NEW DELHI: The Delhi government suffered cumulative losses exceeding Rs 2,000 crore due to the now-scrapped 2021-22 excise policy, largely due to a weak policy framework and deficient implementation, according to a Comptroller and Auditor General (CAG) report tabled in the assembly on Tuesday.
The report, one of 14 audit reviews on the previous Aam Aadmi Party (AAP) government’s performance being presented by the new Rekha Gupta-led administration, has also pointed to violations in the licensing process. It stated that recommendations from an expert panel formed to suggest changes in the policy’s formulation were ignored by then deputy chief minister and excise minister Manish Sisodia.
The report on the alleged liquor scam, which has been a major flashpoint in the run-up to elections, estimated a revenue loss of Rs 941.53 crore, attributing it to the failure to secure timely approvals for opening liquor vends in “non-conforming municipal wards.” Such areas do not adhere to land use norms permitting liquor vends. The audit observed that the excise department lost approximately Rs 890.15 crore due to surrendered licences in these zones and its failure to initiate a re-tendering process.
Further, the report flagged an additional revenue loss of Rs 144 crore, citing “irregular grant” of waivers to licensees due to Covid-related closures. The policy’s alleged irregularities had snowballed into a political controversy, with the BJP launching repeated attacks on the AAP government after then Lt Governor VK Saxena recommended a CBI probe in July 2022. Several top AAP leaders, including Arvind Kejriwal, Sisodia, and Sanjay Singh, have since been arrested in connection with the case and spent months in jail.
The audit noted that while the Master Plan Delhi-2021 prohibited liquor vends in non-conforming areas, the 2021-22 Excise Policy mandated opening at least two retail vends in each ward. The tender document had initially specified that no vend could be set up in such areas unless explicitly approved by the government. However, despite this requirement, the excise department floated tenders on June 28, 2021, without consulting the Delhi Development Authority (DDA) and Municipal Corporation of Delhi (MCD).
Licences were subsequently allotted in August 2021, even before resolving this issue. Liquor vends were set to begin operations from November 17, 2021, but on November 16, the DDA issued an order disallowing such vends in non-conforming areas. The matter soon reached the Delhi high court, which, on December 9, 2021, ruled that licensees would not be required to pay fees for 67 affected wards. This led to a cumulative exemption of Rs 941.53 crore in licence fees.
The report highlighted that 19 zonal licensees surrendered their licences before the policy expired in August 2022—four in March, five in May, and 10 in July. However, the excise department did not initiate a re-tendering process to operationalise liquor vends in these zones, leading to a complete revenue loss from them in subsequent months. No alternative arrangements were made to ensure liquor retail operations in these areas.
Further scrutiny revealed that licensees sought a waiver from the excise department, citing Covid-related restrictions from December 28, 2021, to January 4, 2022. On January 6, 2022, the Delhi High Court directed the department to issue a reasoned order on the matter. The excise and finance departments subsequently proposed that a proportionate waiver should not be considered, as no provision for such relief existed in the tender document. However, the excise minister, Manish Sisodia, overturned this recommendation, granting a waiver on the grounds that hotels, clubs, and restaurants (HCR) had received similar relief during the Covid lockdown. This decision, the report stated, resulted in a revenue loss of Rs 144 crore.
Another Rs 27 crore was lost due to the incorrect collection of security deposits from licensees, the report noted. It also revealed that the group of ministers (GoM), headed by Sisodia, altered recommendations of the expert committee formed to draft the excise policy. Deviating from expert suggestions, the GoM allowed private entities to manage wholesale liquor operations, replaced the lottery system with a one-time bidding mechanism to allocate vends, and permitted bidders to acquire up to 54 vends instead of the recommended two per individual.
The report further found that several key decisions with significant revenue implications were taken without cabinet approval or consultation with the lieutenant governor. These included relaxations on coercive action against defaulter licensees, waivers in licence fees, refunds of earnest money deposits for the airport zone, and modifications in the formula used to calculate the maximum retail price of foreign liquor.
“Due to a number of issues ranging from weak policy framework to deficient implementation of the policy, there was a cumulative loss of approximately Rs 2,002.68 crore,” the CAG report concluded.
The BJP has repeatedly accused the previous AAP administration of deliberately withholding these audit reports. Last week, Delhi chief minister Rekha Gupta had announced that all pending CAG audits—including those on state finances, public health infrastructure, vehicular pollution, liquor regulation, and the functioning of the Delhi Transport Corporation—would be made public in the first session under her government.