Dairygold says the industry has "significant over-capacity"

The Dairygold factory at Felinfach, near Lampeter, has shut with the loss of 115 jobs.

Politicians have called for the repayment of a �663,000 assembly government grant in 2002 to help buy machinery and safeguard jobs.

The firm said it was in talks over any repayments of the grant aid.

The Irish-owned company, which set up in Felinfach with a �1.2m grant in 2001, blamed the "harsh realities of the marketplace" for the closure.

The packaging operation is moving away from its Aeron Valley industrial park site to a plant in Staffordshire.

An investigation by the BBC Radio Cymru programme Manylu found the machinery bought with the grant had been sold on to the Kerrygold company, which is part-owned by Dairygold, and is being moved on to its packing facility in Leek, Staffordshire.

The firm was an employment "lifeline" in the rural area

Ceredigion MP Mark Williams said when the announcement of the closure was made in March the job losses would have a huge impact in a rural area like the Aeron Valley.

Llanarth community councillor Tommy Evans said the factory had been an employment "lifeline" to people in the rural community.

He said: "The closure of Felinfach would be similar to the Rover factory closing in Birmingham, that's the sort of devastation it's going to cause."

"We all thought that Felinfach was going to employ more people because of the building that had gone up there.

"It's a blow to find that so soon after building a large extension at the factory they are just closing it down.

"People were devastated. There was a rumour that there was a buyer and everybody felt elated. But then nothing materialised.