Cabinet Note details reasons for withdrawal of new Excise Policy

New Delhi: As per Delhi Lieutenant Governor Vinai Kumar Saxena, the Arvind Kejriwal-led Delhi government admitted that the new Excise Policy launched by them in 2021-22 resulted in a revenue loss, windfall gains to license holders, and destabilisation in the liquor market.

The L-G approved the Delhi government's proposal to extend the new Excise Policy 2021-22 by a month "strictly as a one-time measure" on Monday. However, he slammed the Delhi government while doing so, by stating he had "no other option but to agree with the proposal". Officials from the L-G's office stated that he accepted the proposal as a 'transitory measure' for purposes of stock clearances, to avoid any disruption/closure of retail or wholesale vends of liquor, and sale of unauthorised liquor, and law and order situation due to non-availability of authorised liquor. Delhi will be going back to the old excise policy from September 1, 2022, onwards.

Saxena noted that Delhi Chief Minister Arvind Kejriwal decided to withdraw the new policy conceding to the severe irregularities and inconsistencies in the new Excise Policy. A Cabinet Note brought in by the Delhi government to discontinue the new Excise Policy and revert to the old policy, goes into the details of why the new policy needs to be discontinued. The L-G noted that "Every single point mentioned in the Cabinet Note is an admission of guilt in terms of revenue generation and consumer choice and "windfall gain" for the existing licensees and severe loss to the exchequer."

L-G's office said, "It can be reasonably concluded that continuation of the Excise Policy 2021-22 any further can be expected to have adverse revenue implications apart from perpetuating windfall gain to certain license holders and causing distortion and destabilisation in market practices which are not healthy for a stable revenue regime."

Excerpts from the note say, "During the Q 1 of the current fiscal (2022-23), Rs 1,485 crore was realised which is 37.51 per cent below the Budget estimates for current fiscal i.e. Rs 2,375 crore for Q 1. This includes Rs 980 crore of the refundable security deposit," pointing to revenue shortfall due to the policy.

Another issue pointed out by L-G was that the new policy provided "Windfall Gains to License Holders". Another excerpt from the Cabinet Note states that 9 zonal retail licensees choose not to avail extensions during April 2022, while 3 zonal retail licensees expressed to avail extensions beyond July 2022. 4 out of 14 wholesale license holders have opted to discontinue their licenses.

The note explains, "The revenue decline on account of surrendered zones is estimated to be around Rs 193.95 crore per month." A total of 468 shops were operational opposed to the targeted 849 shops in the Excise policy, which

led to several areas remaining unserved, allowing windfall gain to existing license holders and defeating the purpose of the policy itself.