NEW DELHI: The CAG report on the Delhi Excise Policy tabled during Delhi Assembly session on Tuesday said that various steps resulted in losses of varying amounts, for example: not opening retail shops in non-conforming wards (941.53 crore), failure to re-tender surrendered licenses (1890 crore), citing Covid-19-fee waiver to zonal licensees against Excise Department's advice (144 crore), failure to collect proper security deposits from zonal licensees (27 crore).
The report said that failure to enforce Rule 35 of the Delhi Excise Rules, 2010, resulted in grant of licenses to wholesalers having interests in manufacturing and wholesalers having relationships with retailers. This polluted the entire liquor supply chain with common beneficial ownership across licensees in manufacturing, wholesale, and retail.
Increase of Wholesaler Margin from 5% to 12%:
This was done saying it was necessary to compensate for a quality checking system involving setting up government-approved labs at warehouses. However, no labs were set up. Thus, the profit margin of wholesale licenses increased, while revenue went down.
No screening, upfront costs ignored:
The AAP government awarded retail liquor licenses without proper checks on solvency, financial statements, and criminal records.
Running a liquor zone required an initial investment of over 100 crore, yet no qualifying financial criteria was set. Thus licenses were given to financially weak entities, with multiple bidders reporting minimal to zero income in the last 3 years. These measures suggest proxy ownership, raising questions about political favouritism and backdoor deals.
Ignored Expert Recommendations:
The AAP government disregarded recommendations of its own Expert Committee while drafting the 2021-22 Excise Policy, with no justification recorded.
Lack of Transparency, Weak Checks, Formation of Liquor Cartels
The policy permitted a single applicant to operate up to 54 liquor vends, (previous limit was 2) - paving the way for monopolies and cartelization. Earlier, government corporations operated 377 retail vends, while 262 were run by private individuals. The new policy created 32 retail zones with 849 vends, but licenses were given to only 22 private entities - reducing transparency and fairness.
Enabling Monopolies and Brand Pushing:
AAP's policy forced manufacturers to tie up with a single wholesaler, allowing a few wholesalers to dominate the supply chain. Out of 367 registered IMFL brands, 25 accounted for nearly 70% of total liquor sales in Delhi. Only three wholesalers (Indospirit, Mahadev Liquors, and Brindco) controlled over 71% of supply. These 3 also held exclusive supply rights for 192 brands, effectively deciding which brands would succeed or fail. Consumers had fewer choices, and liquor prices could be artificially inflated. The government lost potential revenue as competition was stifled.
Violation of Cabinet Procedures:
Key exemptions and relaxations with significant revenue impact were granted without Cabinet approval or consulting the LG, violating legal procedures.
Illegal Opening of Liquor Vends in Non-Conforming Areas:
AAP's Excise Department approved liquor vends in nonconforming (residential/mixed land use) areas without mandatory approval from MCD or DDA.
Inspection teams falsely declared 4 vends in Zone 23 as being in commercial areas, in some cases applicants themselves admitted that the vends were in residential/mixed land use areas, yet licenses were issued. Due to these violations, all four illegal liquor vends were sealed by MCD in early 2022. This proves that due process was bypassed.
Lack of Transparency in Liquor Pricing:
The Excise Department allowed L1 licensees to set their own Ex-Distillery Price (EDP) for high-priced liquor, leading to price manipulation.
Violation of Testing Rules:
Public put at risk: Excise Department issued licenses even when quality test reports were missing or non-compliant with Bureau of Indian Standards (BIS) norms.
Some test reports submitted by licensees were from labs not accredited by the National Accreditation Board for Testing and Calibration Laboratories (NABL), violating FSSAI guidelines.
In 51% of foreign liquor test cases, reports were either older than 1 year, missing, or had no date - indicating QC negligence. Reports on harmful substances like heavy metals, methyl alcohol etc. were absent or ignored, raising serious safety concerns.
Weak Enforcement on Smuggling by Excise Intelligence Bureau (EIB):
EIB failed to take proactive action against smuggling, especially of country liquor which made up 65% of seized stock. They merely recorded seizures instead of taking proactive action.
FIR analysis revealed repeated smuggling patterns in certain areas, yet the government failed to act - indicating negligence/possible collusion.
Poor Data Management and Encouraging Illegal Liquor Trade:
The Excise Department maintained fragmented and basic records, making it impossible to track revenue losses or smuggling patterns. Due to supply restrictions, limited brand options, and bottle size constraints, illegal country liquor trade flourished.
Inaction on Excise Policy Violators:
The AAP government failed to penalize liquor licensees for violating Excise laws. Excise raids were conducted arbitrarily, leading to ineffective enforcement.
Failure to collect and substantiate evidence weakened cases against violators. Inspection reports were inaccurate, and Show Cause Notices were poorly drafted, making enforcement actions ineffective.
Security Label Project Abandoned, Outdated Methods Used:
The Excise Adhesive Label project (to ensure authenticity and prevent tampering) was not implemented, making the supply chain vulnerable to fraud. Instead of using modern data analytics and Al for fraud detection, AAP's excise policy relied on outdated and ineffective tracking methods.
