Delhi Excise Policy Case: CAG report reveals loss of Rs 2,026 crore

New Delhi: A Comptroller and Auditor General (CAG) report on the Delhi government's excise policy revealed a revenue loss of Rs 2,026 crore to the state exchequer.
The report's findings stated that there were deviations from the objective of the policy, a lack of transparency in pricing, and violations in issuing licenses that were not penalised.
Of the losses worth Rs 2,026 crore to the state exchequer, the loss of Rs 890 crore resulted from the government's failure to re-tender the surrendered licenses before the policy period concluded, according to the report. Moreover, exemptions granted to the zonal licenses led to the loss of Rs 941 crore.
"The Department was issuing licenses without checking various requirements relating to Excise Rules and Terms and Conditions for the issue of different types of licenses. 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.," the executive summary of the CAG report read.
According to the report, the loss to the exchequer was largely because of sub-optimal implementation, which resulted in failure to achieve policy objectives. The report also alleges that AAP leaders benefited from kickbacks.
The important findings in the report point out revenue loss in crores and the overlooking of expert panel recommendations by the Group of Ministers (GoMs). It also states that despite complaints, all entities were allowed to bid and licenses were issued without proper scrutiny. Moreover, violations in the issuance of licenses were not penalised.
"Further, selective adherence of various Rules and Regulations while issuing Licenses is non-compliance of procedures and responsibility should be fixed for violations of the same," the report read.
The report findings allege that the cabinet and Lieutenant Governor (LG) were not consulted over important approvals and changes. Alleging a breach of procedural norms, the report reads that excise rules were not presented before the legislative assembly for ratification.
Highlighting the lack of transparency in the pricing of the Indian-made foreign liquor (IMFL), the report observed that the discretion of the L1 licensee (Manufacturer and Wholesaler) allowed them to manipulate prices of liquor to their own advantage, through the increase in Ex-Distillery Price (EDP).
"Pricing of liquor was important to ensure optimal excise revenue collection. Excise Department allowed discretion to L1 licensee (Manufacturer and Wholesaler) to declare its Ex-Distillery Price (EDP), for liquor priced above a certain level. All the price components after manufacture, including profit of manufacturer, were added thereafter. Audit observed varying EDP in various States for liquor supplied by same manufacturer unit. Further, this discretion allowed L1 licensee to manipulate prices of liquor to its own advantage, through increase in EDP," the report read.
"Analysis of pricing and sale of a few brands revealed that discretionary EDP led to decline in sales and consequent loss in excise revenue. As the costing details were not sought to ascertain the reasonability of EDP, there was a risk of L1 licensee getting compensated by the profits hidden in increased EDP," it added.
The report further states that a waiver of Rs 144 crore was granted to zonal licenses based on COVID-19 restrictions, which resulted in revenue loss as well. This happened despite the tender document stating that any commercial risk shall lie with those being issued licenses, with no provision for "force majeure."
An additional Rs 27 crore was lost due to incorrect collection of security deposits.