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CBI raids Manish Sisodia: Delhi’s liquor sector reform, and where it went wrong - Govt.in - Telling the truth- always!
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CBI raids Manish Sisodia: Delhi’s liquor sector reform, and where it went wrong

Delhi News : The 2021-22 excise policy was intended to herald a new era for the city’s liquor business by putting an end to cartelisation and black marketing, while also completely overhauling customer experience that was till then marred by dingy stores, a shortage of options in several areas, and a lack of discounts.

 With CBI raids, an FIR accusing 15 people, including deputy chief minister Manish Sisodia, for irregularities and 11 suspensions, the Delhi Excise Policy 2021-22 has become the most controversial move of the Aam Aadmi Party (AAP) government in Delhi so far, triggering an intense tussle with the Bharatiya Janata Party (BJP)-led central government.

On Friday, the Central Bureau of Investigation (CBI) raided Sisodia’s residence and dozens of other premises across seven states and UTs after registering a case on the alleged irregularities. A look at the policy and why it has ended in controversy.

The 2021-22 excise policy, which came into effect from November 17 last year, was aimed at promoting equitable distribution of the retail liquor business across Delhi. Accordingly, the city was divided into 32 zones with each expected to have 27 liquor shops. It was intended to herald a new era for the city’s liquor business by putting an end to cartelisation and black marketing, while also completely overhauling customer experience that was till then marred by dingy stores, a shortage of options in several areas, and a lack of discounts.

The government exited from the retail sale of liquor and rationalised the revenue collections system for both retail and wholesale trade for private players. It made rules flexible for licensees, which also allowed them to offer discounts. The policy also reduced the number of dry days in Delhi from 21 to just three, and allowed bars in hotels, pubs, clubs and restaurants to operate till 3am.

While several of the plan’s proposed targets were met, the policy also had significant hiccups. Liquor traders and restaurateurs have said the policy was not flawed in itself, but its implementation was patchy .

“In a fundamental misconstruct, the size of zones was too big. We repeatedly raised the matter of keeping zone sizes small to reduce financial stakes of the bidders (and increase viability) and to prevent monopolies. But none of that was taken into consideration. We also suggested more simplicity and flexibility in operational issues such as license ownership changes, but to no avail,” said Vinod Giri, director general of the Confederation of Indian Alcoholic Beverage Companies (CIABC).

Eight months into the revamped system, the number of shops fell from 639 in May to 464 in July. The actual plan was to have 849 private retail liquor vends. But the shops never reached that number and customers in some pockets always had to head to other neighbourhoods for their brand of choice, especially those seeking more premium products.

Due to high upfront costs being paid to the government as per the new regime and lower revenue owing to stiff competition and discounts, more and more licensees started exiting the business, leaving at least nine of the 32 zones vacant.

The Delhi Cabinet, led by Kejriwal, in a Cabinet note last month endorsed data that during the first quarter, 1,485 crore was realised, which was 37.51% below the budget estimates for 2022-23. Also, a revenue decline on account of surrendered zones was estimated to be around 193.95 crore per month, despite no decline in the sale of liquor in Delhi.

The AAP, however, says that the main reason behind the problems was that the former LG Anil Baijal changed a policy clause at the last minute, leading to hundreds of vends not being opened in locations where they would have been set up.

”The policy was approved at the macro level, but not allowed to be implemented properly at the micro level, leading to a lot of license holders exiting,” said an AAP functionary who asked not to be named.

The controversy began when Delhi chief secretary Naresh Kumar submitted a report to Lieutenant Governor VK Saxena and chief minister Kejriwal citing purported irregularities. To be sure, Kumar was not directed by the LG or the CM to probe the matter but took up the case on his own as the chief secretary is empowered to under the Transaction of Business Rules 1993 to flag deviation from procedures to the LG and the CM.

Based on Kumar’s report, LG VK Saxena on July 22 recommended a CBI probe, alleging Sisodia and officials indulged in a series of irregularities to favour private entities in lieu of money. The LG stated that the Delhi government illegally refunded an earnest money deposit (EMD) to a liquor licensee, waived off tendered license fee, violated tender norms by increasing the number of liquor shops in a ward, and took decisions without the Cabinet or the LG’s approval.

As per the CS’s report, which was included by the LG in his recommendation to the Union home ministry for a CBI probe, the Delhi government’s excise department favoured some alcohol merchants by allowing waivers amounting to 144.36 crore on license fee they had paid on account of Covid-19 lockdowns. The department refunded a deposit amounting to 30 crore to an L-1 bidder who failed to obtain an NOC from the airport authorities, and should have been made to forfeit the payment, the allegations said.

The LG also alleged that the Delhi government, while extending the liquor license of private retails vends, hotels, restaurants and other licensees, did not increase the tendered license fee, which could have been to extend benefits to the licensees. He also stated that extensions for all retail vends were given twice (from April 1, 2022 to May 31, 2022 and then for another month till July 31, 2022) without approval of the Cabinet or the LG.

The CS report also said that the excise department, without seeking approval from the competent authority, revised the formula for calculation of rates of foreign liquor and removed the import pass fee at 50 per case on beer, which made foreign liquor as well as beer cheaper for retail licenses at a loss to the exchequer.

The Directorate of Vigilance (DoV), which probed licensees for the CS to prepare his report, said the excise department indulged in cartelisation, awarding tenders to blacklisted companies and illegally allowing manufacturers to get retail licenses by amending the excise policy at will.

AAP says all these allegations are false and trumped-up.

On August 6, Sisodia, who is also Delhi’s excise minister, said that the Delhi government incurred losses worth “thousands of crores of rupees” under the new excise policy 2021, but blamed this on a decision by the previous LG, Anil Baijal, alleging that he “made a U-turn at the last moment” before implementing the new regime from November 17 last year. Sisodia sought a CBI probe into Baijal’s involvement in the matter.

“Under the new excise policy, 849 shops were to be opened across Delhi, including in unauthorised areas. The LG did not object to the proposal and approved it. The file, after making the necessary changes as suggested by the LG, was sent for a second time in November first week. The new policy was to be implemented from November 17 and the LG returned the file on November 15, just 48 hours before the launch, asking us to make major changes to it. The LG said that we need to get permission from the Delhi Development Authority (DDA) and the municipal corporation for permitting liquor shops in unauthorised colonies,” Sisodia said.

“Because of this, the Delhi government suffered losses worth thousands of crores of rupees, as close to 300-350 shops that were to open in unauthorised colonies could never operate. As a result, the few companies who managed to open liquor shops in Delhi earned huge profits, while others suffered. The primary aim of the new excise policy was to put an end to the inequitable distribution of liquor shops, which could never be achieved because of the LG’s decision,” he said.

In government documents, Sisodia also noted last month that the earlier regime, in which large numbers of retail vends were run by government corporations, there were “huge leakages”, but accepted that the new regime was indeed hit by instability. “It was also felt that it is not the job of the government to sell liquor. Therefore, the government brought the new excise policy. However, there are several parameters which have caused instability in the new excise policy,” read Sisodia’s comments in a Cabinet note.

On August 9, former LG Anil Baijal hit back at Sisodia and said the allegations were “baseless and motivated”.

“It appears that the AAP government of NCT of Delhi and its excise minister [Sisodia] initially claimed record revenue through excise by manipulating figures; but when that got utterly exposed, they are now playing this deplorable game of blaming me, by distorting facts and painting a false narrative,” Baijal said in a statement shared by the current LG’s office on August 9.

“The record will speak for itself and I dismiss the claims made by the government and its excise minister in toto. Time and investigations will reveal the truth. As a public functionary, I have always worked with the highest degree of moral values and ethics,” Baijal said

The Delhi excise policy 2021-22 has been withdrawn and extended just for a month to prevent a chaotic transition, and to ensure a smooth change to a system where only government-run stores will sell liquor from September 1.

Consumers at present bear the brunt of the controversy, with a mere few shops found open in the city. Stocks too are scarce with premium brands largely being unavailable, forcing people to neighbouring cities to procure liquor.

(Except for the headline, this story has not been edited by GOVT.in staff and is published from a syndicated feed.)

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