Was Delhi’s rollbacked liquor policy success or failure? It's lost in conflicting claims

The Aam Aadmi Party government’s new liquor policy and its subsequent rollback has generated quite a storm — both within Delhi and the larger political firmament. The policy and its implementation has ballooned into a major controversy for the ruling dispensation in Delhi, especially with its leader and Deputy Chief Minister Manish Sisodia repeatedly being questioned by the investigative agencies.

The revenue plank and its rationale

The new liquor policy was enacted to fundamentally address three anomalies: growing black-marketing, elimination of middlemen and liquor mafia and, most importantly, to prop up state revenue. How far the stated objectives have been addressed remain questionable.

Also read: Delhi’s old liquor policy kicks in, but tepid response from tipplers

The big claim of a 27 per cent jump in state revenue during the first eight month of the new regime has also initiated hard questioning. On the face of it, the government accrued Rs 8,917 crore through license bidding against a reserve price of Rs 7,041 crore.

The economic rubric

The ongoing investigations by various agencies suggest profit margins for liquor retailers in Delhi may have increased as much as ten-fold. Preliminary reading of the document currently being scrutinised by various investigative bodies underline that retail margins for a 750 ml bottle of a single brand, for instance, shot up from Rs 34 to Rs 368.

This has also led to a shrinkage in state coffers and a hard bargain for customers. The reports also seem to dismiss the government’s claim of a significant uptick as the agencies compared the two models — new and old — threadbare.

In the old regime, the excise duty stood at Rs 224 for a bottle of a liquor brand worth Rs 530. In the new policy, the duty was fixed at one per cent of the wholesale price per bottle, roughly translating into Rs 1.88 spent by liquor vends for the same bottle.

The new liquor policy also invoked other allegations of revised rates for foreign liquor, removal of import pass fee of Rs 50 per case of beer and irregularities and corruption in allocation of licenses in the designated 32 zones of Delhi. Alcohol is highly taxed and along with fuel makes up about 24 per cent of states’ own tax base. States on an average collect around Rs 2.26 lakh crore a year on alcohol.

The big numbers

A report by The Indian Express showed how the Delhi government had completely failed to even come remotely close to its intended revenue targets that it had set towards the beginning of the new liquor policy. “In November 2021, the Delhi government had looked to bring in Rs 10,000-crore revenue in one year. In the eight months since, the excise department has fallen well short of its target, collecting revenue of just around Rs 1,993 crore,” read the report.

AAP’s big justification

Justifying the new policy, the AAP government explained it in a readout, showing a nearly 60 per cent increase in state revenue from license fee from bids without any noticeable changes in retail prices for the end users.

Also read: CBI raids Sisodia’s house; what’s the controversy on Delhi liquor policy?

One is forced to wonder whether the big claim of revenue uptick through a modern, city-centric liquor policy actually lived up to its intended purpose. If it did, then did it warrant a summary policy reversal?