NEW DELHI: A performance audit report by the Comptroller and Auditor General (CAG) of India has brought to light major irregularities in the regulation and supply of liquor in Delhi. The report, submitted to the Lieutenant Governor of Delhi, examines licensing, pricing policies, quality control, and enforcement practices under the Delhi Excise Department from 2017-18 to 2020-21, including the controversial Excise Policy 2021-22, which was withdrawn in September 2022.
Key Findings of the Report
- Licensing Irregularities and Violation of Rules
The Excise Department issued multiple licenses to related parties in violation of the Delhi Excise Act, ignoring regulations on cross-ownership and cartel formation.
Licenses were granted without verifying criminal antecedents, solvency, or legal possession of premises.
Certain licenses were issued without mandatory approvals from the Tourism Department, fire safety insurance, and CCTV surveillance.
Foreign Liquor (FL) and Indian Made Foreign Liquor (IMFL) licenses were granted despite the failure to submit quality test reports compliant with Bureau of Indian Standards (BIS) norms.
- Financial Mismanagement and Revenue Loss
The government suffered a revenue loss of โน2,026.91 crore due to policy mismanagement and irregularities.
Excise duty was delinked from actual sales, leading to a drop in revenue collection.
Retail licenses were surrendered before the policy period ended, yet the government failed to re-tender these licenses, leading to a loss of โน890 crore.
โน941 crore in revenue was lost due to exemptions granted to zonal licensees.
- Monopoly Risks and Brand Favoritism
The new policy restricted wholesale licenses to 14 entities, compared to 77 under the previous policy, increasing risks of monopolization.
The formation of retail zones covering 27 wards each limited competition and enabled cartelization.
Cases of related businesses holding licenses across the supply chain suggested exclusivity arrangements and brand pushing.
- Weak Regulatory Enforcement and Quality Control Failures
Inspection procedures were poorly implemented, with inconsistent stock reports and weak tracking mechanisms.
The Excise Intelligence Bureau (EIB) failed to track repeat defaulters, and its data was not used for enforcement actions.
Fake and expired barcodes were found in liquor vends, but enforcement failed to act decisively.
Quality control measures were weak, with deficient test certificates and a lack of monitoring on adulterated liquor.
Excise Policy 2021-22: A Failed Reform?
The Excise Policy 2021-22 was designed to bring transparency and eliminate monopolies, but the CAG audit found that:
The policy ignored key recommendations of the Expert Committee regarding license distribution.
The Cabinet and Lieutenant Governorโs approval was not obtained for critical policy exemptions.
The government did not take corrective actions despite early signs of implementation failure.
Ongoing Investigations and Future Implications
The CBI and Enforcement Directorate (ED) are currently investigating potential corruption linked to the Excise Policy 2021-22. Due to these investigations, many documents were not made available for audit, raising further concerns about the policyโs transparency.
Recommendations for Reform
The CAG report suggests:
Strict enforcement of licensing rules, with background checks and financial scrutiny.
Transparent and competitive pricing mechanisms to prevent monopolization.
Real-time tracking of liquor sales using barcode technology.
Strengthening of the Excise Intelligence Bureau (EIB) for better enforcement.
Independent audits and public disclosures on revenue collection and policy impact.
The CAG audit exposes significant flaws in Delhiโs liquor regulation framework, highlighting financial mismanagement, enforcement gaps, and monopolistic tendencies. As investigations continue, accountability measures and policy corrections will be crucial for restoring credibility to Delhiโs excise system.
