The Comptroller and Auditor General (CAG) of India has released a detailed audit report on Delhi’s liquor policy for the financial year 2021-2022. The report claims that the excise policy implemented by the then Aam Aadmi Party (AAP) government led to a cumulative revenue loss exceeding ₹2,000 crore for the national capital.

The audit report, one of the 14 pending CAG reports, was presented in the Delhi Assembly on Tuesday by BJP leader and Chief Minister Rekha Gupta. The findings highlight significant irregularities, financial mismanagement, and procedural violations that have raised concerns over the policy’s implementation.

Key Findings of the 208-Page CAG Report

Ignored Recommendations of the Expert Panel

The CAG report points out that the recommendations of an expert committee, which was formed to advise on the formulation of the new excise policy, were overlooked by former Deputy Chief Minister Manish Sisodia. This deviation from expert recommendations contributed to significant revenue losses and policy mismanagement.

Revenue Loss Due to Licensing Issues

One of the major reasons for the revenue loss was the failure to obtain timely permissions for opening liquor vends in non-conforming municipal wards. Non-conforming areas are those that do not comply with land-use norms for liquor shops. Due to this oversight, the excise department suffered an estimated loss of ₹941.53 crore.

License Fee Losses and Failed Re-Tendering

The excise department reportedly incurred a loss of ₹890.15 crore due to the surrender of licenses and the failure to re-tender them in time. This indicates major inefficiencies in the policy’s execution and enforcement.

Covid-19 Waivers and Revenue Impact

The report highlights that an “irregular grant” of waiver amounting to ₹144 crore was provided to licensees due to pandemic-related closures. The manner in which these waivers were granted raised concerns over financial transparency.

Quality Control Lapses in Liquor Wholesaling

Another alarming revelation in the report is that several liquor wholesalers failed to submit the mandatory quality test reports required to verify compliance with Bureau of Indian Standards (BIS) norms. Crucial quality reports, including tests for water quality, harmful ingredients, heavy metals, and microbiological contamination, were not submitted for various brands. The responsibility for ensuring liquor quality lies with the excise department, which failed in its duty, the report states.

Financial Irregularities in Excise Supply Chain Management

The Excise Supply Chain Information Management System (ESCIMS) also faced scrutiny. The CAG report found that an undue benefit of ₹24.23 crore was given to the implementing agency responsible for ESCIMS. Additionally, payments were made for liquor bottles that were not authenticated through barcode scanning at the Point of Sale (POS). Between December 2013 and November 2022, barcode authentication amounted to ₹65.88 crore, but the actual payment liability created was ₹90.11 crore, resulting in a financial discrepancy of ₹24.23 crore.

Major Concerns in the Excise Policies (2017-2021)

  1. Lack of Proper Verification for Licenses

    • Licenses were issued without verifying solvency, financial statements, wholesale price data, and criminal records of applicants.
    • Multiple licenses were issued to related parties with common directorships, violating regulatory norms.

  2. Non-Transparent Liquor Pricing

    • Wholesalers (L1 licensees) had excessive freedom to set the Ex-Distillery Price (EDP), leading to manipulated pricing structures.
    • Higher EDP in Delhi reduced liquor sales, ultimately leading to excise revenue losses.

  3. Weak Enforcement Against Smuggling

    • The Excise Intelligence Bureau (EIB) failed to curb liquor smuggling effectively.
    • Country liquor accounted for 65% of all liquor seizures, highlighting enforcement deficiencies.
    • The lack of standard procedures for inspections weakened enforcement mechanisms.

Issues Identified in the New Excise Policy (2021-22)

  1. Expert Committee Recommendations Ignored

    • Instead of following the panel’s advice to establish a government-controlled entity for wholesale liquor distribution, private wholesalers were given control.

  2. Lack of Required Approvals

    • Major policy decisions were taken without approval from the Delhi Cabinet and the Lieutenant Governor.

  3. Market Control by Limited Entities

    • Retail licenses were restricted to only 22 entities, enabling market monopolization.

The findings of the CAG report have triggered political debates, with opposition parties accusing the AAP government of financial mismanagement and corruption in liquor policy execution. The report underscores the need for stronger governance, better regulatory mechanisms, and improved transparency in policy-making to prevent such significant revenue losses in the future.

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