The Delhi government’s now-cancelled excise policy for 2021–2022 contains significant financial irregularities, according to a damning assessment by India’s Comptroller and Auditor General (CAG). According to the research, policy infractions, preferential treatment for specific spirits businesses, and poor management have resulted in a revenue loss of 2,002.68 crore.
The CAG report, which was presented to the Delhi Assembly, raises severe questions regarding the integrity of the policy and its effect on state revenues by highlighting egregious license violations, cartelisation, a lack of transparency, and a deterioration in regulatory enforcement.
Major Revelations in the CAG Report:
Massive Revenue Loss Due to Policy Decisions
The report details a staggering ₹2,002.68 crore revenue shortfall due to multiple lapses, including:
- ₹941.53 crore loss due to failure in opening retail liquor shops in non-conforming wards.
- ₹890 crore loss as a result of not re-tendering surrendered licenses.
- ₹144 crore revenue impact from granting a COVID-19 fee waiver against the Excise Department’s advice.
- ₹27 crore loss due to inadequate security deposits from licensees.
Violation of Excise Rules, License Allocation Without Checks
The policy allegedly granted licenses to entities with overlapping interests across liquor manufacturing, wholesale, and retail, violating Rule 35 of the Delhi Excise Rules, 2010. This move allowed common beneficial ownership across the entire supply chain, creating monopolies and favoring select players.
Additionally, the AAP government is accused of distributing retail liquor licenses without screening applicants for solvency, financial stability, or criminal records. The report notes that running a liquor zone required an initial investment of over ₹100 crore, yet no financial eligibility criteria were set, enabling politically connected but financially weak firms to obtain licenses.
Increase in Wholesaler Profit Margins Without Justification
The CAG questions the increase in wholesalers’ margins from 5% to 12%, which was justified on the grounds of setting up quality-checking laboratories at warehouses. However, the report reveals that no such labs were ever established, suggesting that the policy was tailored to favor wholesalers at the state’s expense.
Liquor Cartels, Monopoly, and Brand Control
The excise policy permitted a single entity to operate up to 54 liquor vends, a major jump from the previous limit of just two. This led to:
- Only 22 private companies controlling 849 liquor shops across 32 zones.
- Three major wholesalers (Indospirit, Mahadev Liquors, Brindco) controlling over 71% of liquor supply.
- 70% of liquor sales concentrated in just 25 brands, with these three wholesalers holding exclusive supply rights for 192 brands, effectively deciding which products reached consumers.
The report highlights that such practices eliminated competition, reduced consumer choices, and potentially led to artificially inflated liquor prices.
Illegal Liquor Shops in Residential Areas
The Delhi Excise Department illegally approved liquor vends in non-conforming (residential and mixed land-use) areas without seeking necessary approvals from the Municipal Corporation of Delhi (MCD) and Delhi Development Authority (DDA).
In several cases, inspection teams falsely classified shops as being in commercial zones, and some applicants even admitted their shops were in non-commercial areas. Consequently, MCD sealed four such illegal vends in early 2022, exposing serious procedural violations.
Weak Enforcement, Smuggling, and Safety Lapses
The CAG report points out the failure of the Excise Intelligence Bureau (EIB) in cracking down on liquor smuggling. Despite clear patterns emerging from multiple First Information Reports (FIRs), enforcement agencies allegedly failed to take proactive measures against repeat offenders.
Additionally, the quality of liquor sold under the policy was not rigorously tested, posing risks to public health. Some test reports were missing, outdated, or sourced from non-accredited labs, violating Bureau of Indian Standards (BIS) and Food Safety and Standards Authority of India (FSSAI) guidelines.
Alleged Political Favouritism and Procedural Violations
One of the most damning allegations in the report is that significant exemptions and policy relaxations were made without seeking mandatory Cabinet approvals or consulting the Lieutenant Governor (LG). This bypassing of constitutional procedures suggests possible political interference in policymaking.
Moreover, the report states that the Delhi government ignored recommendations from its own Expert Committee while framing the 2021-22 excise policy.
Poor Data Management, Encouraging Illegal Liquor Trade
The CAG has flagged the absence of a proper data management system within the Delhi Excise Department. Basic records were missing or fragmented, making it difficult to track revenue losses, smuggling patterns, or illegal activities.
Due to supply restrictions, limited brand availability, and bottle size constraints, illegal country liquor sales flourished, further impacting state revenues.
Legal and Investigative Implications
With multiple enforcement agencies, including the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI), already probing the matter, the latest findings from the CAG are likely to add weight to ongoing legal cases.
Earlier, several AAP leaders, including Manish Sisodia, were questioned by the ED in connection with alleged money laundering related to the excise policy. The CAG report may accelerate legal proceedings and lead to further arrests or investigations.
A Policy Marred by Irregularities
A concerning image of Delhi’s now-defunct excise regime is presented in the CAG report, which emphasises policy mismanagement, a lack of due diligence, revenue losses, monopolisation, and lax enforcement.
The report’s findings will probably escalate Delhi’s political and legal disputes as investigations continue, with major ramifications for the credibility of the AAP government and its future policies. It’s unclear if this will result in criminal charges or political fallout.
Also Read: Call Merging Scam: You May Lose Money Without Sharing OTP
