Food grains worth Rs 58,000 crore are rotting away as they are not stored properly, when the country is reeling under a double-digit inflation in food prices. But there's a silver lining: at least liquor manufacturers could benefit from this height-of-misgovernance episode. That is what Bharatiya Janata Party president Nitin Gadkari believes and an activist has compiled data to substantiate it.

He was not talking through his hat when he addressed a symposium here on Wednesday. He runs Poorti Sugar Mills near Nagpur with an ethanol plant and thus he knows economics of producing alcohol from molasses, the by-product after crushing sugarcane. Hailing from Maharashtra, he knows how alcohol is produced from rotten and poor quality food grains in the state and that too under a state-sponsored racket of Rs 10 subsidy per liter.

Aurangabad-based NGO and social activist Chetan Kamble has already moved the Bombay High Court and then the Supreme Court to put an end to the subsidy racket flourishing in Maharashtra under a 2007 liquor policy. Most of the beneficiaries of the policy are close relatives of political leaders, primarily from the state's ruling coalition partners – Congress and NCP, it is alleged.

The policy provides financial relief to the grain-based distilleries to meet the rising demand for industrial spirit and potable liquor. It specifically stipulates the use of "rotten food grains" or "poor quality food grains" by such distilleries on the ground that crops often get spoilt for various reasons and they can be still put to use.

Kamble says the policy is, however, encouraging deliberate rotting of food grains to provide raw material for some 28 distilleries that have come up in Maharashtra to take advantage of the government subsidy.

"Similar is the case from all parts of the country and everywhere the food grains are allowed to rot in a deliberate attempt to divert these as raw materials for manufacturing alcohol," Kamble told a local daily, pointing out that food grains being used to make alcohol can be used to feed the poor.

When he filed a public interest litigation (PIL), the state government defended the subsidy, claiming in an affidavit last February that it was in the interest of farmers, particularly the jowar growers who can get better returns. It also stated that the subsidy was necessary to make production of alcohol from food grains more competitive compared to production from molasses.

According to Kamble, the very first project sanctioned subsidy under the scheme floated during the tenure of Vilasrao Deshmukh as chief minister belonged to his sons Amit and Dhiraj. Kamble's petition lists Amit Deshmukh as one of the stakeholders.

Another beneficiary of the scheme is former Maharashtra Pradesh Congress president and MP Givindrao Adil, who is chairman of Balapur Industries Limited. Another licensed distillery under the scheme is Dhaval Pratap Singh Mohite-Patil Agro Industries in Solapur, run by Dhaval Mohite-Patil, a relation of former deputy chief minister Vijaysingh Mohite-Patil.
Yet another licensed Solapur unit is Vithal Distilleries run by Vikram and Ranjit, sons of NCP MLA Babanrao Shinde. A son-in-law of late former prime minister P V Narasimha Rao allegedly owns Pioneer Distilleries in Nanded district.