A recent report by the Comptroller and Auditor General (CAG) has revealed significant irregularities in Delhi's Excise Policy 2021-22, resulting in a loss of approximately ₹2,026.91 crore to the government.
New Delhi: The CAG's recent report on Delhi's excise policy highlights several critical flaws. According to the report, opacity and regulatory violations have caused a loss of ₹2,026.91 crore to the Delhi government. This report was presented in the Delhi Assembly, where the functioning of the excise department also came under question.
How did the losses occur?
* The CAG report identified numerous flaws in the implementation of the excise policy, leading to substantial financial losses for the government. The main irregularities include:
* Non-operational retail shops: Many liquor shops remained unopened in several areas, resulting in a loss of ₹941.53 crore to the government.
* Failure in license auctions: Licenses surrendered by several businesses were not re-auctioned, leading to a shortfall of ₹890 crore.
* Undue discounts: Discounts worth ₹144 crore were given to liquor vendors under the pretext of COVID-19.
* Neglect of security deposits: Appropriate security deposits were not collected from liquor vendors, resulting in a loss of ₹27 crore to the government.
Regulatory Violations and Lack of Transparency
The CAG report reveals that the excise department did not adhere to regulations during license issuance. According to the Delhi Excise Rules, 2010, a single company cannot be granted different types of licenses (wholesale, retail, hotel-restaurant); however, some companies were granted multiple licenses in violation of these rules.
Furthermore, some companies attempted to form cartels in the liquor business by obtaining licenses through proxy ownership. The excise department failed to verify the financial stability, sales records, pricing practices, and criminal backgrounds of applicants.
Pricing Irregularities
The CAG report also points out that wholesale vendors were given the freedom to determine liquor prices, leading to arbitrary pricing. The prices of liquor sold in Delhi differed significantly from other states, resulting in a loss of excise duty for the government. The report states that the excise department failed to ensure the quality of liquor sold in Delhi.
According to regulations, each wholesaler must submit test reports as per the Bureau of Indian Standards (BIS); however, in 51% of cases, test reports for imported liquor were more than a year old or unavailable. Many reports were issued by labs lacking accreditation from the National Accreditation Board for Testing and Calibration Laboratories (NABL).
Lack of Modern Technology
The role of the Excise Intelligence Bureau (EIB) in curbing liquor smuggling has been deemed weak. 65% of the seized liquor was domestically produced, indicating widespread illegal liquor trade. The report recommends using modern technologies like data analytics and artificial intelligence (AI) to monitor illegal supply.
The CAG observed that the Delhi government amended the Excise Policy 2021-22 without cabinet approval. The new policy granted wholesale licenses to private companies, sidelining government companies. This step resulted in a loss of ₹2,002 crore to the government.
CAG Recommendations
* The licensing process should be made transparent, and all applications should be thoroughly vetted.
* Transparency should be brought into liquor pricing to prevent profiteering and tax evasion.
* Quality control should be strengthened to curb the sale of spurious and adulterated liquor.
* Modern technology should be used to prevent liquor smuggling.
* Responsibility for the financial loss should be ascertained, and strict action should be taken against those responsible.
