A CAG report presented in the Delhi Assembly indicated that the scrapped liquor policy implemented by the AAP government caused a loss of Rs 2,002.68 crore to the Delhi government. The policy, criticized for various financial missteps, contributed to the legal troubles of key AAP leaders and was a factor in their recent electoral defeat. Major losses stemmed from restrictions on liquor shop operations and failure to issue tenders for surrendered licenses. Additionally, the report highlighted failures in regulatory enforcement, monopoly concerns among wholesalers, and revenue losses from lower sales in government shops compared to private vendors.
New Delhi:
A report by the Comptroller and Auditor General (CAG), presented in the Delhi Assembly on Tuesday, highlights a series of misguided decisions and oversights, indicating that the liquor policy implemented in November 2021 and repealed in September the following year resulted in a loss of Rs 2,002.68 crore to the Delhi government.
This liquor policy became a significant burden for the prior AAP administration, leading to multiple leaders, including then Chief Minister Arvind Kejriwal and Deputy Chief Minister Manish Sisodia, facing imprisonment. The corruption allegations associated with this policy are also believed to have been a crucial factor in the AAP’s defeat in the recent Assembly elections, allowing the BJP to reclaim governance in Delhi after a span of 26 years.
The report, tabled amidst considerable turmoil in the Assembly—resulting in the suspension of 15 AAP MLAs—breaks down the losses into several categories. The largest portion of the loss, amounting to Rs 941.53 crore, stemmed from the restriction on opening liquor stores in non-conforming areas—locations that do not meet land use regulations for liquor sales—under the new policy.
The next significant loss, totaling Rs 890.15 crore, occurred due to the failure to issue tenders for 19 zones where licenses had been surrendered. “As a result, no excise revenue from license fees was generated from these zones following their surrender. Notably, no alternative arrangements were made to facilitate liquor retail in these areas,” the report notes.
Additionally, the report indicates a revenue loss of Rs 144 crore due to fee waivers to licensees citing Covid-19 and a Rs 27 crore loss attributed to the improper collection of security deposits from zonal licensees. The cumulative figures from these four categories equal Rs 2,002.68 crore.
Violations
The CAG report also identifies other violations, pointing out that the Delhi Excise department failed to ensure the proper enforcement of Rule 35 of the Delhi Excise Rules, 2010, which prohibits the granting of multiple licenses of various categories—wholesaler, retailer, HCR (hotels, clubs, and restaurants)—to related parties. This, according to sources, favored certain individuals.
One of the primary critiques of the liquor policy was the increase in wholesaler margins from 5% to 12%. The Enforcement Directorate additionally noted that half of this 12% margin was meant to be returned to wholesalers as kickbacks for AAP leaders. The rationale for raising the margin was linked to the requirement for licensees to establish a government-sanctioned laboratory at their warehouses for random testing of sub-standard or counterfeit liquor from manufacturers, including covering local transportation costs.
The report asserts that the local transportation charge “did not sufficiently justify the significant rise in distributor margin,” and the quality control labs “which were to be developed, reportedly with substantial expenses, were neither established nor operational.”
According to sources, this scenario fostered monopolization and cartelization.
Moreover, three wholesalers accounted for over 70% of the liquor sold in Delhi. “Out of the 367 IMFL brands provided by 13 wholesale licensees, the largest number was exclusively supplied by Indospirit (76 brands), followed by Mahadev Liquors (71 brands) and Brindco (45 brands). These three wholesalers collectively represented 71.70 percent of the liquor volume sold in Delhi,” the report claims.
Government vs Private
Another significant observation in the report was that the four top-selling whiskey brands in Delhi were offered at lower prices in government shops compared to private ones, leading to a revenue shortfall for the Delhi government.
For example, only 9.25% of Royal Stag Reserve/Premier whiskey sales occurred at government liquor shops, while private outlets accounted for the remaining 90.75%. Although Officer’s Choice Blue whiskey saw 22.04% of its sales in government shops, “MCD No 1” whiskey—which likely refers to McDowell’s No 1—experienced a mere 2.26% in government sales.