Delhi government delays contentious point-based liquor procurement system

According to a 10 January proposal, the Aam Aadmi Party (AAP) government planned to place liquor orders based on a company's sales figures that were to be first normalized as a percentage of the total in each region and then weighted accordingly. Only brands registered with the Delhi excise department were to be included in the calculation.

In a letter issued on 20 January, Delhi's excise department said it would delay enforcing the new rules, which were scheduled to take effect on 22 January. 

The decision came after a meeting chaired by the additional chief secretary of finance to review concerns raised by private distributors and liquor companies. 

Also Read: Small liquor firms decry Delhi's new point-based procurement system as favouring bigger brands

For now, the working committee formed by the four government corporations selling alcohol in the national capital has instructed the concerned corporations and the excise department to thoroughly review the received representations from private distributors and associations per relevant rules.

The delay allows for further evaluation of the proposed system, which small and medium alcohol companies say will favour their bigger rivals.

“The working committee has taken into cognisance the suggestions given by the various stakeholders in Delhi and has decided not to operationalize the new standard operating procedure, which would otherwise have led to a disproportionate bias in favour of only some companies," said Poonam Chandel, managing director of Delhi-based NeuWorld Spirits Pvt. Ltd.

Kyndal Spirits’ managing director Siddharth Banerji also welcomed the decision, saying, "It’s good that the government is taking into account, the views of all players. 

Also Read: Mint Primer | Telangana liquor crisis: What just went wrong?

On Friday, Mint reported that the proposed system's weighting favoured companies with national sales and those operating in the National Capital Region (NCR), giving big brands a significant advantage. 

It proposed assigning the highest weight to companies with significant national sales, followed by those selling in the NCR, and the lowest weight to those selling in defence canteens.

Such a system would primarily benefit large multinational corporations, such as Pernod Ricard India, Diageo, and Allied Blenders, among others, over smaller and medium-sized companies, such as Jagatjit Industries, NeuWorld Spirits Pvt. Ltd., and Kyndal Spirits.

The Delhi Distillers and Brewers Association, for instance, argued that the policy unfairly favoured multinational corporations and would lead to a market duopoly, undermining consumer choice. 

They warned that the new system, introduced midway through the excise year, could have harmed local brands and reduced government revenue. 

The association recommended maintaining the current system, which had increased excise revenue, and addressing brand pushing through improved oversight.

Also Read: Kingfisher beer maker UB suspends supply to Telangana; association alleges state pays 47% less than other states

The proposal attracted criticism from opposition parties as well, with concerns being raised about its timing. To be sure, the model code of conduct is in force in Delhi as the national capital goes to polls on 5 February. Among other things, the code prohibits policy, project or scheme announcements that could influence voters.

The excise department, however, claimed that the new ordering system aimed to eliminate brand favouritism and ensure better availability of consumer-demanded products. 

Some industry leaders, especially those representing multinational companies, viewed the proposal as a step forward in correcting market distortions and increasing the availability of popular brands in Delhi.

"The current system has resulted in many popular national brands not being available thereby forcing consumers to pick up the brands from neighbouring cities in the NCR. Our members are significant contributors to the state excise revenues across the country, and, in fact, the Indian manufactured foreign liquor sales contribute to 97% or more in volume to the state and the community through investments, employment and social programmes," said Sanjit Padhi, chief executive of the International Spirits and Wines Association of India, which represents Pernod Ricard India and Diageo.

In addition to the points system, the four government corporations distributing alcohol in the capital were considering a shift to app-based ordering for consumers. 

However, critics argued that the policy mirrored the old controversial reforms, such as the scrapped New Delhi Excise Policy 2021-22, which had invited scrutiny for procedural lapses and corruption. 

Also Read: Music concerts, sports events: How top liquor brands landed in a mess over surrogate ads

Mint reached out to the four departments via email but did not receive any response.