Govt to stop subsidy to grain-based alcohol units | mumbai | Hindustan Times
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Govt to stop subsidy to grain-based alcohol units

Severe criticism of its plans to subsidise foodgrain-based liquor units has prompted the state government to make a U-turn.

mumbai Updated: Jan 12, 2010 02:13 IST
HT Correspondent

Severe criticism of its plans to subsidise foodgrain-based liquor units has prompted the state government to make a U-turn.

The government has decided to stop cash subsidy to some foodgrain-based alcohol distilleries and has said it will not allow any new units to come up.

Chief Minister Ashok Chavan told journalists at Mantralaya on Monday that the decision was taken recently. “We have stayed subsidy to some of the existing units [that were granted huge amounts by the earlier government two years ago],” said Chavan. “We will not give licences to new grain-based alcohol distilleries in future.”

The state’s decision was challenged in the Bombay High Court, which had chastised the government asking, “What is an essential commodity for you — liquor or foodgrain?” The court has asked the state to file an affidavit by February 3.

The government had promised between Rs 788 crore and 1,000 crore in subsidies to over 20 distilleries — mostly run by politicians — and had already disbursed Rs 9 crore.

The move to encourage distilleries making liquor from foodgrain drew large-scale public criticism because of the shortage of grain and the use of taxpayers’ money to subsidies the units, some of which are promoted by the kin of influential politicians like former-CM Vilasrao Deshmukh.

The decision to grant subsidies to these distilleries was taken in 2007 when Deshmukh was at the helm of affairs.

Other than the units controlled by Deshmukh’s legislator son Amit, beneficiaries included distilleries run by Nationalist Congress Party (NCP) leader Mansinh Fatehsinh Naik and Dhawalapratapsinh Mohite-Patil, a relative of NCP leader Vijaysinh Mohite-Patil.

The government’s rationale was that subsidies would encourage the production of jowar and bajra and also help farmers earn money by selling substandard food grain to distilleries.

Each of the 21 units, of which only seven are functional, would get Rs 37 crore to Rs 50 crore for capital investment.

If all units were to start operations, the amount needed for subsidies would be Rs 788 crore.