Exposing a string of wrong decisions and omissions, a report by the Comptroller and Auditor General (CAG) has revealed the Delhi government incurred a massive loss of Rs 2,026.91 Crore because of alleged irregularities in the implementation of the now-scrapped excise policy in 2021-22.
Titled ‘Performance Audit on Regulation and Supply of Liquor in Delhi,’ (Audit Report No 1 of the year 2024)” , the CAG report is one of 14 on the previous Aam Aadmi Party (AAP) government’s performance, which was tabled in the Delhi Assembly by the new Rekha Gupta-led dispensation. The report also flagged violations in the process of issuing licences. AAP leaders, including then chief minister Arvind Kejriwal and former deputy chief minister Manish Sisodia, were arrested in the case lodged by the Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED).
The report estimated a revenue loss of Rs 941.53 Crore, citing failure to obtain timely permissions for opening liquor vends in non-conforming municipal wards — areas not designated for liquor sales under zoning laws. This led to a significant financial impact on the Delhi government’s earnings. Additionally, the Excise Department lost Rs 890.15 Crore due to surrender of licences and the department’s failure to re-tender liquor zones. The report also flagged an irregular waiver of Rs 144 Crore granted to licence holders, citing COVID-19 restrictions, a decision personally approved by Sisodia despite finance department objections. The department also failed to collect proper security deposits from zonal licences to the tune of Rs 27 Crore. Overall, implementation issues of the new policy led to a loss of revenue of approximately Rs 2,002.68 Crore.
The CAG report sparked fresh war of words between AAP and the BJP. While AAP stood firm in support of the discontinued new liquor policy, the BJP asserted that the report demonstrated how AAP had deceived and defrauded Delhi residents. The BJP has alleged that the CAG reports will reveal the ‘black deeds’ of the previous AAP government in the national capital.
The CAG Audit has covered a period of four years from 2017-18 to 2020-21 to examine Regulation and Supply of Indian Made Foreign Liquor and Foreign Liquor in Delhi, in detail. Audit observed several discrepancies in the way Excise Department monitored and regulated the supply of Liquor in NCT of Delhi.
The liquor policy was an albatross around the neck of the previous AAP government and had led to several of its leaders, including then chief minister Arvind Kejriwal and deputy chief minister Manish Sisodia, landing behind bars. The corruption allegations surrounding the policy are also seen as having played a key role in the AAP being defeated in this month’s Assembly elections and the BJP forming a government in Delhi after a gap of 27 years.
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 which do not conform to land use norms for opening of liquor vends. “The excise department suffered a loss of approximately Rs 890.15 Crore on account of licence fee from these zones owing to their surrender and failure of the department in re-tendering,” the report, tabled by the chief minister, added.
The CAG report also points to serious violations in policy implementation. It highlights the Delhi Excise Department’s failure to enforce Rule 35 of the Delhi Excise Rules, 2010, which prohibits a single entity from holding multiple liquor licences across different categories such as wholesale, retail, and HCR (hotels, clubs, and restaurants). Sources indicate that this lapse benefited select individuals.
An increase of wholesaler margin from 5 per cent to 12 per cent was justified as necessary to compensate for a quality checking system involving setting up government-approved labs at warehouses. However, no labs were set up. Thus, the profit margin of wholesale licences increased, while revenue went down, the report noted
The AAP government awarded retail liquor licences without proper checks on solvency, financial statements, and criminal records, the report observed. Running a liquor zone required an initial investment of over Rs 100 crore, yet no qualifying financial criteria was set. Thus licences were given to financially weak entities, with multiple bidders reporting minimal to zero income in the last three years. These measures suggest proxy ownership, raising questions about political favouritism and backdoor deals. The AAP government disregarded recommendations of its own Expert Committee while drafting the 2021-22 Excise Policy, with no justification recorded.
The policy further permitted a single applicant to operate up to 54 liquor vends, (previous limit was two), paving the way for monopolies and cartelisation. Earlier, government corporations operated 377 retail vends, while 262 were run by private individuals. The new policy created 32 retail zones with 849 vends, but licenses were given to only 22 private entities - reducing transparency and fairness.
The CAG also noted that the Excise Department allowed L1 licensees to set their own Ex-Distillery Price (EDP) for high-priced liquor, leading to price manipulation.
The report also highlighted that the AAP’s Excise Department approved liquor vends in nonconforming (residential/mixed land use) areas without mandatory approval from MCD or DDA. - Inspection teams falsely declared 4 vends in Zone 23 as being in commercial areas, in some cases applicants themselves admitted that the vends were in residential/mixed land use areas, yet licenses were issued. Due to these violations, all four illegal liquor vends were sealed by MCD in early 2022. This proves that due process was bypassed.
The report also pointed out key exemptions and relaxations with significant revenue impact were granted without Cabinet approval or consulting the LG, violating legal procedures.
According to CAG, violating of testing rules has put public at risk. The Excise Department issued licenses even when quality test reports were missing or non-compliant with Bureau of Indian Standards (BIS) norms. Some test reports submitted by licensees were from labs not accredited by the National Accreditation Board for Testing and Calibration Laboratories (NABL), violating FSSAI guidelines.
“In 51 per cent of foreign liquor test cases, reports were either older than one year, missing, or had no date - indicating QC negligence. Reports on harmful substances like heavy metals, methyl alcohol etc were absent or ignored, raising serious safety concerns,” it said. The CAG stated that Excise Intelligence Bureau (EIB) failed to take proactive action against smuggling, especially of country liquor which made up 65 per cent of seized stock. They merely recorded seizures instead of taking proactive action.
“It was observed that licenses were issued without ensuring solvency, submission of audited financial statements, submission of data regarding sales and wholesale price declared in other states and across the year, verification of criminal antecedents from the competent authority etc as required under the Rules,” it added.