Bitter Harvest

THE PROCEEDINGS OF the Delhi Assembly on February 25 were an inversion of what was the norm since 2015. The previous Assemblies met infrequent­ly and when they did, the opposition Bharatiya Janata Party (BJP) MLAs were swiftly turfed out of the House. Thereafter, Aam Aadmi Party (AAP) leader Arvind Kejriwal turned the chamber into an exclusive televised show, making allegations against rivals that might attract libel charges but for the protec­tion offered by legislative privilege. With an admiring cohort of AAP MLAs tittering in support, Kejriwal spared no one even as his often slanderous insinuations were hailed by an admir­ing commentariat as evidence of a combative leader capable of denying BJP the trophy of Delhi.

Things could not have been more different when Chief Minister Rekha Gupta placed the report of the Comptroller and Auditor General of India (CAG) on the AAP government’s liquor policy in the House. The 22 AAP MLAs who now form the opposition had raised slogans during Lieutenant Governor Vinai Kumar Saxena’s address and were later suspended from the House. The shoe, it would appear, was on the other foot. They would have experienced a sense of déjà vu except that this time they were at the re­ceiving end. If the AAP MLAs had been in the House, the speeches of BJP MLAs would not have been easy to digest. And if Kejriwal did follow the proceedings online, it would have brought home just how much circumstances have changed. Since AAP’s electoral de­feat, Kejriwal has kept a low profile which upbeat BJP leaders attribute to the leader’s concerns about a likely political storm 14 untabled CAG reports could uncork.

Under the gaze of newly elected Speaker Vijender Gupta—the veteran BJP MLA bore the brunt of AAP’s strongarm tactics as leader of the opposi­tion—BJP MLAs read off parts of the CAG report on regulation and supply of liquor in Delhi with regard to policy and implementation between 2017-18 and 2020-21. The man who proclaimed himself as “kattar imandar (staunchly honest)” found himself caught in the cycle of “jail and bail” inundated by scams while the capital’s residents suffered declining civic services, they said. The AAP government’s schemes were either implemented ineffectively or suffered from the taint of corruption and at the end of two full terms in office several of its leaders face inquiries.

Aware that the AAP chief often targeted Prime Minister Narendra Modi, BJP MLAs made the point that while the AAP leader failed to prepare the city to deal with Covid, Modi ensured rations for the poor and the Centre delivered oxygen supplies to hospitals. This was the time, they said, the AAP supremo spent crores of rupees doing up his luxurious former official residence that BJP tellingly labelled ‘Sheesh Mahal’.

The salient points of the CAG report brought out in the Assem­bly discussions substantiate the findings of the enforcement direc­torate and observations of the Delhi High Court and the Supreme Court denying bail and upholding the arrest of Kejriwal and his close associate Manish Sisodia. Though the leaders are currently out on bail, the reasons for the relief have more to do with the length of the trial. MLAs drew attention to not just the changes in the excise policy, which was hastily withdrawn in 2022, that led to revenue loss and effectively reduced consumer choice but that even manda­tory quality tests for water used in the manufacture of alcohol were incomplete and not up-to-date. It was astounding that the govern­ment had suppressed CAG reports, said Jangpura MLA Tarvinder Singh Marwah who defeated Sisodia by a narrow margin. He accused the former chief minister of be­traying his mentor, anti-corruption activ­ist Anna Hazare, and asked if CAG reports were not tabled, where would the account­ability of government go? In the years that AAP was in office, appropriation, Goods and Services Tax (GST), and salary and al­lowances bills accounted for most of the legislation passed by the Delhi Assembly. A clutch of other bills, mostly passed early in AAP’s tenure were denied by the LG’s of­fice, but the overall legislative record of the party’s tenure makes for very sorry reading.

The CAG report relates a tale of misgov­ernance and complicity at every turn. Such was the rush to award liquor licences that routine checks regarding the finances of the licensees were given the go-by. “It was observed that licenses were issued without ensuring solvency, submission of audited financial statements, submission of data re­garding sales and wholesale price declared in other states and across the year, verifica­tion of criminal antecedents from the com­petent authority…” the report states. It adds: “selective adherence of various Rules and Regulations while issuing Licenses is non-compliance of procedures and responsibil­ity should be fixed for violations of the same.”

These irregularities undercut the defence offered by AAP that alcohol in Delhi became cheaper as the report reveals manufac­turers and wholesalers submitted varying ex-distillery prices for different states where they operated. Analysis of pricing and sale of a few brands showed that discretionary pricing led to a decline in sales and consequent loss of revenue. “As the costing details were not sought to ascertain the reasonability of EDP, there was a risk of L1 licensee getting compensated by the profits hidden in increased EDP. The concept of EDP needs to be transparently de­fined and cost sheets should be obtained in support of the declared EDP,” the report concludes. The suppliers who got the licences were so confident that their products would not face scrutiny that some of them did not bother to submit reports from laboratories accredited by the National Accreditation Board for Testing and Calibration Laboratories as per the Food Safety and Standards Authority of India. Some did not submit test reports at all.

“Important test reports of water quality, harmful ingredients, heavy metals, methyl alcohol, microbiological tests reports, etc., were not submitted for various brands…Deficient test certificates was also noticed during scrutiny of test checked reports. In respect of 51 per cent of the test checked reports, relating to foreign liquor, it was found test reports furnished were older than one year/or no test report was provided/date not mentioned,” the CAG found, revealing a shocking absence of monitoring and accountability on the part of the AAP government.

Rather than preventing monopolies and cartels—the stated objective of the new excise policy—the scheme “imposed” exclu­sivity arrangements, limiting the total number of licences and in­creasing the possibility of cartelisation and brand pushing. “It was noticed that wholesale licenses for supply of IMFL and FL were granted to 14 business entities, whereas the same were granted to 77 manufacturers of IMFL and 24 suppliers of FL in the old policy (2020-21). Similarly, for the purpose of retail vends, Delhi was di­vided into 32 Zones (containing 849 vends) whose licenses were granted to 22 entities through tendering, whereas, 377 retail vends were run by four Government Corporations and 262 retail vends were allotted to private individuals previously. Moreover, cases of related business entities holding licenses across the supply chain and skewed distribution pattern highlighted the risk of exclusiv­ity arrangements and brand pushing,” the report states.

THIS MIGHT EXPLAIN why certain brands were almost never available in Delhi’s liquor stores due to entities getting licences for different links in the supply chain. The poorly thought-out policy and rising political heat made some licensees wary about likely consequences and they surrendered their retail contracts. Oddly enough, the policy had no provision requiring licensees to provide advance notice and since these licences were not retendered, the revenue lost was approximately ₹890 crore. Needless to say, the shuttered vends meant the distribution process was far from equitable. The exemptions provided to zonal licences added another ₹941 crore to the revenue loss.

“Despite being mentioned in the conditions of the tender document that any commercial risk shall lie with the licensee, clarification provided during the pre-bid meeting that there is no provision for force majeure and against the opinion of the Excise Department to relax the license fees, a waiver of license fees of ₹144 crore was granted to the zonal licensees on the basis of COVID re­strictions (28 December 2021 to 27 January, 2022), resulting in loss of revenue to the Government,” the CAG said. Incorrect collection of security deposits added another ₹27 crore to the revenue loss and in the end a flawed design and poor implementation of the new policy led to a staggering loss of revenue of approximately ₹2,002 crore, the CAG concluded.

The Directorate of Enforcement (ED) investigation, now fur­ther validated by the CAG, uncovered the money laundering and criminal aspects to the liquor policy that made it a full-fledged, pre-mediated scam with a cast of conspirators. The pronouncements of the special court, high court and apex court in orders pertaining to remand and bail for Kejriwal and Sisodia make it clear that ED’s assertion of the role of the two leaders in policy formation has not been rejected. Further, the courts, while considering evidence in the case, noted ED investigations tracking specific hawala opera­tors and their mobile sets used while moving and handing over illegal funds. Upholding the ED demand for custodial remand following Kejriwal’s arrest in March 2024, the special judge noted that the then chief minister was directly involved in formulation of the 2021-22 excise policy, drafted considering favours to be granted to the ‘South Group’ in col­lusion with Sisodia and AAP adviser Vijay Nair. The statement of C Arvind, then secretary to Sisodia, that he was given a 30-page document that was to be the basis for a “final” group of ministers (GoM) report was never discussed by the ministerial group. The document mentioned wholesale licence be given to agents or private players of manufactur­ers, that one wholesale licensee could be a distributor for any number of manufac­turers, and profit margin for wholesalers be fixed at 12 per cent.

Dealing with Kejriwal’s application challenging his arrest, the Delhi High Court’s observations make it clear that the ED case did not hinge only on state­ments of “approvers” as made out by AAP although their evidentiary value is recognised by the law. The court said it had perused several statements of sur­vey workers, area managers, assembly managers, hawala operators as well as the statement of one AAP candidate in the Goa elections of 2022, namely ‘X’, as recorded on March 8, 2024. “The statement of ‘X’ recorded mentions the receipt of a cash amount of about 90 lakhs, payment of which was managed by the Aam Aadmi Party, Delhi office and the assurance which he had received from senior leaders of the party including the present petitioner Sh. Kejriwal that he need not worry about ex­penses in relation to Goa elections,” the court said. The evidence presented related to the money trail and the proceeds of crime allegedly received in the form of kickbacks through the South Group spent on the Goa campaign. This was further corroborated by statements of an approver who was allegedly given kickbacks for the Goa elections and statements of hawala operators and the AAP candidate regarding receipt of cash. The candidate referred to meeting Kejriwal in Goa and their conversation regarding cash amounts for expenditure was taken note of by the court. Impor­tantly, the court referred to the Supreme Court observation in the case of Sisodia that it was indisputable that “in a period of about 10 months, the wholesale distributors had earned ₹581 crore as fixed fee, of which excess profit earned due to increase of margin from 5% to 12% i.e. ₹338 crore was the proceeds of crime, emanating from the Delhi Excise Policy 2021-22.”

It is payback time for Kejriwal and AAP. Not only does the leader have to contend with a serious legal case with possibly more to follow but the aura that elevated him from an RTI activ­ist to Delhi’s chief minister has fallen to the ground. His political troubles are only just beginning.

AAPArvind KejriwalAssembly Elections 2025CAG Reportchief ministerDelhi CM Rekha GuptaDelhi ElectionsDelhi liquor scamDelhi’s Liquor Policy