The Comptroller and Auditor General of India (CAG) has found significant lapses in the regulation of the legal supply chain for liquor products in Odisha by the Excise Commission.
The CAG has pointed out the absence of the critical ‘track and trace’ functionality to monitor the movement of liquor products from manufacture to retail point.
In its compliance audit for the year ended March 2021of the Departments of Excise, Finance and Revenue and Disaster Management (Report Number 5) laid in the State Legislative Assembly on December 2, the auditing agency pointed out that no software application or mobile app had been developed to empower the end consumer of liquor products in Odisha to scan the Excise Adhesive Labels (EALs) affixed on liquor products at retail point to ascertain the EAL as genuine,the product safe for human consumption and Government taxes had indeed been paid.
The report further said that such an application would have also enabled the Officers of the Enforcement Wing of the Excise Commission to scan the EALs affixed on liquor products at any point during the movement through the legal supply chain and verify the specific routing from source to destination. The EALs are required to be affixed on all liquor products, to enable ‘track and trace’ functionality through the legal supply chain.
Another significant lapse commented on by the CAG is the inordinate delay in implementation of the EAL Accounting Module in the supply chain management software, which had been scheduled to be completed by 2014, but had not been implemented even by end of 2022.
The CAG clarified that manufacturers located outside Odisha State had not supplied liquor products commensurate with the number of EALs which they had been issued, and not even renewed their licences during subsequent financial years. There was a material risk that such EALs may have been diverted for use by manufacturers located within Odisha, who could then affix them on their liquor products which were the result of excess production not reported to the Excise Commission.
Other significant irregularities identified were flow meters have not been installed at the distilleries and breweries, to ascertain the actual production of liquor products. The Excise Commission has instead been accepting production figures reported through manual registers maintained by the distilleries and breweries, without any cross verification with system generated production records. This lack of internal control resulted in the material risk of manufacture and sale of liquor products without payment of Excise Duty and Value Added Tax.
The agency slammed the poor documentary and storage controls in the depots of the Odisha State Beverages Corporation Limited (OSBCL). No norms had been adopted for spoilage (no refrigeration facilities for beer at its depots for example, and liquor products exposed to rain and sun in some cases), breakage or pilferage. The OSBCL does not adequately monitor the loss of liquor products from its depots, which results in loss of VAT, the report observed.
The CAG highlighted that there is a crippling shortage of Excise Officers and hence, a significant number of vacancies in the Excise Commission. In the absence of CCTV cameras to monitor and record the footage of the production line at distilleries/ breweries, the visiting officers were not in a position to review footage of the production shifts which had taken place from the time of their last visit.
There are adequate provisions in the Odisha Excise Rules 2017 (such as
Rule 158) to address the above lack of internal controls. However, gross non-compliance with the Odisha Excise Rules 2017 by the liquor manufacturers, the Odisha State Beverages Corporation Limited and liquor retailers, as well as the lack of effective enforcement of the rules by the Excise Commission have contributed to large scale irregularities.