CAG report tabled in Assembly REVEALS Delhi government suffered losses of Rs... due to liquor policy

The Delhi government suffered cumulative losses of over Rs 2,000 crore due to the 2021-2022 excise policy for reasons ranging from weak policy framework to deficient implementation, according to a CAG report tabled in the assembly on Tuesday.

The report, one of 14 on the previous Aam Aadmi Party government’s performance to be tabled by the new Rekha Gupta-led dispensation, has also flagged violations in the process of issuing licences. It has pointed out that recommendations of an expert panel, formed to suggest changes for the formation of the now scrapped policy, were ignored by then deputy chief minister and excise minister Manish Sisodia.

The report on the alleged liquor scam, a hot-button issue in the run-up to the elections, claimed a loss of revenue to the tune of Rs 941.53 crore, saying timely permissions were not taken for opening the liquor vends in “non-conforming municipal wards”.

Non-conforming areas are areas that do not conform to land use norms for opening liquor vends. "The excise department suffered a loss of approximately Rs 890.15 crore on account of license fee from these zones owing to their surrender and failure of the department in re-tendering," the report, tabled by the chief minister, added.

Besides, there was a loss of revenue to the tune of Rs 144 crore due to an "irregular grant" of waiver to the licensees because of Covid pandemic-related closure, the report said.

The alleged irregularities in the formulation and implementation of the policy had snowballed into a political punching bag used by the BJP after Lt Governor V K Saxena recommended a CBI probe in July 2022. Top leaders of AAP, including Arvind Kejriwal, Sisodia, and Sanjay Singh, have spent months in jail after probe agencies arrested them in the case.

The report said the Master Plan Delhi-2021 prohibited the opening of liquor vends in non-conforming areas, but the Excise Policy 2021-22 mandated opening at least two retail vends in each ward.

According to the report, the tender document for opening new vends had said no liquor stores would be located in a non-conforming area. In case, a vend was in a non-conforming area, it had to be considered with the prior approval of the government, said the report.

"The excise department did not take timely action to work out modalities for proposed vends in non-conforming areas and the initial tender was floated on June 28, 2021, without taking comments from the DDA and MCD,” it said.

Licences were allotted in August 2021 even before this issue was sorted out and the vends were scheduled to start operations from November 17, 2021. Meanwhile, the Delhi Development Authority (DDA) issued an order on November 16, 2021, disallowing vends in non-conforming areas, it said.

The licensees then approached the high court. On December 9, 2021, the court exempted them from paying any licence fee in respect of mandatory vends in 67 non-conforming wards. This resulted in the exemption of licence fee of Rs 114.50 crore per month.

"Non-sorting of this issue before notice inviting tender (NIT), resulted in this exemption and a cumulative loss of nearly Rs 941.53 crore," said the CAG report.

The report pointed out that 19 zonal licensees had surrendered their licences before the policy expired in August 2022 -- four in March 2022, five in May 2022, and 10 in July 2022.

However, no re-tendering process was initiated by the excise department to operationalise the retail vends in these zones. Consequently, no excise revenue accrued as licence fees from these zones in the months after surrender. Notably, no other contingent arrangement was put in place to continue liquor retail in these zones.

The licensees sought a waiver from the excise department, citing the Covid restriction from December 28, 2021, to January 4, 2022. The high court in its order on January 6, 2022, asked the department to pass a reasoned order on the matter.

The excise and finance departments after examining the matter proposed that proportionate waiver in license fee due to Covid restrictions may not be considered as there is no provision in the tender document for it, said the report.

"This proposal was turned down by the Minister in charge of the Department and grant of waiver to each Zonal licensee for the closed vends during the period from 28 December 2021 to 27 January 2022 was approved," it said.

The approval was given by the minister (Manish Sisodia) with the reason that the government had given the benefit of pro-rata fee waiver to hotels, clubs, and restaurants (HCR) during the Covid lockdown, it said.
"This resulted in the loss of approximately pro-rata Rs 144 crore to the government," the report claimed.

The report further noted a loss of Rs 27 crore owing to the "incorrect" collection of security deposits from the licensees.

The report stated that the group of ministers (GoM), headed by then deputy CM and excise minister Manish Sisodia, changed the recommendations of the expert committee formed to formulate the policy.
Going against the recommendation of the committee, the GoM allowed private parties to handle wholesale liquor operations and introduced one-time bidding instead of a lottery system to allocate vends, allowing bidders to have 54 vends against the recommended two per individual, it said.

According to the report, certain decisions with revenue implications were taken without having the approval of the Cabinet and the opinion of the lieutenant governor. These included relaxation from coercive action against defaulter licensees, waiver in license fee, refund of earnest money deposit in case of airport zone, and 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...there was a cumulative loss of approximately 2,002.68 crores" the CAG said in the report.

The BJP has been alleging that the reports were withheld by the AAP administration.

Delhi Chief Minister Rekha Gupta had announced last Thursday that the reports would be made public in the first session under the new government. The pending CAG audits include reviews of state finances, public health infrastructure, vehicular air pollution, liquor regulation, and the functioning of the Delhi Transport Corporation, among others.

(Except for the headline, this story has not been edited by DNA staff and is published from PTI)