Implementation challenges related to the new liquor policy have resulted in significant financial losses exceeding ₹2,000 crore for the Delhi government, according to a report from the Comptroller and Auditor General (CAG) presented in the Delhi Assembly on Tuesday.
The report highlights that these implementation issues accounted for an estimated revenue loss of about ₹2,002 crore. Although the Excise Policy was designed to eliminate the sale of counterfeit alcohol and combat bootlegging, it failed to enforce key provisions, such as establishing liquor testing laboratories, conducting batch tests for stringent quality assurance, and creating a dedicated oversight position for monitoring and regulation.
This policy has also played a pivotal role in the legal troubles of former Delhi Chief Minister and Aam Aadmi Party (AAP) leader Arvind Kejriwal, along with former Deputy Chief Minister Manish Sisodia. Furthermore, it became a critical issue during the recent assembly elections, which saw AAP lose its governing position.
The audit report reviews a four-year period from 2017-18 to 2020-21, assessing the regulation and supply of Indian Made Foreign Liquor (IMFL) and Foreign Liquor (FL) in Delhi. It scrutinizes the supply chain of country liquor concerning confiscation operations, noting several irregularities in how the Excise Department managed and regulated the liquor supply in the National Capital Territory (NCT).
The report raises various concerns about the Excise Department’s effectiveness in fulfilling its duties. Specifically, it points out that the department failed to adhere to Rule 35 of the Delhi Excise Rules, 2010, which prohibits issuing multiple licenses of differing categories (such as Wholesaler and Retailer) to related parties. This oversight has led to several entities sharing common directorship, undermining regulatory integrity. Licenses were reportedly issued without thorough investigations into the necessary compliance with excise regulations and license issuance terms.
Furthermore, the audit highlighted that licenses were granted without confirming the solvency of applicants, requiring submission of audited financial records, or evaluating sales and wholesale pricing data from other states. It emphasized the need for strict enforcement of regulations related to cross-ownership and proxy ownership among companies seeking licenses to prevent unethical practices like cartelization in the liquor industry.
The report also noted the selective enforcement of rules during the licensing process, resulting in procedural non-compliance. It underscored the need for accountability in instances of regulatory violations.
On the quality front, the report found numerous violations of Bureau of Indian Standards (BIS) specifications in alcohol testing reports. The Excise Department issued licenses even when significant quality issues were present. Essential test reports assessing water quality, hazardous ingredients, heavy metals, methyl alcohol, and microbiological factors were often missing or non-compliant.
During the review of test reports for foreign liquor, it was discovered that 51% of the analyzed reports were outdated by more than a year or lacked proper documentation. The report emphasizes the urgent need for the Excise Department to enhance its quality monitoring processes and establish strict quality standards to ensure compliance in the alcohol sector.
