The recent report by the Comptroller and Auditor General of India (CAG) has brought to light significant financial irregularities in the implementation of the now-scrapped Delhi liquor policy, resulting in a staggering revenue loss of ₹2,002 crore. The findings were presented in the Delhi Assembly, where Chief Minister Rekha Gupta tabled the report amid intense opposition from Aam Aadmi Party (AAP) MLAs. The disruption inside the Assembly escalated to the point where 12 AAP legislators, including former Chief Minister Atishi, were suspended for the day following protests against the report’s presentation.
This highly controversial liquor policy, initially introduced by the AAP government as a measure to streamline liquor sales in the national capital, has now emerged as a major corruption scandal. The CAG audit details how the flawed execution of the policy led to massive revenue losses due to lapses in re-tendering, arbitrary exemptions granted to select license holders, and unauthorized waivers that violated established rules. The report also exposes the alarming lack of oversight in pricing regulations and the failure to ensure quality control for liquor being sold under the policy.
Key Findings of the CAG Report
Massive Revenue Losses Due to Policy Failures
One of the most damning aspects of the CAG report is the revelation that the Delhi government suffered an approximate ₹890 crore loss due to its failure to re-tender surrendered liquor licenses. The excise policy allowed retailers to return their licenses without prior notice, but instead of re-auctioning these licenses to recover lost revenue, the government failed to take appropriate action, resulting in a substantial financial hit.
Additionally, the government’s delay in responding to these lapses led to further revenue losses of ₹941 crore due to exemptions granted to zonal licensees. The policy, which was expected to boost government earnings, instead resulted in large-scale losses because of poor planning and execution.
One of the most controversial aspects of the report is the ₹144 crore waiver granted to liquor vendors for the period between December 28, 2021, and January 27, 2022, citing Covid-19 restrictions. The CAG observed that this waiver was not justified and directly contradicted the stance of the Excise Department, causing further revenue leakage.
Moreover, incorrect collection of security deposits from zonal licensees resulted in an additional ₹27 crore shortfall. These findings suggest that the policy was structured in a manner that financially benefited select private entities at the cost of government revenue.
Violation of Licensing Norms and Preferential Treatment
The CAG report highlights significant irregularities in the allocation of liquor licenses, many of which were issued in violation of existing rules. Under Rule 35 of the Delhi Excise Rules, 2010, multiple liquor licenses cannot be issued to a single entity. However, the audit found that some retailers were allowed to hold multiple licenses until the expiration of the policy, while others surrendered them prematurely, leading to disruptions in liquor supply.
Furthermore, the report states that the licensing process lacked transparency, as licenses were issued without proper verification of financial solvency, audited financial statements, sales data, and even the criminal records of applicants. This raises serious concerns about how the government vetted applicants before granting them lucrative liquor licenses.
The absence of regulatory checks and balances in the licensing process suggests that the policy was deliberately structured in a way that favored certain license holders while ignoring critical safeguards meant to ensure fairness and accountability.
Manipulation of Liquor Pricing and Market Control
Another critical issue flagged in the CAG report is the manipulation of liquor pricing, which contributed to revenue losses and created an unfair advantage for certain players in the industry. The audit found that discretionary ex-distillery pricing (EDP) was used to influence sales trends and market control.
The Delhi Excise Department allowed L1 license holders (wholesale suppliers) to self-declare the ex-distillery price (EDP) for liquor brands priced above a certain threshold. However, the audit found that additional pricing components—such as manufacturer profits and distribution costs—were added later, giving an unfair advantage to L1 license holders.
This lack of price regulation allowed wholesalers to artificially inflate liquor prices for their own benefit while simultaneously reducing the Delhi government’s share of revenue. The report highlights that this system was manipulated to benefit select players at the cost of the exchequer, leading to lower tax collections.
Quality Control Lapses and Consumer Safety Concerns
Beyond financial losses, the CAG report also raises serious concerns about the quality control measures—or lack thereof—associated with liquor sold under the now-defunct excise policy. A significant number of liquor test reports were found to be non-compliant with the Bureau of Indian Standards (BIS).
The CAG noted that crucial quality tests—such as those checking for harmful ingredients, heavy metals, methyl alcohol levels, and microbiological substances—were either not conducted or were carried out by unauthorized laboratories. These lapses posed a potential risk to public health, as liquor that did not meet safety standards may have been sold to consumers.
In many cases, test reports for foreign liquor brands were outdated, with 51% of them being older than a year or missing essential details such as test dates. The report also states that water quality tests for liquor production were not conducted as per regulatory norms, raising further concerns about consumer safety.
Political Fallout and Tensions in the Delhi Assembly
The tabling of the CAG report sparked a political firestorm in the Delhi Assembly, with AAP MLAs aggressively opposing its presentation. The chaos led to the suspension of 12 AAP legislators, including former Chief Minister Atishi, after they resorted to sloganeering and disrupting Assembly proceedings.
The current BJP-led Delhi government has announced its intention to table all 14 pending CAG reports during the ongoing Assembly session. This move is expected to intensify political tensions, as BJP leaders have been using the liquor policy scam as a key issue to target AAP over allegations of corruption and financial mismanagement.
Implications and Future Course of Action
The revelations in the CAG report could have far-reaching consequences for the Aam Aadmi Party, which is already embroiled in legal battles over the liquor policy case. Several top AAP leaders, including party chief Arvind Kejriwal, former Deputy CM Manish Sisodia, Rajya Sabha MP Sanjay Singh, and former Delhi Minister Satyendar Jain, have been arrested in connection with the alleged scam.
The report provides strong documentary evidence of financial irregularities and violations of excise laws, which could further strengthen legal cases against AAP leaders. Additionally, opposition parties are likely to use this scandal as a major talking point in the upcoming elections, further damaging AAP’s credibility.
With mounting pressure from both political opponents and investigative agencies, AAP now faces an uphill battle to defend itself against the allegations of corruption and misgovernance. Meanwhile, the BJP government in Delhi is expected to push for stricter regulations in future excise policies to prevent similar financial losses.
As the debate over the liquor policy intensifies, it is clear that this controversy will continue to shape Delhi’s political landscape in the months to come. The findings of the CAG report serve as a stark reminder of the importance of transparency, accountability, and sound financial planning in government policy-making.
