300% profit margin! You've been paying unfairly high for single malts in Delhi

Delhi Liquor Policy Scam: Foreign liquor wholesalers (L1F licensees) had excessive control over their pricing, setting profit margins as high as 347%, which increased liquor prices for consumers, the Comptroller and Auditor General (CAG) report on the Delhi Excise Policy tabled in the Delhi Assembly on Tuesday claimed.

The report tabled by the newly elected CM Rekha Gupta highlighted the alleged irregularities in the liquor policy brought during the previous Aam Aadmi Party (AAP) government.

Discretionary Margins

“In case of Foreign Liquor, Government adopted a very liberal policy as L1F licensee was at liberty to determine its profit margin at its discretion. Audit noticed that the profit margin of three test checked L1F licensees ranged from 44% to 347% of the Landed Price, and the average of percentage of profit margin to landed price was 255%, 243%, 169% and 172% during the years 2017-18, 2018-19, 2019-20 and 2020-21 respectively. This resulted in inflated MRP for Foreign Liquor despite very low cost of import,” the report noted.

Blaming it on the exorbitant prices, the report said this excessive price difference encouraged smuggling from states with lower liquor prices. Despite rules requiring transparency, the Arvind Kejriwal-led government did not enforce them properly.

Failure to Submit Wholesale Selling Price

As per the report, L1F licensees were required to provide sales data, landing prices, and prevailing Wholesale Selling Price (WSP) of their brands in Delhi, All India, and other states for the past two years. However, CAG audit revealed that none of the licensees provided WSP details for other states.

“During the test-check of the brands pertaining to the three selected L1F licensees, it was found that while two licensees provided data regarding sales in other states, one34 licensee had not furnished sales data for its brands for the year 2017-21. Regarding the declaration of WSP in other states, none of the licensees had submitted the prevailing WSP in other states,” the report noted.

“The influx of liquor through porus borders, owing to the price differential has also been highlighted by the Ravi Dhawan Committee formed (2020) by GNCTD to suggest measures for Excise Policy reforms. As per the Excise policy and license requirement, the L1F (FL licensees) need to declare the WSP of all other States in which it supplies liquor. Audit observed that this condition was flouted, however, no objection was raised by the Excise Department itself,” the report said.

Quality Concerns

The report pointed out that in 51% of foreign liquor test cases, reports were either older than 1 year, missing, or had no date. In one of the cases, a test report more than nine years old was accepted by the Excise Department for issue of license. Thus, no quality claim can be made about the liquor actually supplied, as the reports were from entirely different, older batches.

In over 58% of the cases, Quality Compliance Reports were provided from in-house laboratories or related companies instead of independent, third-party labs.

This created a conflict of interest, as these reports were not truly independent.