencement of the processing unit is expected to give a fillip tooil palm cultivation in Tamil Nadu. This marks the culmination of a morethan 15-year effort by the State Government and the private sector toencourage oil palm cultivation in Tamil Nadu, sources said.

Since the efforts by the State Government to encourage oil palmcultivation in the mid-90s, Cauvery Oil Palm is the only player in thefield in Tamil Nadu. Other corporates, including S&S Industries andEnterprises Ltd exited from oil palm cultivation after they found that theenvironment was unsustainable. The corporates were wary of committing theinvestment needed for the processing unit in the absence of sufficientacreages of oil palm plantations to meet the capacity utilisation. Thefarmers were wary of going in for oil palm cultivation in the absence of aprocessing unit.

According to industry sources the minimum economic size for the processingunit is about 15 tonnes per hour. However, in the international scenarioover 25 tonnes per hour capacity is needed for the facility to set up acogeneration unit, Palmolein extraction unit and production facility toextract vitamin A and E. All these would add to the unit's viability andcompetitiveness.