CAG Report on Delhi Liquor Policy: Key Findings and Allegations

New Delhi : The Comptroller and Auditor General (CAG) of India has released a report on Delhi’s excise policy for 2021-2022, alleging financial irregularities and policy mismanagement that led to a cumulative revenue loss of over ₹2000 crore. The report was tabled in the Delhi assembly on Tuesday by Chief Minister Rekha Gupta.

Major Allegations in the CAG Report

1. Policy Formulation Irregularities:

   • The CAG report claims that recommendations from an expert panel formed to advise on the new excise policy were disregarded by former Deputy Chief Minister Manish Sisodia.

   • The policy allegedly prioritized private wholesalers over a government-controlled entity, raising concerns over transparency and financial prudence.

2. Revenue Loss Due to Non-Conforming Areas:

   • Liquor vends were opened in “non-conforming municipal wards” without obtaining necessary permissions, resulting in a revenue loss of ₹941.53 crore.

   • These areas did not meet land-use norms for liquor sales, contributing to the financial setback.

3. Loss from License Surrender and Retendering Failure:

   • The excise department reportedly incurred a loss of approximately ₹890.15 crore due to the surrender of licenses and its failure to re-tender them.

4. Pandemic-Related Waivers:

   • An “irregular grant” of waivers to licensees during Covid-related closures caused a revenue loss of ₹144 crore.

5. Lack of Mandatory Quality Testing:

   • Several liquor wholesalers failed to submit quality test reports verifying compliance with Bureau of Indian Standards (BIS) norms.

   • Tests for water quality, harmful ingredients, heavy metals, methyl alcohol, and microbiological contamination were reportedly missing in several brands.

6. Financial Irregularities in Excise Supply Chain Information Management System (ESCIMS):

   • The CAG report flagged undue benefits of ₹24.23 crore given to the implementing agency managing ESCIMS.

   • It was found that payments were made for liquor bottles without proper barcode authentication at the Point of Sale (POS), violating contract terms.

   • Between December 2013 and November 2022, barcode authentication amounted to ₹65.88 crore, whereas the payment liability was ₹90.11 crore.

7. Previous Excise Policy (2017-21) Lapses:

   • Licenses were issued without verifying solvency, financial statements, wholesale price data, or criminal records.

   • Multiple licenses were granted to entities with common directorships, violating established regulations.

8. Non-Transparent Pricing of Liquor:

   • Wholesalers (L1 licensees) were granted excessive discretion in setting the Ex-Distillery Price (EDP), leading to manipulated pricing.

   • Higher EDP in Delhi compared to neighboring states resulted in reduced sales and excise revenue losses.

9. Failure to Curb Liquor Smuggling:

   • The Excise Intelligence Bureau (EIB) failed to effectively prevent liquor smuggling.

   • Country liquor accounted for 65% of seizures, highlighting enforcement inefficiencies.

   • The lack of standard operating procedures for inspections weakened regulatory efforts.

10. Issues in the New Excise Policy (2021-22):

    • Key decisions were taken without required approvals from the Delhi Cabinet and the Lieutenant Governor.

    • Retail liquor licenses were limited to 22 entities, allowing a few players to control the market.

Political Reactions

Following the report’s release, opposition leaders have intensified their criticism of the previous Aam Aadmi Party (AAP) government, accusing it of financial mismanagement and corruption. BJP leaders have demanded accountability and further investigation into the alleged irregularities. Meanwhile, AAP leaders, including Leader of Opposition Atishi, have dismissed the report as politically motivated, arguing that revenue losses stemmed from systemic flaws in Delhi’s excise policies before the 2021-22 overhaul.

As the Delhi assembly debates the findings, calls for an independent inquiry into the excise policy’s implementation are growing. The issue is likely to remain a focal point in the city’s political landscape in the coming weeks.