The story so far: The New Delhi Excise Policy 2021-22, launched last November, which sought to ensure optimum revenue for the State government, confront the sale of spurious or bootlegged liquor and transform consumer experience, ran into protests and widespread allegations of “procedural lapses”. This has forced the government to scrap it with effect from August 1, 2022. On July 22, Delhi Lieutenant Governor Vinai Kumar Saxena recommended a CBI probe into the new policy, which culminated in raids on the premises of the Delhi Government’s Deputy Chief Minister Manish Sisodia, who holds the excise portfolio. His role is under the scanner for allegedly providing “undue financial favours” to private liquor licensees, a charge denied by the Aam Aadmi Party (AAP) leadership.

What were some of the changes mooted in the new policy?

The new policy marked the exit of the State government from liquor retail in the city. It sought to provide more choice to alcohol consumers by offering more variety of brands — both popular and niche ones — through opening more liquor vendors. It sought to provide a “better environment”, especially for female citizens, while shopping for liquor through dedicated alcohol vends.

In addition to reducing the number of dry days in Delhi from over 20 to just three, it also sought to reduce the age of alcohol consumption in Delhi from 25 to 18 — but did not proceed with the step as it would have required a legislative amendment. The new policy also sought to ensure equitable distribution of alcohol vends in the city by ensuring two liquor shops in each municipal ward to bridge the gap between “overserved” and “underserved” areas. Under the new policy, the number of liquor vends in Delhi would have increased from around 630 to 850 — all privately owned and operated. One person could hold more than one liquor retail licence and the “heavily regulated” excise regime under the previous policy was simplified for ease of doing business in the overall trade. Another change in the policy was making wholesale licensees (L1) independent of manufacturers; the revamped policy allowed independent entities to set up wholesale stores and get franchisee from various manufacturers. The revamped policy was implemented on November 17, 2021 and remained in force till July 31, 2022.

Why and how did the revamped policy get mired in controversy?

The revamped excise policy ran into controversy as soon as it was implemented with private liquor vends opening up across the capital. While protests against the opening of liquor shops in their neighbourhoods were led by citizens in some areas, the Bharatiya Janata Party (BJP) and the Congress led a slew of protests against the opening of liquor vends at locations nears schools, religious places and unauthorised areas.

Many of these were sealed by the BJP-led Municipal Corporation of Delhi (MCD) for various violations related to non-conforming areas, where certain businesses such as liquor retail are not allowed as per the provisions of the Master Plan for Delhi that governs urban planning, and implementation in the city. As many as 134 court cases, broadly about retail shops in unauthorised or non-conforming areas, issues related to discounts and schemes such as 1+1, rounding off duty and payment of licence fee were filed after the implementation of the policy. Only 468 of the around 850 liquor vends could actually open which led to many vendors surrendering their licences causing revenue losses for the government. On the other hand, vendors increasingly exiting the market effectively brought Delhi’s liquor trade back to square one — making windfall gain for existing players in business and cartelisation.

Why was the new policy abruptly withdrawn?

In July, the Delhi Lieutenant Governor recommended a CBI probe into the new policy after receiving a report from the Chief Secretary, also sent to Chief Minister Arvind Kejriwal, stating that the policy was rife with alleged violations and “deliberate and gross procedural lapses.” What began as an assessment of departures from administrative procedures led to bringing Mr. Sisodia, who holds the excise portfolio, under the lens for allegedly providing “undue financial favours” to liquor licensees. He has been booked for corruption by the CBI along with 15 others including liquor business owners and event media barons — allegedly involved in shaping the new policy — and extending “undue pecuniary advantage to public servants”, bureaucrats and subordinate government officials. Around midnight on July 31, the LG received a proposal from the Delhi Cabinet to scrap the revamped policy and revert to the old policy for six months till the way forward could be figured out. The new policy, according to the proposal, has not been able to achieve its desired objective of “fetching greater revenue” and several issues in it had been flagged and were under detailed examination and investigation by agencies.

How much revenue does Delhi earn from excise?

According to official figures, a little over ₹4,000 crore was generated in excise revenue in 2019-20. Between November 2021 and July 2022, it earned approximately ₹5,400 crore, but the controversy led to a fall in sales and revenue. With both retail and wholesale licensees abandoning their licences or choosing not to renew them, the Delhi government admitted it had been suffering a loss of over ₹193 crore on a monthly basis.