Liberal MP Sharman Stone has said it is “breathtaking” that some of her party colleagues would allow the fruit processing firm SPC Ardmona to fold, accusing them of failing to properly understand the realities of free market economics.

Stone, MP for the Victorian rural electorate of Murray, told Guardian Australia she is “very concerned” SPC won’t get the $25m it has requested from the federal government.

SPC is the last major fruit processing operation in Australia. It utilises more than 100 fruit growers around the Victorian city of Shepparton, although this number has been significantly reduced due to the company’s parlous financial situation.

Stone said there were a number of misconceptions about SPC’s request for government assistance, suggesting that some cabinet members did not fully appreciate how the concept of free trade impacted Australian industries.

“There was a lot of leaking from the last cabinet meeting suggesting that this is a subsidy,” she said. “Well, no it’s not. A subsidy is an ongoing government injection of money to survive – this is a one-off co-investment in a plant and equipment. It’s a different story.

“SPC is the last standing fruit manufacturer and it has been hit by extraordinary conditions such as the high dollar and the dumping of cheap products in Australia. We shouldn’t rule out assistance due to dogma.

“There is no such thing as free trade, especially internationally. To pretend there is, to close your eyes to circumstances that obliterate industries, is breathtaking. Some of my colleagues, if you go through question time responses, make it sound as if we have a completely free trade situation and that if you don’t survive it’s just because you’re not competing. If you understand economics, you realise that’s not the case.”

Stone said she understood prime minister Tony Abbott’s concern about spending more money, but added: “It’s concerning but I’m sure on reflection he will realise it’s not a subsidy. I know he realises the importance of the rural economy and that it’s better to have people paying taxes than being on the dole.

“I think [industry minister] Ian Macfarlane understands the importance of manufacturing in Australia, but for others to write off a $25m investment and allow so many jobs to go in north Victoria is absurd. I know some cabinet members are supportive but others have a misunderstanding of the situation.”

Abbott has already signalled his reluctance to fund struggling businesses, declaring in December that he was loath to consider requests for subsidies and that “we don’t believe in corporate welfare”.

It’s anticipated that SPC’s funding request will be discussed at a cabinet meeting this month. The company is seeking $25m from the federal government and $25m from the Victorian government, amid concerns that the 100-year-old business could close, costing about 3,000 jobs in the region, this year if it does not get the money.

Bill Shorten, the Labor leader, said Stone’s position on the issue showed there were divisions within the Liberal party.

"We have seen Sharman Stone, a Liberal senior member of parliament, say that SPC should be protected. We will have to hear if [the treasurer] Joe Hockey is going to give in to her or not," he said.

A spokeswoman for SPC said: “SPC Ardmona appreciates the support and leadership that Sharman Stone has shown on behalf of our industry, growers and community in the Goulburn Valley.

“We remain hopeful that both state and federal government will see the importance of funding this co-investment to support the transformation and growth of fruit and vegetable manufacturing in Australia.”