AAP's liquor policy caused ₹2,002 cr revenue loss: Key highlights from CAG report tabled in Delhi Assembly

Delhi Chief Minister Rekha Gupta tabled the Comptroller and Auditor General (CAG) report titled ‘Performance Audit on Regulation and Supply of Liquor in Delhi’ in the assembly on Tuesday, February 25. 

The report is one of the 14 CAG reports about the performance of the previous Aam Aadmi Party (AAP) administration that the Bhartiya Janata Party (BJP) government in the national capital plans to table in the Delhi assembly.

Eight Chapters on Lapses

The 208-page report, divided into eight chapters, highlights the lapses in implementing the now-scrapped Delhi excise policy, which eventually led to a loss of approximately ₹2,002 crores to the Delhi government.

The revenue loss includes about ₹941.53 crore due to not taking timely permissions, ₹890.15 crore due to re-tendering of surrendered zones not done, ₹144 crore owing to irregular grant of waiver on account of COVID to zonal licensees and ₹27 crore loss due to incorrect collection of security deposit from zonal licensees, the report says. 

The CAG report, accessed by Mint, says that while the common man bore the cost, Aam Aadmi Party (AAP) leaders received ‘kickbacks’. It also points out the glaring lapses, policy violations, and questionable decisions favouring certain entities while sidelining due process.

“It is amazing to know that the CAG report has not been tabled in the assembly after 2017-18. In this regard, the then LoP, i.e. me and five other opposition leaders, had requested the President, Speaker of the assembly, CM, and Chief Secretary to table the report. It was much needed to obtain the financial condition of the state. Unfortunately, the CAG report was not tabled, and the previous government violated the Constitution,” said Delhi Legislative Assembly Speaker Vijender Gupta after the report was tabled.

The eight chapters in the report, apart from an introduction, are titled Excise Supply Chain Information Management System, Issue of Licenses, Pricing of IMFL and FL, Violation of Quality Norms, EIB and Confiscation, Enforcement, and Excise Policy 2021-22.

What does the CAG report reveal?

The executive summary mentions the issues in the excise policy in A) four years between 2017 and 2021, among the issues that the summary highlights include violations in the award of licenses, lack of transparency in the pricing of Indian-made foreign Liquor (IMFL), inadequate quality control, weak regulatory functioning, poor execution of the enforcement function, and lacunae in end-to-end inventory tracking.

The report also mentions B) issues in the new excise policy (2021-22). It highlights issues such as infirmities in the formation of the excise policy, issues and design in awarding licenses, and issues of implementing the excise policy.

“Despite being mentioned in the conditions of the tender document that any commercial risk shall lie with the licensee, the clarification provided during the pre-bid meeting that there is no provision for force majeure and against the opinion of the excise department to relax the license fees, a waiver of license fees of ₹144 crores was granted to the zonal licenses on the basis of COVID restrictions (December 28, 2021 to January 27, 2022) resulting in loss of revenue to the government,” reads the report.

The Delhi Excise Policy, introduced in November 2021, was pitched as a game-changer for Delhi’s liquor market. However, the policy faced criticism amid allegations of corruption and financial irregularities. Top AAP leaders in the Delhi government, including Arvind Kejriwal and Manish Sisodia, were arrested in the case and eventually released on bail.

₹890.15 crore loss due to license fees from zones

“The Excise Department suffered a loss of approximately ₹890.15 crore on account of license fee from these zones owing to their surrender and failure of the Department in re-tendering. Loss of Excise revenue has been calculated on the basis of actual license fee for the months for which surrendered zones were non-operational and after accounting for the waiver offered on account of non-conforming ward," the report reads.

Apart from the above three, incorrect collection of security deposits from zonal licensees led to a revenue loss of around ₹27 crore, the report says. “Therefore, these implementation issues of the new policy led to a revenue loss of approximately ₹2,002 crores,” it reads.  

“Excise policy aimed to eradicate the sale of spurious liquor and check bootlegging. However, important measures that were planned in the policy, like setting up liquor testing laboratories, batch testing for rigorous quality assurance, and monitoring and regulation through the creation of a dedicated post, were not ensured,” the document reads.   

‘GoM changed recommendations of expert panel’

The report also claims that the group of Ministers (GoM), headed by then Deputy Chief Minister and Excise Minister Manish Sisodia, changed the recommendations of the expert committee formed to formulate the policy. Manish is an accused in the case and is out on bail after spending 17 months in jail. 

The GoM, it alleges, decided against the recommendation of the panel and allowed private players to handle wholesale liquor operations, introduced one time bidding instead of lottery system to allocate vends and thus allowed bidders to have 54 vends against recommended two per individual, it said.

Some decisions with revenue implications were taken without Cabinet's approval and without L-G's opinion. Some of these decisiions, says the report, included relaxation from coercive action against defaulter licensees, waiver in license fee, refund of earnest money deposit in case of airport zone, correction in formulae to calculate maximum retail price of foreign liquor.

“Audit noted that due to a number of issues ranging from weak policy framework to deficient implementation of the policy, as discussed in this Chapter, there was cumulative loss of approximately ₹ 2,002.68 crore” the report reads.