Corruption Taint Haunts AAP: Explosive Findings in CAG Report on Delhi 'Liquorgate'

New Delhi: The newly-elected Chief Minister of Delhi, Rekha Gupta, on the second day of the Legislative Assembly Session, tabled the Comptroller and Auditor General (CAG) Report on the Delhi Excise Policy. The CAG Report highlights explosive findings on Delhi ‘Liquorgate’. The report regarding the purported liquor scam, a contentious issue ahead of the elections, indicated a revenue loss of Rs 941.53 crore. 

The report noted that the necessary approvals for opening liquor stores in “non-conforming municipal wards” were not secured promptly. According to the report, which was presented by the chief minister, the excise department incurred a loss of around Rs 890.15 crore due to lost license fees from these areas, attributed to the surrender of licenses and the department's failure to re-tender them. Additionally, as per PTI, there was an estimated revenue loss of Rs 144 crore resulting from the "irregular waiver" granted to license holders due to closures linked to the Covid pandemic, the report stated.

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Corruption Taint Haunts AAP: Explosive Findings in CAG Report Tabled in Delhi Assembly

The Comptroller and Auditor General (CAG) Report tabled in the Delhi Legislative Assembly highlighted the irregularities in the Excise Policy brought by the previous Aam Aadmi Party (AAP) government, initially led by Arvind Kejriwal and then by Atishi. The report includes the performance audit on the regulation and supply of liquor in Delhi as compared to the global industry. The CAG report also uncovers the massive irregularities in the planning, tendering and execution of 'Sheeshmahal'. The misuse of public funds by Aam Aadmi Party and Arvind Kejriwal have been highlighted in the CAG Report.

According to the CAG report that was presented, the Delhi excise policy for 2021-22 aimed to streamline the liquor trade, enhance transparency, curb monopolies, maximize revenue, and improve the consumer experience. However, the goals set for this policy revision were not met. The report highlighted design flaws in the new policy, which included exclusive contracts between manufacturers and wholesalers, as well as the establishment of retail zones with a minimum of 27 wards each. 

This structure limited the total number of licenses and heightened the potential for monopolistic behavior and cartel formation. Additionally, the report pointed out that the Excise Department conducted insufficient scrutiny regarding the financial viability, management skills, and sustainability of the operators involved. Furthermore, several crucial initiatives outlined in the policy, such as the establishment of liquor testing laboratories, batch quality testing, and enhanced monitoring and regulation, were not carried out.

CAG Report Highlights Issues in Delhi ‘Liquorgate’

As per the CAG Report, the Delhi government experienced total losses exceeding Rs 2,000 crore attributed to the excise policy for 2021-2022, due to issues such as a weak policy framework and poor implementation. Several design and process issues have been seen and highlighted in the way wholesale licenses were granted. 

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Speaking about the process of awarding a license, applications were to be invited for the grant of wholesale licenses to those who fulfilled the eligibility criteria of having wholesale distribution experience in the liquor trade for at least five years and a minimum turnover of 150 crores every year for the preceding three consecutive financial years. The wholesale licenses were to be awarded on an application basis; any entity/person fulfilling the eligibility criteria could apply to get this license. It was for the competent authority to decide on acceptance or rejection of the individual application.

The audit requisition for providing all records related to the entire process was not met - the department reported that a total of 18 applications were received for the grant of wholesale licenses and indicated that one application was withdrawn by the applicant, another was rejected due to being incorrectly submitted, and two additional applications were rejected during the review process. However, the records related to these four applications were not provided for audit. Due to the absence of these records, the audit could not confirm the validity of the processes followed in these cases.

The exclusive arrangement posed an increased risk of monopoly because the policy framework stated that these wholesalers would act as distributors (not manufacturers) and could collaborate with multiple manufacturers for the supply of liquor. However, a manufacturer could only supply its brands through a single wholesaler. The audit revealed that the requirement for a compulsory tie-up restricted manufacturers from supplying their brands exclusively through a single wholesaler. As a result, under the excise policy for 2021-22, wholesale licenses were granted to only 14 business entities for the supply of Indian Made Foreign Liquor (IMFL) and Foreign Liquor (FL). In contrast, the previous policy for 2020-21 allowed 77 manufacturers of IMFL and 24 suppliers of FL to operate. This concentration of wholesale supply among a limited number of entities heightened the risk of monopoly or cartel formation, which contradicts one of the objectives of the new excise policy. 

Speaking about the revenue from wholesale operations, one of the key objectives of the new policy was to augment the state excise duty revenue. Under the earlier policy, the wholesale license fee was linked with the number of brands and their wholesale value. However, as per the new excise policy, the wholesale licensee was to pay an annual license fee of 5 crore.

On the CAG Report, Delhi Lieutenant Governor VK Saxena has said that the leaders of all departments have been instructed to create a 100-day plan along with an outline of the development works that need to be undertaken. During the first cabinet meeting of the new government, it was decided that the CAG report would be tabled in the assembly and presented to everyone. This move aims to expose the administrative failures of the previous government and assist in addressing those issues moving forward.

The BJP has accused the AAP government of concealing these reports. Last Thursday, Delhi Chief Minister Rekha Gupta stated that these reports would be disclosed during the first session of the new government. The outstanding CAG audits cover various areas, including state finances, public health infrastructure, vehicular air pollution, liquor regulation, and the operations of the Delhi Transport Corporation, among other topics.

(Inputs from PTI)