CIL officials said that production has been stopped since Monday and all the 20 employees have been offered the VRS. As part of the VRS, each employee will be given 75 per cent of a month's salary for every year of service completed and six months salary for every year of service remaining with the company. The cost of the compensation to the company will amount to Rs 1 crore, according to the company.

Each employee will get approximately Rs 5 lakh as compensation, added the official. Most of the employees have accepted the VRS, he added.

The Rs 5 crore plant has been shut as it was found to be commercially unviable, as compared with two other plants situated at Chennai and Mumbai. Company officials said that over the years, the lube industry in India has become extremly competitive and there has also been an increase in the input cost of raw material. Following this, CIL had to review its efficiency in all its areas of business including supply chain, he added.

"As part of the review, the company decided to shut the lube plant as it was unviable, considering the high entry tax CIL has to pay for the raw materials," added the official. The plant was landlocked, thus resulting in a high cost of transportation of base oil from Chennai to Mumbai.

The company has, however, yet to decide on its future plans for the plant, machinery and land owned by it, the official added.