Delhi Excise Policy case: CAG report reveals loss of Rs 2,026 crore to state exchequer

The report also alleges that Aam Aadmi Party (AAP) leaders benefited from kickbacks. File pic

A Comptroller and Auditor General (CAG) report on the Delhi government's excise policy has revealed a revenue loss of Rs 2,026 crore to the state exchequer, news agency ANI reported.

The report highlighted several issues, including deviations from the objectives of the Delhi Excise Policy, a lack of transparency in pricing, and violations in issuing licences, which were not penalised.

Of the Rs 2,026-crore loss to the state exchequer, Rs 890 crore resulted from the government's failure to re-tender surrendered licences before the conclusion of the policy period, according to the report. Additionally, exemptions granted to zonal licences led to a loss of Rs 941 crore, ANI reported.

"The Department was issuing licences without checking various requirements relating to Excise Rules and Terms and Conditions for the issue of different types of licences. It was observed that licences 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.

The report stated that the loss to the exchequer was primarily owing to sub-optimal implementation, which resulted in a failure to achieve the objectives of the Delhi Excise Policy, ANI reported. The report also alleges that Aam Aadmi Party (AAP) leaders benefited from kickbacks.

Key findings in the report highlight the revenue loss in crores and the ignoring of expert panel recommendations by the Group of Ministers (GoMs). It also noted that, despite complaints, all entities were allowed to bid and licences were issued without proper scrutiny. Furthermore, violations in the issuance of licences were not penalised.

Delhi Excise Policy case: Cabinet, LG not consulted over important approvals

"Further, selective adherence of various Rules and Regulations while issuing Licences is non-compliance of procedures and responsibility should be fixed for violations of the same," the report read.

The report's findings also allege that the cabinet and the Lieutenant Governor (LG) were not consulted over important approvals and changes. In what the report claims to be a breach of procedural norms, excise rules were not presented before the legislative assembly for ratification.

The report also emphasised the lack of transparency in the pricing of Indian-made foreign liquor (IMFL), observing that the discretion granted to the L1 licensee (Manufacturer and Wholesaler) allowed them to manipulate liquor prices to their own advantage by increasing the 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 a 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 noted that a waiver of Rs 144 crore was granted to zonal licences based on COVID-19 restrictions, leading to additional revenue loss. This occurred despite the tender document stating that any commercial risk would lie with the licencees, with no provision for "force majeure."

An additional Rs 27 crore was lost due to incorrect collection of security deposits.

(With ANI inputs)