Thiruvananthapuram: The Kerala government on Monday cancelled the sanction for setting up new breweries and a distillery in the state over which corruption charges have been levelled by the Congress-led UDF opposition.

Days after rejecting the charges, Chief Minister Pinarayi Vijayan said the government cancelled the sanction accorded to avoid further "confusion" over the issue at a time when everybody had to stand united for rebuilding the state after the devastating floods.

The CPI(M)-led LDF government's decision came hours after the United Democratic Front (UDF) announced a state-wide agitation over the issue, alleging "nepotism" and "corruption" in awarding sanction for the breweries and distillery.

The UDF has alleged that corruption to the tune of crores of rupees had taken place in sanctioning the breweries and distillery, and demanded a comprehensive probe into it.

However, the chief minister reiterated there was nothing wrong in sanctioning the new breweries and distillery, and accused the Opposition of trying to create a "smokescreen" and tarnish the image of the government over the issue.

Vijayan, who had last week strongly defended the grant of the sanction, made it clear that the government would continue its policy of giving permission for new breweries and distilleries. It was not in violation of the declared liquor policy of the ruling Left Democratic Front (LDF), he said.

"It has been decided to cancel the sanction given for new breweries and distillery in the state. But, it does not mean that the government will step back from allowing such facilities in the state," he told reporters here.

At present, 40% of total beer requirement and eight per cent of Indian Made Foreign Liquor (IMFL) needed for the state are procured from neighbouring states, the chief minister said.

"So, the government still feels that new breweries and distilleries are essential...interested parties can apply for sanction which will be given after the necessary technical inspection," he said.

Terming the controversy over the new breweries as "baseless" and "unnecessary", Vijayan alleged the opposition had attempted to create suspicion among the public.

Leader of the Opposition in the state assembly Ramesh Chennithala welcomed the government decision but stood by his allegation of corruption in the grant of the sanction. He said the Left government had been exposed on the issue.

The government had decided to cancel the sanctioning of breweries and distillery as it had been "caught red-handed" for "corruption", he said.

Chennithala also wanted a comprehensive probe into the grant of the sanction and said the agitation demanding the resignation of Excise Minister TP Ramakrishnan would continue.

He had earlier alleged that the new breweries and distillery were sanctioned through the "back door" without making any changes in the LDF's declared liquor policy.