NEW DELHI: The Delhi government’s ambitious 2021-22 excise policy, which promised transparency and revenue optimisation, has now been laid bare as a financial disaster.
A recent Comptroller and Auditor General (CAG) report tabled in assembly by the newly formed BJP led city government, reveals that the policy not only failed in its intended objectives but also inflicted a staggering loss of over Rs 2000 crore on the exchequer.
One of the primary objectives of the policy was to curb monopoly and cartel formation. However, the report highlights inherent flaws in its design that facilitated exclusivity arrangements between manufacturers and wholesalers. Instead of broadening competition, the new framework restricted the number of licensees, increasing the risk of monopolisation.
According to the CAG, wholesale licenses for Indian Made Foreign Liquor (IMFL) and Foreign Liquor (FL) were granted to just 14 business entities under the new policy. In contrast, the previous policy (2020-21) had licenses distributed among 77 IMFL manufacturers and 24 FL suppliers.
The report also found that the retail sector was equally skewed. Under the new regime, Delhi was divided into 32 retail zones, each containing at least 27 wards. A total of 849 vends were licensed to only 22 entities, a stark contrast to the previous system where 377 retail vends were operated by four government corporations and 262 were allotted to private individuals.
The CAG report underscores significant financial mismanagement. It states that retail licensees, limited in number, disrupted supply chains by surrendering their licenses prematurely.
The government failed to mandate advance notice before surrender, leading to severe supply disruptions and an estimated revenue loss of `890 crore as the surrendered licenses were not retendered.
Further, the government’s failure to open vends in non-conforming wards, a crucial requirement for equitable liquor distribution, resulted in additional revenue losses of Rs 941 crore due to exemptions given to zonal licensees.
Key Details
Failure to enforce Rule 35 of the Delhi Excise Rules, 2010
The policy created 32 retail zones with 849 vends, but licenses were given to only 22 private entities - reducing transparency and fairness.
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.
Key exemptions and relaxations with significant revenue impact were granted without Cabinet approval or consulting the LG, violating legal procedures.
