Executive Summary: The Core of the Controversy
In a development that has sent shockwaves through Indian political and administrative circles the Comptroller and Auditor General of India (CAG) has tabled a report in the Delhi Assembly alleging a monumental loss of Rs 2,002-Crore Loss to Delhi Government Due to Excise Policy: CAG Report. This loss is attributed to the formulation and implementation of the now-controversial Delhi Excise Policy for 2021-22. The report is a forensic dissection of a policy that was marketed as a reformist move to revolutionize the liquor trade in the national capital but, according to the national auditor, ended up benefiting private liquor barons at the cost of public revenue. This article deconstructs the CAG’s findings, explaining the “what, when, how and why” of one of the most significant alleged financial scandals in recent Delhi history.
Table of Contents
Part 1: The Protagonists and the Stage – Understanding the Context
What is the CAG? Rs 2,002-Crore Loss to Delhi Government Due to Excise Policy: CAG Report
The Comptroller and Auditor General (CAG) of India is the supreme audit institution of the country. Established under Article 148 of the Constitution its primary duty is to audit all receipts and expenditure of the Government of India and the state governments. A CAG report is not just an accounting exercise. it is a powerful tool of accountability, often uncovering inefficiency, procedural violations and potential corruption. Its findings carry immense legal and political weight.
What was the 2021-22 Delhi Excise Policy?
The Delhi Excise Policy 2021-22 was a radical departure from the previous model. The old regime had the Delhi government operating through its own outlets and granting licenses to private individuals for vends. The new policy, which came into effect on November 17, 2021 and was retracted by September 2022, aimed to:
Transform the Consumer Experience: Create a more modern, mall-like ambiance for liquor purchase.
Break the “Liquor Mafia”: End the cartelization and monopolistic practices prevalent in the old system.
Increase Revenue: Generate higher revenue for the government through a more transparent and competitive bidding process.
The core of the new policy was to move from a volume-based franchisee model to a retailer-focused model where the government would exit the retail business entirely and private entities would bid for zones across the city.
Part 2: The Anatomy of a Loss – How the ₹2,002 Crore Figure Was Calculated
The CAG’s allegation of a ₹2,002 crore loss is not a single, monolithic figure. It is an aggregate of several key decisions and omissions that, according to the auditor, deprived the government of its legitimate revenue. Let’s break down the primary sources of this loss.
1. The Waiver of License Fee During the COVID-19 Pandemic (Loss: ₹ 477.40 Crore)
- The Decision: During the pandemic-induced lockdowns, the Delhi government allowed the closure of liquor vends. To compensate the licensees for this period of non-operation, the government decided to grant an extension of the license period equivalent to the closure period. However, it went a step further and waived the license fee for this extended period.
- The CAG’s Objection: The auditor slammed this move as “irregular.” It argued that the extension of the license period was a sufficient relief. Waiving the fee on top of that was an unjustified and gratuitous concession to the private entities. The government derived no benefit from the extended period, resulting in a direct and avoidable loss of ₹477.40 crore.
2. Granting an Unwarranted 6% Profit Margin to Wholesalers (Loss: ₹ 338.36 Crore)
- The Decision: The new policy introduced a 6% profit margin for wholesale distributors. This was ostensibly to cover their operational costs and ensure a viable business model.
- The CAG’s Objection: The auditor found this decision to be “without any justification.” In the previous system, the government itself acted as the wholesaler and bore all associated costs, including transportation and storage. By handing over the wholesale business to private players and gifting them a fixed profit margin, the government effectively gave up a significant revenue stream it previously enjoyed. The CAG calculated that if the government had retained the wholesale operation, it would have earned this ₹338.36 crore.
3. Reduction in the Number of Dry Days (Loss: ₹ 197.14 Crore)
- The Decision: The new policy drastically reduced the number of “dry days” (days when liquor sales are prohibited) from 21 per year to just 3.
- The CAG’s Objection: While this was presented as a consumer-friendly measure, the auditor viewed it purely from a revenue perspective. It noted that the government failed to capitalize on this liberalization. The policy did not mandate any additional fee or charge from the retailers for the privilege of operating on 18 extra days. The CAG estimated that the government could have earned an additional ₹197.14 crore by levying a reasonable fee for these additional sale days.
4. The Abrupt and Costly Rollback of the Policy
- The Decision: Following allegations of corruption and manipulation, the Delhi government decided to revert to the old excise regime from September 1, 2022. However, to facilitate this transition, it allowed the private retailers under the new policy to exit without paying the full license fee for the unexpired period of their license.
- The CAG’s Objection: This decision, according to the report, was taken “in violation of the provisions of the Excise Policy.” The policy had clear clauses for the recovery of dues in case of an early exit. By not invoking these clauses, the government allegedly let the retailers off the hook, causing a further loss of revenue. This amount is part of the cumulative ₹2,002 crore figure.
5. Procedural Violations and Alleged Favoritism
Beyond the quantifiable losses, the CAG report highlights severe procedural lapses that created an environment ripe for manipulation:
- Undue Benefits to L-1 Licensees: The report alleges that the policy was deliberately designed to favour the L-1 license holders (wholesalers). For instance, the policy allowed them to claim a refund of the tendered amount if the number of functional retail shops fell below a certain threshold. The CAG saw this as a one-sided clause that protected private players from market risks at the government’s expense.
- Post-Tender Beneficial Amendments: The CAG found that several beneficial modifications were made to the policy after the bids were received and the L-1 licenses were awarded. In a fair and transparent process, the rules of the game cannot be changed after the game has begun. This, the auditor implies, suggests that the policy was tailored to suit specific players.
- Issues with the Quotation System: The report points out flaws in the management of the zones and the quotation system, which may have allowed ineligible entities to participate and win bids.
Part 3: The Fallout and the Political Earthquake
The CAG report did not emerge in a vacuum. It is the culmination of a chain of events that began in 2022:
- LG’s Recommendation: The then Lieutenant Governor of Delhi, Anil Baijal, recommended a CBI probe into the policy based on a report from the Delhi Chief Secretary alleging procedural irregularities.
- CBI and ED Cases: The Central Bureau of Investigation (CBI) and the Enforcement Directorate (ED) registered cases and began investigations, with the ED making several arrests, including that of a serving AAP MLA and a former Deputy Chief Minister, Manish Sisodia, who was the sitting Excise Minister when the policy was formulated.
- Political Slugfest: The report has become a central ammunition in the political war between the ruling Aam Aadmi Party (AAP) and the Bharatiya Janata Party (BJP). The BJP has used it to label the AAP government as “corrupt,” while the AAP has dismissed the report as being “politically motivated” and vetted by the Central government, which controls the CAG. They argue that the policy was approved by the LG and that the loss figure is a theoretical construct.
