The Congress-led Madhya Pradesh government has put on hold payment of pension to those who were detained under the Maintenance of Internal Security Act (MISA) during the Emergency.
The scheme had been launched by the BJP government.
A government order dated December 29 said the officials have been directed to carry out physical verification of former MISA detainees, and until this exercise is over, the monthly pension of Rs 25,000 should not be paid.
It also cited auditors' objections to the scheme.
The BJP said it will oppose the decision.
"Great injustice has been done to the people from all sections of society who had opposed and suffered a lot during the Emergency that had been imposed to hound people and stifle the democracy," said state BJP general secretary V D Sharma.
"The victims were not affiliated to a particular ideology," he said, adding that "we are going to oppose the Congress government's decision tooth and nail".
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Congress spokesperson Narendra Saluja said the order does not scrap the pension scheme but only talks about a necessary exercise prior to the disbursement of money. The BJP was raising hue and cry for no reason, he said.
Congress sources, however, said that party leaders believed that most of the beneficiaries of the pension were affiliated to the BJP or the Sangh parivar.
The MISA pension costs Rs 70 to 75 crore to the state coffers annually, according to government sources.
During the Emergency imposed by the Congress government led by then Prime Minister Indira Gandhi between 1975 to 1977, thousands of people were detained under MISA across the country.
Those detained included, mainly, members of opposition parties as well as organisations such as the Rashtriya Swaymsevak Sangh (RSS).
The pension scheme -- called Loknayak Jayprakash Samman Nidhi -- was started by the BJP government led by Shivraj Singh Chouhan in the state in 2008. It was enshrined into a law last year.
Former chief minister Babulal Gaur, who was detained for 19 months during the Emergency and who gets pension under the scheme, said he would not comment on the issue.