A recent report by the Comptroller and Auditor General of India (CAG) has highlighted that the now-defunct liquor policy introduced by the previous Aam Aadmi Party (AAP)-led Delhi government led to a revenue loss of Rs 2,002 crore. The findings were presented in the Delhi Assembly by Chief Minister Rekha Gupta, amid strong opposition from AAP legislators, resulting in their suspension from the session.

The liquor policy, which was scrapped following allegations of financial misconduct, has been at the center of a major controversy, leading to the arrest of senior AAP leaders, including party chief Arvind Kejriwal, former Deputy Chief Minister Manish Sisodia, Rajya Sabha MP Sanjay Singh, and former Delhi Minister Satyendar Jain.

The current Bharatiya Janata Party (BJP)-led government in Delhi has committed to tabling all 14 pending CAG reports during the ongoing Assembly session.

The CAG report, which examined financial activities between 2017-18 and 2020-21, pointed out several key shortcomings. One of the major concerns was the government’s inability to recover Rs 890 crore due to its failure to re-tender surrendered liquor licenses. Additionally, delays in necessary actions resulted in further losses of Rs 941 crore due to exemptions granted to zonal licensees.

A particularly contentious aspect of the report was the Rs 144 crore waiver granted to liquor licensees for the period between December 28, 2021, and January 27, 2022, under the pretext of COVID-19 restrictions. The CAG noted that this waiver conflicted with the Excise Department’s own stance, further exacerbating revenue losses. Moreover, discrepancies in the collection of security deposits from zonal licensees led to a shortfall of Rs 27 crore.

Key Irregularities Highlighted in the Report

Issues in Licensing Procedures: The audit found that the AAP government did not enforce Rule 35 of the Delhi Excise Rules, 2010, which prohibits issuing multiple liquor licenses. While some licensees retained their licenses until the policy expired, others surrendered them prematurely, disrupting supply chains. The absence of a provision requiring advance notice before surrendering licenses contributed to further inefficiencies.

Additionally, the report claimed that licenses were granted without verifying essential compliance requirements, including solvency certificates, audited financial statements, sales data, and criminal background checks.

Lack of Transparency in Pricing: The CAG noted that the pricing of certain Indian-made foreign liquor (IMFL) brands lacked transparency. The report observed that the discretionary ex-distillery price (EDP) system contributed to decreased sales and subsequent revenue loss. The Excise Department permitted L1 license holders to declare their own EDP for premium liquor, with all additional costs being incorporated later, thereby allowing manipulation of liquor prices for financial gain.

Quality Control Deficiencies: The report also identified significant lapses in liquor quality control. Several test reports did not comply with Bureau of Indian Standards (BIS) specifications. Key tests for water quality, harmful substances, heavy metals, methyl alcohol, and microbiological content were either missing or not conducted by accredited laboratories.

Additionally, 51% of foreign liquor test reports were either outdated or had no date mentioned, raising further concerns about quality assurance in the liquor industry.

Assembly Session Disruptions

The Delhi Assembly saw heated exchanges as AAP MLAs protested against the BJP government ahead of the report’s presentation. Their demonstrations led to the suspension of 12 AAP legislators, including former Chief Minister Atishi, for the remainder of the day.