The federal government faces internal criticism over its decision to refuse a $25 million investment in fruit processor SPC Ardmona.

The federal government’s reasons for rejecting a plan to support ailing fruit processor SPC Ardmona don’t stack up, warns a Liberal MP who believes the fruit processor’s future is on a razor’s edge.

Victorian MP Sharman Stone also fears the impact of losing SPC Ardmona in her electorate of Murray would be greater than that felt by Holden ceasing manufacturing operations in South Australia.

“We’re talking about some 750 workers here plus another 5000 linked jobs,” Dr Stone told AAP.

She maintained it was a “no-brainer” for the federal government to stump up $25 million as part of an investment deal to prop up the operations.

That would have included co-investments from the Victorian government and SPC Ardmona’s parent company Coca-Cola Amatil (CCA).

“There will be far more than $25 million needed for welfare if all these jobs go,” Dr Stone said, adding she hoped CCA shareholders would stand by the Australian label.

Prime Minister Tony Abbott told SPC Ardmona management it must reinvigorate itself without government assistance.

But Dr Stone said the company had already made significant changes including a 30 per cent reduction in the workforce.

“This isn’t a wage issue, this is more about cheap imports currently allowed on Australian supermarket shelves,” she said.

Labor industry spokesman Kim Carr said there was no foundation for Mr Abbott’s suggestion that SPC Ardmona worker conditions were unreasonably generous.

He said a Productivity Commission report found labour costs appeared a relatively minor contributor to costs for the fruit processing industry.

The Australian Manufacturing Workers Union (AMWU) lashed out at the government for encouraging workers to make concessions on pay and conditions, while the Electrical Trades Union pleaded with CCA not to close the factory.

SPC Ardmona plans to review its operations as a result of Thursday’s decision and Victorian Deputy Premier Peter Ryan says the government is keen to discuss with the company a plan to secure its operations.

“The Goulburn Valley is the food bowl of Australia and food production and manufacturing in the region has a very positive outlook with potential to grow exports and create new jobs,” Mr Ryan said.

But Victorian fruit growers fear dire consequences for the Shepparton region.

“The town is going to be decimated because so many industries rely on the fruit industry, it’s not just fruit growers,” local industry spokesman Gary Godwill told AAP.

Dr Stone says she has expressed her disappointment to Mr Abbott and says it is not the first time she’s been at odds with her party.

“People have told me today that I should throw it in and become an independent, but this decision doesn’t affect my Liberal views,” Dr Stone said.

“What it makes me understand is that there is a lot of educating to do in the cabinet room.”