A report by the Comptroller and Auditor General of India (CAG), tabled in the Delhi Assembly by the new Chief Minister, BJP’s Rekha Gupta, has revealed severe financial and administrative irregularities in the implementation of the Delhi Excise Policy of the Aam Aadmi Party (AAP)-led government in Delhi. The report alleges that lapses in policy formulation, enforcement, and regulation led to a staggering revenue loss of ₹2,002 crore.
The supply and distribution of liquor in Delhi involve multiple stakeholders, from manufacturers outside Delhi to bonded Warehouses, corporation and private vends, hotels, clubs, and restaurants, ultimately reaching the consumers. The Excise Department collects revenue through excise duty, license fees, permit fees, and import/export fees, making the regulation of liquor supply a complex task.
The CAG Report covers the period from 2017-18 to 2020-21 and includes a scathing analysis of the controversial Excise Policy 2021-22, which was subsequently withdrawn on September 1, 2022 and led to the arrest of prominent AAP leaders such as Arvind Kejriwal and Manish Sisodia.
Issues in Excise Policy 2017-21
The CAG audit highlighted multiple discrepancies in the issuance and regulation of licenses by the Excise Department. It alleges that the Department failed to enforce Rule 35 of the Delhi Excise rules, which prohibits issue of multiple licenses of different categories such as wholesaler, retailer, hotel clubs and restaurants (HCRs), which led to multiple licenses being issued to related parties, fostering build-up of cartels in liquor trade. It also said that the licenses were given without verifying solvency, audited finances, wholesale price declarations, and criminal antecedents. The report also suggested manipulation of the pricing as the administration’s decision for discretionary Ex-Distillery Price (EDP) declarations under the policy allowed wholesalers to inflate liquor prices arbitrarily, causing revenue loss.
Furthermore, many liquor brands did not meet Bureau of Indian Standards (BIS) norms, with some reports being outdated, non-compliant, or missing altogether, as per the audit.
The audit report also cited a failure in enforcement of the policy, claiming that the Excise intelligence Bureau (EIB) failed to act as a deterrent against liquor smuggling, leading to rampant illegal trade, especially in country liquor. The administration failed to efficiently utilise the Excise Supply Chain Information Management System (ESCIM) which resulted in faulty real-time tracking of liquor, leading to data discrepancies and potential tax evasion.
Issues in Excise Policy 2021-22
The CAG report also exposed significant deficiencies in the formation and implementation of the Excise Policy in 2021-22, which introduced to revolutionise the liquor trade in Delhi. The report claimed that the recommendations from the Expert Committee were ignored in the formation of the Excise Policy, such as maintaining a state-owned wholesale entity and steps to avoid monopolization in the trade. The report mentioned that of 367 registered Indian Made Foreign Liquor brands, 25 accounted for nearly 70% of total liquor sales in Delhi and very few popular ones formed the bulk of sales volume.
Several implementation lapses led to a revenue loss of ₹2,002 crore. The government suffered a ₹890 crore loss due to failure to retender surrendered licenses, ₹941 crore loss due to unwarranted waiver of license fees, and ₹27 crore loss due to incorrect security deposit collection. Additionally, planned quality control measures like liquor testing laboratories and batch testing were not implemented, which undermined efforts to curb spurious liquor distribution.
Moreover, “despite being aware that vends were required to be opened in non-conforming wards (which do not have areas conforming to land use norms) for opening of vends in order to achieve the objective of equitable distribution, the Department did not take timely action to work out modalities leading to non-achievement of the objective. It also resulted in loss of revenue of approximately ₹ 941 crore due to exemptions which had to be given to the zonal licensees” according to the report.
The report underscored the need for a transparent and robust regulatory framework in the Delhi Excise Department. The audit calls for stricter compliance enforcement to prevent cartelization and manipulation of liquor pricing, better quality assurance mechanisms to ensure liquor sold in Delhi meets BIS and Food Safety and Standards Authority of India (FSSAI) standards, enhanced enforcement and intelligence efforts to combat liquor smuggling and illegal trade, real-time barcode tracking systems which the previous administration failed to properly utilise, and policy reforms to ensure fair market competition and maximise government revenue.
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Manbilas Singh is a talented writer and journalist who focuses on the finer details in every story and values integrity above everything. A self-proclaimed sleuth, he strives to expose the fine print behind seemingly mundane activities and aims to uncover the truth that is hidden from the general public. In his time away from work, he is a music aficionado and a nerd who revels in video & board games, books and Formula 1.
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