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The Comptroller and Auditor General (CAG) of India has exposed alarming financial mismanagement in the Delhi Excise Policy 2021-22, revealing a revenue loss of ₹2,026 crore. The report was tabled in the Delhi Assembly on the second day of the session by newly elected Chief Minister Rekha Gupta, highlighting significant deviations from policy objectives, violations in licensing, and lack of transparency in liquor pricing.
The excise policy, introduced under the Aam Aadmi Party (AAP) government, aimed to streamline liquor trade, enhance transparency, curb monopolies, and boost revenue. However, the CAG findings suggest the opposite—pointing to large-scale corruption and financial misconduct.
#WATCH | Delhi CM Rekha Gupta tables the CAG report on Excise Policy 2024.
Source: Vidhan Sabha https://t.co/b033XjJhTk pic.twitter.com/FOWwxWkvqO
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Key Findings of the CAG Report on Delhi Excise Policy
1. ₹2,026 Crore Revenue Loss Due to Multiple Irregularities
- ₹890 crore lost due to the government’s failure to re-tender surrendered liquor licenses before the policy period ended.
- ₹941 crore lost due to unauthorized exemptions granted to zonal license holders.
- ₹144 crore revenue loss attributed to COVID-19-related fee waivers, given against the Excise Department’s advice.
- ₹27 crore loss due to inadequate security deposit collection from licensees.
2. Violation of Delhi Excise Rules
- The AAP government failed to enforce Rule 35 of the Delhi Excise Rules, 2010, which prohibits wholesalers from having direct business interests in manufacturing and retail.
- This led to common ownership across manufacturing, wholesale, and retail sectors, distorting the supply chain.
3. Questionable Increase in Wholesaler Margins
- The wholesale profit margin was raised from 5% to 12% under the pretext of setting up government-approved quality testing labs.
- However, no such labs were established, leading to undue profits for liquor wholesalers while reducing state revenue.
4. Awarding Liquor Licenses Without Financial Screening
- The Delhi government granted liquor retail licenses without verifying solvency, financial history, or criminal records of applicants.
- Running a liquor zone required ₹100 crore in investment, yet no minimum financial criteria were set.
- Many license holders had little to no income in the past three years, raising suspicions of proxy ownership and political favoritism.
5. Ignoring Expert Recommendations
- The AAP government dismissed suggestions from its own expert committee while drafting the excise policy, without providing justification.
6. Formation of Liquor Cartels and Monopoly
- The policy allowed a single entity to operate up to 54 liquor vends, compared to the previous limit of 2.
- This encouraged monopolization, with only 22 private entities controlling 849 liquor stores in the city.
7. Enabling Private Control Over the Liquor Market
- Liquor manufacturers were forced to tie up with specific wholesalers, leading to a concentration of power among a few players.
- Three wholesalers—Indospirit, Mahadev Liquors, and Brindco—controlled over 71% of the liquor supply in Delhi.
- These companies also held exclusive rights for 192 liquor brands, giving them unchecked control over market availability and pricing.
8. Cabinet Violations in Policy Implementation
- Major policy relaxations, including exemptions worth hundreds of crores, were granted without Cabinet approval or consultation with the Lieutenant Governor (LG).
9. Illegal Liquor Vends in Non-Conforming Areas
- The Excise Department issued liquor shop licenses in residential and mixed-use areas without mandatory approvals from the Municipal Corporation of Delhi (MCD) or Delhi Development Authority (DDA).
- Investigations later found that some licensees admitted their outlets were in non-commercial areas, leading to the sealing of at least four illegal vends.
10. Liquor Price Manipulation
- L1 license holders (wholesalers) were allowed to set their own Ex-Distillery Price (EDP) for premium liquor, leading to unchecked price inflation.
11. Public Health Risks Due to Lax Quality Testing
- Excise authorities issued licenses without verifying quality test reports, some of which were outdated or non-compliant with Bureau of Indian Standards (BIS) norms.
- Over 51% of foreign liquor test cases lacked proper documentation, with no reports on harmful substances like heavy metals or methyl alcohol.
12. Failure to Curb Liquor Smuggling
- Despite smuggling being a major concern, the Excise Intelligence Bureau (EIB) took no proactive action.
- Smuggled country liquor accounted for 65% of all seized stock, yet no strict measures were taken to crack down on illegal sales.
13. Poor Data Management Encouraged Illegal Liquor Trade
- The Excise Department’s lack of a centralized database made it impossible to track lost revenue or identify smuggling patterns.
14. Weak Enforcement Against Excise Violations
- Liquor vendors violating excise laws faced no serious penalties, as enforcement actions were either arbitrary or ineffective.
- Inspections were poorly conducted, leading to weak legal cases against violators.
15. Abandoned Security Labeling Project
- A critical project aimed at tracking liquor authenticity and preventing tampering was scrapped.
- Instead of using modern tracking methods like AI and data analytics, the Excise Department relied on outdated, inefficient monitoring practices.
Political Reactions and Allegations
The Bharatiya Janata Party (BJP) has accused the AAP government of deliberately modifying the excise policy to benefit select private players. They claim that Manish Sisodia, the former Deputy Chief Minister, made crucial changes favoring private liquor vendors at the cost of public revenue.
BJP leaders have demanded strict action against those responsible for the financial irregularities, calling the policy a “liquor scam” that led to the loss of taxpayer money. Meanwhile, AAP leaders have dismissed the allegations, stating that the excise policy was designed to improve revenue generation and curb illicit liquor trade.
What’s Next?
With the CAG report bringing fresh scrutiny on the AAP-led government’s excise policy, further investigations are expected. The revelations could have legal and political consequences, as opposition parties continue to demand accountability for the massive revenue losses and alleged policy corruption.
As the controversy unfolds, it remains to be seen whether legal action will follow or if the matter will escalate into a larger political battle in Delhi.
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